Credit memos and customer credits
Updated September 23, 2026
What this does
A credit memo is the mirror of an invoice: a document that reduces what a customer owes, or records that you owe them. Use it when an invoice was paid and then a charge was wrong, a part came back, or you're giving goodwill against a future visit. It lives under Money In → Credit Memos and posts like an invoice in reverse.
Before you start
accounting.manage. Know which invoice it relates to (Original Invoice, optional) and the Reason, which is required.
Steps
- Credit Memos → New. Pick the Customer, the original invoice if there is one, the Reason, and add Line Items with amounts. Tax is calculated at post time from the lines.
- Save as Draft. Check it.
- Post. This is the journal entry; a credit memo that isn't posted hasn't reduced anything.
- Apply Credit to one of the customer's open invoices, in whole or part. Application History shows where it went. Unapply if you applied it to the wrong one.
- Void a posted memo that shouldn't exist. Refused while any of it is applied; unapply first. Voiding reverses the entry before marking it void, so a lock or failure leaves it untouched rather than void with live postings.
Overpayment credits
When a payment exceeds what an invoice owes (see Customer Payments), the excess becomes a customer credit automatically, with no memo to create. It shows on the customer's account and applies the same way.
What happens in the books
Post: Dr contra-revenue for the pre-tax amount, Dr Sales Tax Payable for the tax portion, Cr Accounts Receivable. Contra-revenue rather than reversing the original revenue account, so the P&L shows gross sales and credits separately; the tax leg reduces what you'll remit. Apply: no new entry; the memo and the invoice both carry the application. Customer credits are part of receivables, and the nightly tie-out counts them on the invoice side.
Refunding a credit
Paying a credit back in cash rather than applying it is recorded as a refund from the credit: Dr Accounts Receivable, Cr the bank or cash it left from, and the credit is drawn down so the same money can't also be applied. There is no refund screen in the app today; ask support to record one until there is.
Common problems
The customer's balance didn't drop. The memo is a draft. Post it.
Void is refused. Part of the memo is applied. Unapply from Application History, then void.