Credit memos, credits, and refunds can be confusing at times. To overcome this challenge, the differences and proper ways to apply them to transactions are outlined here to guide you.

The difference between a credit memo, credit or refund
Enter and apply a credit memo
Enter and apply a credit
Enter and apply a refund

Note: If you create a credit memo and want to issue a refund instead or vice versa you will need to delete the transaction and recreate it.


What's the difference between a credit memo, credit and a refund?

A credit memo is a posting transaction which can be applied to a customer's invoice as a payment or reduction.
A delayed credit is a non-posting transaction that you can include later on a customer's invoice. This transaction only affects the customer's balance once it is added to an invoice
A refund is a posting transaction used to reimburse a customer's money.

This means that:

  • Credit memos are used to offset an existing customer balance.
  • Delayed credits can be included only on an invoice.
  • Delayed credits don't affect a customer balance until they are included on a saved invoice.
  • Refunds are used to show money given back to a customer to refund for services the customer is not happy with to offset a credit balance, merchandise or service not received, or an overpayment.

Enter and apply a credit memo

Entering a credit memo will affect your customer's balance, but will not affect a customer's invoice until it is manually applied.

Enter a credit memo

  1. Select the Plus icon (+) at the top, then Refund Receipt or Credit Memo.
  2. Fill out all required fields (including the customer name, date, products/service items, quantities and amounts).
  3. Select Save and close.

Apply the credit memo to an invoice

  1. Select the Plus icon (+) at the top, then choose Receive Payment.
  2. Complete these fields as follows:
    • Customer - From the drop-down list, select the customer the credit memo is for.
    • Date - Change if necessary.
    • Pymt Method, Ref#, Deposit to, Amount - Fields are to be left blank.
    • Memo - (Optional)
  3. Select the Credit Memo that you are wanting to apply to the invoice
  4. Verify that the total to pay (if any) is correct after applying the Credit Memo.
  5. Select Save and close.

Enter and apply a delayed credit

Delayed credits can be added as line items on your customer's next invoice.

Enter a delayed credit

  1. Select the Plus icon (+) at the top, then choose Delayed Credit.
  2. Complete all the necessary fields (including the customer name, date, products/service items, quantities and amounts).
  3. Select Save and close.

Apply the delayed credit to an invoice

  1. Select the Plus icon (+) at the top, then choose Invoice.
  2. Choose a customer from the drop-down list, then complete all the necessary fields.
  3. Under the Unbilled charges and credits or Unbilled charges, credits, expenses and time, Add to Invoice section, select on Add or the Plus (+) next to Charges/Credits to add to the invoice; Choose Open will allow you to view more details about the credits.
  4. Choose the box next to the Credit that you want to apply.
  5. Once invoice is complete, select Save.
    Note: If after choosing give a refund or credit, you do not see the sections Create credit memo to give to the customer or Enter a credit to appear on the customer's next invoice, then you will need to turn on the preference for delayed charges:
    1. Select the Plus icon (+) at the top, then choose Delayed Charge.
    2. Check the box for the Delayed Charges feature and fill out necessary fields.
    3. Select Save and close.

Enter and apply a refund

Depending on the situation, refunds given may or may not affect your customer's balance.
Note: Refund Receipts doubles up a credit if there is already a credit memo entered in the system, so make sure that there is no credit memo entered yet, otherwise you will need to delete the credit memo and then re-create the intended refund. The next section of this article tells you how to delete the credit memo and also re-create the intended refund.

  1. Complete the following steps depending on the type of refund you chose:
    • Type 1: Refund for goods or services that didn't satisfy the customer.
      • Example: A customer already paid for an item and is returning it for a full or partial refund.
      • This option will provide a Refund Receipt to record reimbursements to customers via cash, cheque, or credit card.
      • Does not affect the customer balance - accounts receivable, only the bank balance.
      • To reimburse the customer and record the return of products/services:
        1. Select the Plus icon (+) at the top, then choose Refund Receipt.
        2. Select the same product/service that you are refunding, and the exact amount of the refund.
        3. After filling out all the necessary fields, select Save.
    • Type 2: Pay the customer their outstanding credit balance
      • Affects the customer balance - Accounts Receivable
      • This option will allow you to provide your customer a refund cheque in order to offset any open credits they would like paid out.
      • Example: A customer has a store credit that they would like to have it paid out/redeemed for cash.
    • Type 3: Refund for a prepaid order the customer hasn't received
      • Affects the customer balance - Accounts Receivable
      • This option is used when a client makes a down payment or prepayment and cancels the order before receiving the goods or services and no invoice or sales receipt was created. The option will lead you directly to entering in a cheque.
      • Example: A customer prepaid an order which has been cancelled, and you need to refund the payment.
    • Type 4: Refund the customer for paying you too much
      • Affects the customer balance - Accounts Receivable
      • This option will allow you to provide a refund when a customer overpays and you want to give the customer money back (cash or a cheque) for the amount overpaid.
      • You may either use the Cheque or Expense features to record the refund.
      • Example: A customer over-paid on an invoice, and you need to return the excess money.
  2. If Refund Types 2, 3 or 4 were used:
    • Make sure to select accounts receivable for the account at the bottom left of the Cheque or Expense screen.
    • Also make sure that you link the cheque or cash purchase to the open credit or unapplied payment.
    • To do:
      1. Select the Plus icon (+) at the top, then choose Receive Payment.
      2. Complete the fields as follows:
        • Customer - Select the customer the refund is for
        • Date - Change if necessary
        • Payment method, Reference no., Deposit to, and Amount received - Fields to be left blank
        • Memo - (Optional)
      3. On the left under Credits, select on the plus sign (+) next to Total Credits; this will allow you to view more details about the credits.
      4. Make sure the Credit or Unapplied Payment you want the cheque or cash entry linked to is checked and ensure that the amount is correct. (check the boxes next to the refund or the customer credit)
        Note: to check if the credit matches the expense exactly, the receive payment will total $0.
      5. Select Save.

If you create a credit memo and want to issue a refund instead, or vice versa, you'll need to delete the transaction and recreate it

  1. Locate the credit memo or refund.
    1. Select Sales from the left menu.
    2. Select Customers at the top.
    3. Choose the customer's name.
    4. Under Transactions, set Show to All transactions.
    5. Tap on the credit memo or refund.
  2. On the bottom, under More, select Delete button. Once the credit memo or refund is deleted you will want to enter in the intended refund or credit memo.