Creating a credit memo from a customer credit balance

It's a delight to have you here in the Community, @medcure.

Using the credit memo for the overpayments is simple and quick in QuickBooks Desktop (QBDT). I've got steps to help ensure you can achieve this.

First, let's create a credit memo to give money back or credit to your customers. Here's how:

1. Click the Customers menu, and then select Create Credit Memos/Refunds.
   
   
2. Choose a customer name from the Customer: Job drop-down ▼.
3. Enter the items you're giving credit for, and then hit Save & Close once ready.
   
   

Then, you'll be given three options on how to handle it. The following are:

• Retain as an available credit. QuickBooks enters a negative amount in your Accounts Receivable (A/R) register for the credit memo. You can use this credit as payment for another transaction. If you chose to retain as available credit, you'll see the available credits in the customer payment window.
• Give a refund. You can issue the refund in cash, a check, or on a credit card.
• Apply to an invoice. QuickBooks opens the Apply Credit to Invoices window. Select an invoice you want to apply this credit to.

To retain this as an available credit, here's how:

1. Choose the Customers menu, and then click Receive Payments.
2. Select a customer name under the Received from the drop-down ▼, and then tap the Discounts and Credits icon.
   
   
3. On the Credits tab, check the credit you want to apply and then pick Done.
4. You may see a prompt to Confirm transfer. If you do, select Yes. The amount will be applied automatically to the invoice.
5. Hit Save & Close.
   
   

On the other hand, if you prefer the other two options, please check out the Option 2 and 3 section of this article: Credit memo in QBDT.

You can also run and customize the Transaction List by Customer report to show all credit memos. Here are the steps how:

1. Click the Reports menu at the top.
2. On the drop-down (▼) list, click Customers & Receivables and choose Transaction List by Customer.
3. Click the Customize Report button, and then tap the Filters tab.
4. In the filter search box, type, and pick Transaction Type.
5. Under Transaction Type drop-down (▼), choose Credit Memo.
6. Hit OK.
   
   

For more info about customizing reports, see this link: How to customize reports.

To make sure you save the current customization settings of your reports, you may memorize them for easy access. Browse this resource for the detailed steps: Memorize reports.

I'm here to lend a hand if you have more questions about managing your credit memos or anything else related to QuickBooks. Take care and have an awesome day.

These are all fine answers. But the problem is, the invoice was $10. They paid $12 via ach on that invoice. When I put the payment towards that particular invoice, they have a -$2.00 balance. If I create a $2.00 credit memo for them, they then have a -$4.00 overall balance, $2.00 from the overpayment on the invoice and $2.00 from the credit memo. How to give them a credit memo but not double the credit on their overall balance???

Thanks for joining this conversation, @WRI_2110.

That's a great question! Allow me to chime in and share additional information about processing credit memos in QuickBooks Desktop (QBDT).

When creating a credit memo, there will be a pop up message after saving it. It will ask what would you like to do with this credit, and you have three options to choose from. Among these are:

• Retain as an available credit. QuickBooks enters a negative amount in your Accounts Receivable (A/R) register for the credit memo. You can use this credit as payment for another transaction. If you chose to retain as available credit, you'll see the available credits in the customer payment window.
• Give a refund. You can issue the refund in cash or a check. If your customer used a credit card, learn how to refund a credit card payment.
• Apply to an invoice. QuickBooks opens the Apply Credit to Invoices window. Select an invoice you want to apply this credit to.

Just make sure to select the Give a refund option instead so the negative amount in the overall balance won't be double.

For more information about managing credit memo, consider checking out this article and proceed to Option 2: Give a refund section: Give your customer a credit or refund in QuickBooks Desktop for Windows.

You can also visit our website for more tips and other resources you can use in the future: Self-help articles.

Please post again or leave a comment in this thread if you have additional questions about this or anything else QuickBooks. I'll be happy to answer them. Take care always.

Clearly there isn't a way and they didn't answer your question. I don't think there is a way to create a Credit Memo from an overpayment. Unfortunately QB is limited in what they can do. 

We concurred. We also faced the same issue not able to create a Credit Memo from overpayment without having a doubled negative balance of the amount of overpayment. 

Thank you for reaching out to the QuickBooks Community and sharing your concerns, Nagakambing. I can see that you've encountered issues creating a credit memo from an overpayment. No worries, I'm here to help you resolve this.

When you have an overpayment from a customer in QuickBooks Desktop (QBDT), there’s no need to create a Credit Memo to issue a refund. QuickBooks will automatically recognize the overpayment in your system, making the process seamless and efficient.

For the overpayment invoice, you need to locate the customer under the Customers section. You'll notice that there will be a negative amount under the Balance Total column.

After that, click the customer and find the payment transaction that was made that day, then double-click the transaction. On the receive payment screen, you'll be given two options, either you'll leave the credit to be used later or you can refund the amount to the customer, then click Save and Close.

I've added a couple of screenshots for your visual reference.

Additionally, if the transactions haven't been settled yet, you can void the payment anytime you want.

Comment on the post if you still have concerns about overpayments in QBDT. I'm here to help in any way I can. 

Will this credit automatically apply to the customer's memorized invoice or you must manually apply it?

I'm here to provide answers/information to your questions about credit memos in QuickBooks Desktop (QBDT), @Nagakambing.

 It is not automatic but there is an easy way to apply the credit memo to an invoice.

There will be a prompt when you record a credit memo. Please see the screenshot below:

A window will appear displaying the pre-selected invoices when you choose the last option. Click Done to proceed after choosing the correct option.

The credit memo is now applied to the chosen invoice.

Furthermore, I have provided this useful reference that compiles articles aimed at assisting you in organizing your customer transactions: Get started with customer transaction workflows in QuickBooks Desktop.

We’re here to offer our full support in getting you acquainted with our product and make sure you have everything you need to be successful. If there’s anything else we can do to help, please get in touch with us by commenting on this post.

@Ethel_A ,

As mentioned if we created credit memo, it will show double credit balance in the same amount of overpayment. 

Then, @RhoiceW advised not to create credit memo so that we can just apply credit on the next invoice. 

Apparently, it will not automatically apply to the next schedule memorized invoice. 

On your post, you mentioned credit memo. How do you create this credit memo without creating double credit?

Hello, Nagakambing.

I would like to shed some light on how the program handles customer credit.

There is no need to another create a credit memo, as you already have an overpayment on your account. Issuing an additional one would result in a duplicate credit balance.

In QuickBooks Desktop, please know that the system does not automatically allocate credits to outstanding invoices. Thus, you'll have to apply them manually by following the steps provided by my colleague, ReyJohn_D. You can also refer to the Option 3 section of this article: Give your customer a credit or refund in QuickBooks Desktop for Windows.

For your additional reference about managing receivables and sales transactions, you can check this guide: Get started with customer transaction workflows in QuickBooks Desktop.

We appreciate your membership in our QuickBooks community. If you have any further questions about the credit memo or need assistance, please don’t hesitate to reach out or leave a comment. I am here to help. Wishing you a wonderful day!