As a seller, you can do one of two things. If you want to let the buyer off the hook and cancel the transaction, you can offer the buyer a mutual cancelation request.
Here is how the process works.
After the process is complete, the buyer can still leave feedback.
You can, if you choose, decide to go for the unpaid item dispute. If the buyer still hasn't paid within four days of the dispute being opened, you can close the dispute and give the buyer an unpaid item strike. If a buyer receives a strike, he won't be able to leave feedback.
Here is the page on unpaid item disputes.
It's up to you which process you want to do.
