How to clear a vendor bill on which you made a payment and got refunded?
If you used the vendor bill to create invoice and received payment on that invoice, you cannot delete the vendor bill as it is linked to the client invoice now. Core allows you to delete the vendor bill only if you choose not to delete the associated time and expense entries that are already invoiced. So first of all, you need to make sure you void the returned check (refund), delete the vendor bill and then refund the payment to the client as well. To refund the client payment, you can create a credit memo of type Project Credit in the Billing > Credit Memos screen. Check the Core Help for details on that. This creates a liability that you can pay back from the Bill Payments screen. You should also use a write-off payment on the remaining balance of the invoice created from the vendor bill (if any), to clear the remaining liability for the client. Check the Core Help for details.