What is a Credit Memo?

A credit memo is a document issued to a buyer from the seller that states a credit balance. Credit memos often include the reason for issuing the memo, the purchase order number, terms of payment and billing, the shipping address, the price, purchase date, as well as the credit memo date.

Why are credit memos issued?

Credit memos are issued for several reasons. The seller may wish to issue a credit memo instead of shipping a replacement item if the item was damaged in shipping. Another example would be if the item was marked down shortly after the purchase date. The seller may choose to issue a credit memo for the marked down amount.

How can I use credit memos in my accounting software?

In QuickBooks Online you are able to easily send credit memos to your customers. You can even apply credit memos to a customer’s existing invoice. Check out this tutorial from QuickBooks to get a step-by-step guide on how to apply a credit memo to a customer’s invoice.

Why is it important to keep track of your credit memos?

It is advised to always keep track of all open credit memos in the event that they can be linked to open accounts receivables. This allows you to send reminders to customers who have open credit memos. To be sure you are doing this correctly, please consult your bookkeeper or accountant.