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Create and apply adjustment notes or delayed credits in QuickBooks Online

SOLVEDby QuickBooksQuickBooks Online129Updated August 08, 2022

Learn how and when to give a adjustment note 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 credits in QuickBooks. You can create a adjustment note 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 difference and how to apply them to customer transactions.

Note: If your customer simply wants a refund, here's how to return your customer's payment.

In QuickBooks, you can give credit using a adjustment note or delayed credit. Here are the key differences:

Adjustment note

  • If your customer wants to immediately reduce their current open balance, use a adjustment note.
  • Your customer can use their adjustment note as payment for an invoice. They can use all of their adjustment note or a portion of it.
  • You can apply a adjustment note when recording payment for a customer’s invoice.
  • Adjustment notes impact sales reports, even if you don't apply them to invoices.

Delayed credit

  • If you want to track a customer's credit for future use, and they don't want it to immediately affect their current open balance, use a delayed credit.
  • Your customer can use their delayed credit to reduce the balance of an invoice.
  • You can add delayed credits to future invoices as a line item.
  • Unlike adjustment notes, delayed credits don't impact sales reports until you apply them to invoices.

Step 1: Turn on the adjustment note auto-apply feature

If you haven't already, you can tell QuickBooks to automatically apply adjustment notes to customers' balances or open invoices. To turn on the adjustment note auto-apply feature:

  1. Go to Settings ⚙ and select Account and settings.
  2. Select Advanced tab.
  3. Select Edit ✎ in the Automation section.
  4. Select Automatically apply credits.
  5. Select Save, then Done.

Tip: You can turn off this feature if you want to decide which open invoices you want to apply adjustment notes to.

Step 2: Create an adjustment note

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

Step 3: Apply the adjustment note to an invoice

If you turned on the adjustment note auto-apply feature, QuickBooks handles this for you. Your work is done and QuickBooks applied the credit for you.

If you turned off the feature, here's how to manually apply a adjustment note to an invoice:

  1. Select + New.
  2. Select Receive payment.
  3. In the Customer dropdown, select the customer.
  4. In the Outstanding Transactions section, select the open invoice you want to apply the adjustment note to.
  5. In the Credits section, select the adjustment notes you want to apply.
  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 adjustment note.
  10. When you're done, select Save and close.

Step 1: Create a delayed credit

  1. Select + New.
  2. Select Delayed credit.
  3. In 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.

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