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Handle customer adjustment notes and delayed credits in QuickBooks Online

by Intuit•10• Updated 2 months ago

Instead of a refund, some customers prefer getting a credit to lower the cost on their next purchase. To handle these in QuickBooks Online, you can use adjustment notes (for immediate use) or delayed credits (for future use).

Note: Automatically apply credits only affects the next invoice created. It does not affect existing invoices in Receive Payment.

To turn on the adjustment note auto-apply feature:

  1. Go to Settings Settings gear icon. and select Account and settings.
  2. Select the Advanced tab.
  3. Select Edit ✎ in the Automation section.
  4. Turn on Automatically apply credits if you want to automatically apply credits to customer balances or open invoices. Turn it off if you want to decide which open invoices you want to apply adjustment notes to.
  5. Select Save, then Done.

Turn on auto-apply credits if you want to automatically apply adjustment notes to the oldest open invoices for the same customer. Here’s what'll happen if it’s on:

  • If you have older open invoices, QuickBooks applies the adjustment note to the oldest open invoice. If none, QuickBooks applies the adjustment note to the next invoice. 
  • If the credit matches the amount on the invoice, the adjustment note and invoice will show as Closed. If the credit is less than the amount of the invoice, the adjustment note will show as Closed, and the invoice will show as Partial.
  • If the credit is more than the amount of the oldest open invoice, QuickBooks applies the remainder to the next oldest open invoice. If there’s no more open invoices, the status of the adjustment note will show as Unapplied.
  • If you create adjustment note and your customer owes nothing, they’ll have a negative balance.

Turn off auto-apply credits if you create a lot of invoices and adjustment notes for customers. Also, if you need to apply specific adjustment notes to specific invoices. Here’s what'll happen if it’s off:

  • When you enter a credit, QuickBooks won’t apply it to any open invoices.
  • When you receive a customer payment using Receive payment, it has a Credits section (if the customer has credits). You can then choose when to apply credits and to which invoices.
  • If you don’t link any credits, the Customer Balance Detail report shows that both the invoice and the adjustment note have open balances. They also show as Open on the Customer and Sales transaction pages.
  1. Select the invoice that has the adjustment note applied. 
  2. Select the blue hyperlink of the adjustment note applied, then select the date. The payment transaction will open.
  3. Select More, then Delete, then select Yes to confirm.

If you want to transfer credit from one customer to another, create a journal entry, then apply the credit.

  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.

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 an adjustment note to an invoice:

  1. Select + New.
  2. Select Receive payment.
  3. From the Customer dropdown, select the customer.
  4. From the Outstanding Transactions section, select the open invoice you want to apply the adjustment note to.
  5. From 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.
  1. Select + New.
  2. Select Delayed credit.
  3. From 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.

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. From 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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If you need it, here's the difference between the two methods:

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

Adjustment note customisation

Any customisations applied to the Standard template will be picked up by the adjustment note. To customise an adjustment note, edit the Standard template according to your needs.

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