Hi @PinnacleBK
Welcome to the forums!
You would need to do this from the payment list itself, but I’ll walk you through the steps 
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First thing to do is to locate the payment on their account. Firstly, go to Purchases >> All Suppliers, and select the supplier (there are several ways to arrive at this screen). Then go to View >> All payments. This lists all payments. If you do an advanced search for Unallocated, this will show you just those that are sat on the account as prepayments.
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View the payment details to reveal a “refund” button. This will appear at the top:
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Click the refund button and follow the steps. This will then create a bank transaction in the bank account in question:
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If you have imported a bank statement, it may create a duplicate transaction. Simply delete the untagged entry:
Hope that helps!