How to Create and Apply Credit Memo in QuickBooks Online

Last Updated on November 7, 2020 by Editor Team

If you are looking for a solution to how to create and apply credit memo or delayed credits in QuickBooks online, then you are in the right place. Here in this blog, you can know the procedure to create and apply credit memo in QuickBooks Online.

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Before proceeding to the article, it will be good to inform you that, here you can get the methods for both credit memo, and delayed credit. If you are new to this and don’t know what is credit memo, and delayed credit then, you will be clear now. A credit memo is a posting transaction that can be applied to the customer’s invoice as payment or reductio, and the delayed credit is a non-posting transaction that you can later include on the customer’s invoice.

A refund is a posting transaction that is used when reimbursing the customer’s money.

it means that the credit memos are used to offset the current customer balance. Delayed credit can only be included on one invoice. Delayed credits do not affect the balance of the customer until they are included in the saved invoice. Refunds are used to refund money to customers for services for which the customer is not happy, to balance credit, merchandise, or service not received, or to compensate for an overpayment.

Credit Memo Vs Delayed Credit: How They Differ

A credit memo is a posting transaction that can be applied to the customer’s invoice as payment or reduction. Delayed credit is a non-posting transaction that you can later include on the customer’s invoice.

Credit Memo

  • Your business customer can use their credit score memo as the payment for the invoice. They can select to apply all in their credit memos or a part of it.
  • You can place a credit score memo at the same time as recording the payment for the customer’s invoice.
  • The credit memos impact sales reports even when you do now no apply to invoices.

When the Customer Credit Memo Issued

When is a customer credit memo issued?

Specific circumstances may occur when you feel the need to issue a credit memo to your customer. Some common examples can be as follows:

  1. When you need to cancel a challan issued in whole or in part.
  2. You are asking for a partial loan for the wrong goods supplied.
  3. The goods have already been purchased and you would like to request a refund for the goods returned to the seller.

Delayed Memo

  • Your customer can use his late loan to reduce the invoice balance.
  • You can add delayed credit to an invoice as a line item.
  • Unlike credit memos, unused delayed credits do not affect sales reports unless you apply them to the invoice.
  • Use delayed credit if you want to track a customer’s credit for future use, but don’t want it to affect their current balance.

Procedure to Create and Apply Credit Memo in QuickBooks Online

Step 1: Create or Set Up a Credit Memo

  • First, you need to click on the option of + New.
  • And then, choose a Credit memo or Give credit.
  • After that, you need to enter the customer’s name, and then fill out the required fields that are given below:-
    • Date
    • Products/service items
    • Quantity
    • Amount
  • And at the last, click on the option of save and close.

Step 2: Apply the Credit Memo to an Invoice

Here, we provide the details to apply the credit memo to an invoice, also provide the two options that are manually, and automatically. You can choose to manually or automatically apply credit memos to open invoices.

Manually Apply a Credit Memo

Here’s we provide the details of how to manually apply a credit memo to an invoice. This process gives you control over which open invoice you can apply a credit memo to, follow these given steps, and complete this manual process:-

  • First, you need to click on the option of + New that is in the right-hand corner of the screen.
  • Then, click on the option of Receive payment or Receive invoice payment.
  • After that, you need to enter the customer’s name, and then fill out the required fields that are given below:-
    Note: You can make sure that you can choose the same customer or project you selected on the invoice.
    • Customer (From the drop-down list select the customer the credit memo is for)
    • Date (Change if necessary)
    • Memo (optional)
    • Deposit To (Leave blank since money is not actually being deposited with this transaction)
  • After that, you can leave the fields Payment method, Reference no, Deposit to, and Amount received blank.
  • Click on the credit memo from Step 1 in the Credits section. Then, you need to enter how much credit your customer wants to use in the Payments column.
  • You need to make sure the total to pay (if any) is correct after applying the credit memo.
  • And at the last, click on the option of save and close.

Automatically Apply Credit Memos to Invoices

Here’s we have to provide the details of how to automatically apply credit memos. This lets QuickBooks use credit memos as payments for newly created or open invoices. Follow these steps carefully:-

  • First, go to the Settings menu, and then click on the Account and Settings.
  • After that, choose the Advanced tab, and then click on the option of Edit in the Automation section.
  • Then, click on the Automatically apply option for credits.
  • At the last, click on the Save option, and then select Done.

Procedure to Create and Apply for a Delayed Credit in QuickBooks Online

Step 1: Create or Set Up a Delayed Credit

  • First, you need to click on the option of + New that is in the right-hand corner of the screen.
  • Click on the Delayed credit option. Or you need to follow the steps to switch to the Accountant view first if you are in the Business view. 
  • After that, you need to enter the customer’s name, and then you need to fill out the required fields:-
    • Date
    • Products/service items
    • Quantity
    • Amount
  • In the end, click on the save and close option.

Step 2: Apply for the Delayed Credit

Remember one thing always that adding a delayed credit to an invoice from a prior accounting period will affect that period’s balances. And here provide all steps related to this process, follow and complete this process:-

  • First, you need to click on the option of + New that is in the right-hand corner of the screen.
  • After that, click on the Invoice or Send Invoice.
  • Next, you are supposed to select the customer for which you want to apply for the credit with it, and also fill out the fields with this step.
    Note: In case your available credits are not visible, you need to click on the small arrow which is beside invoice balance.
  • Click on the option of Add to add a delayed credit to the invoice.
  • And at the last, click on the save and close option.

Final Note

Here, in this article, we tried our best to provide information and we hope after reading the blog you have understood how to create and apply credit memo or delayed credits in QuickBooks online. Further in case, if you need any ProAdvisor support to shut out any kind of doubts or issues regarding this article, then you can drop a call through our Accountwizy toll-free number.

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How to Create and Apply Credit Memo in QuickBooks Online