Open the reservation you wish to cancel then click the config cog beside the reservation # then select Cancel Reservation to continue.

On the Reservation Cancellation screen select the type of Cancel Fee if any, the fee amount, and if you would like to send a cancellation email to the customer. Once you have all desired settings click Cancel Reservation to complete cancellation of the reservation.

If you still owe the customer an amount after the cancellation you will need to process a refund. To see the refund process go to "Creating a refund".