Create and apply credit memos or delayed credits in QuickBooks Online
by Intuit•15• Updated 4 months ago
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 credits 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 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 credit memo or delayed credit. Here are the key differences:
Credit memo
- If your customer wants to immediately reduce their current open balance, use a credit memo.
- Your customer can use their credit memo as payment for an invoice. They can use all of their credit memo or a portion of it.
- You can apply a credit memo when recording payment for a customer’s invoice.
- Credit memos 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 credit memos, delayed credits don't impact sales reports until you apply them to invoices.
Create and apply a credit memo
To watch more how-to videos, visit our video section.
If you turned off the feature, here's how to manually apply a credit memo to an invoice:
- Select + New.
- Select Receive payment.
- In the Customer dropdown, select the customer.
- In the Outstanding Transactions section, select the open invoice you want to apply the credit memo to.
- In the Credits section, select the credit memos you want to apply.
- For the open invoice in the Payment column, enter how much of the credit you want to apply.
- Leave the Payment method, Reference no, Deposit to, and Amount received fields blank.
- Fill out the rest of the form, including the Payment date.
- Make sure the total is correct after applying the credit memo.
- When you're done, select Save and close.
Step 1: Turn on the credit memo auto-apply feature
If you haven't already, you can tell QuickBooks to automatically apply credit memos to customers' balances or open invoices. To turn on the credit memo auto-apply feature:
- Go to Settings ⚙ and select Account and settings.
- Select Advanced tab.
- Select Edit ✎ in the Automation section.
- Select Automatically apply credits.
- Select Save, then Done.
Tip: You can turn off this feature if you want to decide which open invoices you want to apply credit memos to.
Step 2: Create a credit memo
- Select + New.
- Select Credit memo.
- In the Customer dropdown, select the customer's name.
- 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.
- When you're done, select Save and close.
Step 3: Apply the credit memo to an invoice
If you turned on the credit memo 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 credit memo to an invoice:
- Select + New.
- Select Receive payment.
- In the Customer dropdown, select the customer.
- In the Outstanding Transactions section, select the open invoice you want to apply the credit memo to.
- In the Credits section, select the credit memos you want to apply.
- For the open invoice in the Payment column, enter how much of the credit you want to apply.
- Leave the Payment method, Reference no, Deposit to, and Amount received fields blank.
- Fill out the rest of the form, including the Payment date.
- Make sure the total is correct after applying the credit memo.
- When you're done, select Save and close.
Step 1: Create a delayed credit
- Select + New.
- Select
- In the Customer dropdown, select the customer's name
- 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.
- 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.
- Select + New.
- Select Invoice.
- 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.
- Find the delayed credit and select Add. This adds the credit as a line item to the invoice.
- Fill out the rest of the invoice as needed.
- When you're done, select Save and close or Stamp.
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