Create and apply credit memos or delayed credits in QuickBooks Online

Learn how and when to give a credit memo or delayed credit to customers.

Instead of a refund, some customers prefer getting a credit they can use to reduce the balance on their next invoice.

There are a few ways to handle credit memos in QuickBooks. You can create a credit memo to immediately reduce a customer's current balance. Or you can enter a delayed credit so they can use it in the future.

Here's more about the differences and how to apply them to customer transactions.

Note: If you're refunding money that a customer has already paid, create a refund receipt instead.

Create and apply a credit memo

To watch more how-to videos, visit our video section.

Step 1: Turn on or turn off Automatically apply credits

1. Go to Settings and select Account and settings.
2. Select the Advanced tab.
3. Select Edit ✎ in the Automation section.
4. Turn on Automatically apply credits if you want to automatically apply credits to customer balances or open invoices. Turn it off if you want to decide which open invoices you want to apply credit memos to.
5. Select Save, then Done.

Step 2: Create a credit memo

1. Select + New.
2. Select Credit memo.
3. From the Customer dropdown, select the customer's name.
4. Enter the credit memo details, such as the date and the amount.
   Tip: You can create a custom credit service item so you can quickly add it to credit memos as a single line item.
5. When you're done, select Save and close.

Step 3: Apply the credit memo to an invoice

If you turn on the auto-apply credits, QuickBooks will apply the credit for you. If you turn it off, here's how to manually apply a credit memo to an invoice.

1. Select + New.
2. Select Receive payment.
3. From the Customer dropdown, select the customer.
4. In the Outstanding Transactions section, select the open invoice you want to apply the credit memo to.
5. In the Credits section, select the credit memos you want to apply.
   Note: You won't see the credits section if you have not created the credit memo.
6. For the open invoice in the Payment column, enter how much of the credit you want to apply.
7. Leave the Payment method, Reference no, Deposit to, and Amount received fields blank.
8. Fill out the rest of the form, including the Payment date.
9. Make sure the total is correct after applying the credit memo.
10. When you're done, select Save and close.

Create and apply a delayed credit

Step 1: Create a delayed credit

1. Select + New.
2. Select Delayed credit.
3. From the Customer dropdown, select the customer's name.
4. Enter the details, such as the date and the amount.
   Tip: You can create a custom credit service item so you can quickly add it to delayed credits as a single line item.
5. When you're done, select Save and close.

This saves the delayed credit. You can choose to apply it the next time you invoice the customer.

Step 2: Apply the delayed credit to an invoice

Keep in mind that adding a delayed credit to an invoice from a prior accounting period will affect that period's balances.

1. Select + New.
2. Select Invoice.
3. In the Customer dropdown, select the customer. This opens a window with all open transactions for the customer, including invoices and delayed credits.
   Note: If you don't see this, select the small arrow next to the invoice Balance Due.
4. Find the delayed credit and select Add. This adds the credit as a line item to the invoice.
5. Fill out the rest of the invoice as needed.
6. When you're done, select Save and close.

Credit memo customization

Any customizations applied to the Standard template will be picked up by the credit memo. To customize a credit memo, edit the Standard template according to your needs.

Any customizations you make to the standard template will be applied to the credit memo. To customize a credit memo, edit the standard template to suit your needs.