Customer Credit Memos

Customer Credit Memos

Overview

A Credit Memo is a document used in accounting software to reduce the amount a customer owes on a previously issued invoice. It reflects returns, overcharges, cancellations, or other adjustments and ensures accurate customer balances and financial records.

Why Use a Credit Memo?

Credit memos are typically issued for the following reasons:
  1. A customer returned goods or canceled services
  2. The original invoice contained an error or overcharge
  3. A discount or rebate needs to be applied after invoicing
  4. An adjustment is required to correct a customer’s balance
When issued, the credit memo either:
  1. Reduces the balance due on a specific invoice
  2. Creates a customer credit that can be applied to future invoices
  3. Is refunded to the customer (depending on your business process)

Recording a Credit Memo

  1. Navigate to Sales → Sales Returns & Customer Credits.
  2. Click Create → New.
  3. Choose the Customer from the drop-down list. (After choosing a customer, it will ask you to select an open Sales Invoice. Take note that you may or not may associate Credit Memo to a Sales Invoice. Just close the Invoice selection window if you don't want to associate the Credit Memo to an Invoice.)
  4. The Date and Number are auto-filled. Change if necessary.
  5. Select Credit Memo on the Type field.
  6. Enter a Reference # and Sales Person. (optional)
  7. Click the Shipping tab and change the Return to and Ship from fields, if necessary.
  8. Enter a Reason code. (Required)
  9. On the Currency tab, change the currency if needed.
  10. Click the Accounting tab and change the Accounts Receivable (A/R)  and Refund accounts, if necessary.
  11. Click the Memo tab and enter a memo. (optional) Ext. will print on on the Credit Memo and Int: is for internal use and will not print on customer documents.
  12. Click Add and add line(s) for each item returned or for which the credit memo is issued. Change the quantity to reflect the amount being returned or credited.
  13. Click the Sales Tax tab and choose a Sales Tax Rate.
  14. Verify and change (if necessary) the Quantity and Price.
  15. Click Save.

Creating a Credit Memo in CustomBooks™
Credit Memos may or may not be associated with a sales invoice. To associate a credit memo with an invoice, start by navigating to the invoice and Generate → Credit Memo.

In this case, many of the fields on the new Credit Memo will be auto-filled from the Sales Invoice.


Accounting

Credit Memos Debit Income and Inventory and Credit Accounts Receivable and Cost of Goods Sold.

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