diff --git a/server/polar/transaction/service/payout.py b/server/polar/transaction/service/payout.py
index 42bc8b4769..d00ac18e93 100644
--- a/server/polar/transaction/service/payout.py
+++ b/server/polar/transaction/service/payout.py
@@ -445,6 +445,13 @@ async def _prepare_stripe_payout(
             )
         )
 
+        # Sort payment_balance_transactions by increasing transferable amount
+        # This way, if we have negative transferrable amount, they'll increase the outstanding amount
+        # and be compensated by the positive transferrable amounts coming after
+        payment_balance_transactions.sort(
+            key=lambda balance_transaction: balance_transaction.transferable_amount
+        )
+
         # Compute transfers out of each payment balance, making sure to subtract the outstanding amount
         transfers: list[tuple[str, int, Transaction]] = []
         for balance_transaction in payment_balance_transactions:
diff --git a/server/tests/transaction/service/test_payout.py b/server/tests/transaction/service/test_payout.py
index 7f3b73e6f3..1516e856e4 100644
--- a/server/tests/transaction/service/test_payout.py
+++ b/server/tests/transaction/service/test_payout.py
@@ -42,7 +42,7 @@ def stripe_service_mock(mocker: MockerFixture) -> MagicMock:
 async def create_payment_transaction(
     save_fixture: SaveFixture,
     *,
-    amount: int = 1000,
+    amount: int = 10000,
     charge_id: str = "STRIPE_CHARGE_ID",
 ) -> Transaction:
     transaction = Transaction(
@@ -63,7 +63,7 @@ async def create_payment_transaction(
 async def create_refund_transaction(
     save_fixture: SaveFixture,
     *,
-    amount: int = -1000,
+    amount: int = -10000,
     charge_id: str = "STRIPE_CHARGE_ID",
     refund_id: str = "STRIPE_REFUND_ID",
 ) -> Transaction:
@@ -88,7 +88,7 @@ async def create_balance_transaction(
     *,
     account: Account,
     currency: str = "usd",
-    amount: int = 1000,
+    amount: int = 10000,
     payment_transaction: Transaction | None = None,
     balance_reversal_transaction: Transaction | None = None,
     payout_transaction: Transaction | None = None,
@@ -357,37 +357,46 @@ async def test_stripe_refund(
         payment_transaction_1 = await create_payment_transaction(
             save_fixture, charge_id="CHARGE_ID_1"
         )
-        balance_transaction_1 = await create_balance_transaction(
+        balance_transaction_payment_1 = await create_balance_transaction(
             save_fixture, account=account, payment_transaction=payment_transaction_1
         )
+        balance_transaction_fee_1 = await create_balance_transaction(
+            save_fixture,
+            account=account,
+            amount=-100,
+            balance_reversal_transaction=balance_transaction_payment_1,
+        )
 
         payment_transaction_2 = await create_payment_transaction(
             save_fixture, charge_id="CHARGE_ID_2"
         )
-        balance_transaction_2 = await create_balance_transaction(
+        balance_transaction_payment_2 = await create_balance_transaction(
             save_fixture, account=account, payment_transaction=payment_transaction_2
         )
+        balance_transaction_fee_2 = await create_balance_transaction(
+            save_fixture,
+            account=account,
+            amount=-100,
+            balance_reversal_transaction=balance_transaction_payment_2,
+        )
 
-        assert payment_transaction_1.charge_id is not None
-        refund_transaction_1 = await create_refund_transaction(
+        assert payment_transaction_2.charge_id is not None
+        refund_transaction_2 = await create_refund_transaction(
             save_fixture,
-            amount=-payment_transaction_1.amount,
-            charge_id=payment_transaction_1.charge_id,
+            amount=-payment_transaction_2.amount,
+            charge_id=payment_transaction_2.charge_id,
         )
-        balance_transaction_3 = await create_balance_transaction(
+        balance_transaction_refund_2 = await create_balance_transaction(
             save_fixture,
             account=account,
-            amount=refund_transaction_1.amount,
-            balance_reversal_transaction=balance_transaction_1,
+            amount=refund_transaction_2.amount,
+            balance_reversal_transaction=balance_transaction_payment_2,
         )
 
         stripe_service_mock.transfer.return_value = SimpleNamespace(
             id="STRIPE_TRANSFER_ID", balance_transaction="STRIPE_BALANCE_TRANSACTION_ID"
         )
 
-        # then
-        session.expunge_all()
-
         payout = await payout_transaction_service.create_payout(
             session, account=account
         )
@@ -400,12 +409,18 @@ async def test_stripe_refund(
         assert payout.account_currency == "usd"
         assert payout.account_amount < 0
 
-        assert len(payout.paid_transactions) == 3 + len(
+        assert len(payout.paid_transactions) == 5 + len(
             payout.account_incurred_transactions
         )
-        assert payout.paid_transactions[0].id == balance_transaction_1.id
-        assert payout.paid_transactions[1].id == balance_transaction_2.id
-        assert payout.paid_transactions[2].id == balance_transaction_3.id
+        assert set(t.id for t in payout.paid_transactions).issuperset(
+            {
+                balance_transaction_payment_1.id,
+                balance_transaction_fee_1.id,
+                balance_transaction_payment_2.id,
+                balance_transaction_fee_2.id,
+                balance_transaction_refund_2.id,
+            }
+        )
 
         assert len(payout.incurred_transactions) > 0
         assert (
@@ -452,9 +467,9 @@ async def test_stripe_refund_of_paid_payment(
             account=account,
             processor=PaymentProcessor.stripe,
             currency="usd",
-            amount=-1000,
+            amount=-10000,
             account_currency="usd",
-            account_amount=-1000,
+            account_amount=-10000,
             tax_amount=0,
         )
         await save_fixture(previous_payout)