Summary
If you need to apply a different (offline) payment to an already paid invoice, you'll first need to remove any existing payments associated with it before you can manually apply the next payment while the invoice is still "UnPaid", the removed payment will be moved to excess payments, where you can choose to refund it back to your customer or keep it on file so that it will automatically applied to the next invoice.
Solution
Please follow the steps mentioned below.
1. Under Payments section of the invoice, click on Remove to detach the payment from the invoice
2. The invoice will move to Not Paid status. Click Record Payment on the invoice to record the check payment
3. Scroll down on the invoice and under Activity Log, click on more against the log entry for Payment of XXXX removed
4. Click on the transaction and use the Refund option from this page to refund the transaction to the card.
5. Alternatively, you can also visit the customer's details page and then click on the Excess Payments balance. This will take you to the transactions page, where you can open the transaction's details page and refund the transaction from there.
NOTE: When you directly issue a refund using the Refund option or Create Credit Note option, it's treated as a Refund issued for the invoice because of changes or cancellation and would not give you the option to apply another payment to the invoice, as there will now be a payment transaction and a refund transaction against that invoice, to keep the books intact.
Note: Total Excess Payments for a specific customer
We have updated our summary box to provide a more streamlined and elegant user experience. With this upgrade, hyperlinks have been added to the summary box, allowing users to easily access related information. The Total Excess Payments on Summary Section is available at the top of the Customer details page which provides a total amount due of a customer and hyperlink that directs to the details. Refer to this link for more details.
Here's a video of the entire process
https://drive.google.com/file/d/1c-sg84FYR7jgaY_6weOKLwsRIZnNTSam/view?usp=sharing