@Tracey521
The cancellation policy is always applied when a reservation is cancelled.
So if they cancel with "flexibel" , they will have to pay for all nights stayed + 1 extra:
https://www.airbnb.com/help/article/475
During the cancellation proces the guest will already see the refund (If any)
It is calculated automatically, so that's it for the guest !
If you want to give more refund, then use the "change" option on the reservation to shorten the stay, then amend the calculated price in the price-form.