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Credit Memo's and Receiving Payments

Can someone clarify the difference between +Credit Memo vs just directly receiving a payment (e.g. a bank deposit for an Invoice) I'm trying to differentiate when/why a Credit Memo is necessary vs just clicking "Receive Payment" on Invoices. 

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Best answer 06-26-2018

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Re: Credit Memo's and Receiving Payments

Hey there, @ArroyoStrategy.

I'd be happy to explain the difference between the Receive Payment and Credit Memo transactions. I'll outline a general explanation for each below:

Receive Payment
This represents the actual flow of money from a customer to the business. When one or more invoices are paid, you can link this item to those transactions to reduce their Balance Due. The Payment will serve as a deposit in your bank register, or you can send it to Undeposited Funds to be included in a batch deposit. You can see the entire process of receiving a payment in the QuickBooks video tutorial or from the article here.

Credit Memo
This is a multi-purpose transaction for crediting a customer balance. If the customer paid more than what was owed on the invoice, if they're returning a product or requesting a credit for a service, or if you're rewarding/gifting them with store credit, the Credit Memo can fulfill all of these roles. They're applied from within the Receive Payment screen by selecting any mix of open invoices and available credits for a given customer. For more information on creating and applying Credit Memos, check out video guide here or look into this article.

This information will help you decide which transaction to use for a given scenario. There are more common examples that can be found in the video links above. If you have any questions, or need any assistance getting these transactions created, be sure to let me know. Thanks for reaching out, have a wonderful rest of your day.
 

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Highlighted
Content Leader

Re: Credit Memo's and Receiving Payments

Hey there, @ArroyoStrategy.

I'd be happy to explain the difference between the Receive Payment and Credit Memo transactions. I'll outline a general explanation for each below:

Receive Payment
This represents the actual flow of money from a customer to the business. When one or more invoices are paid, you can link this item to those transactions to reduce their Balance Due. The Payment will serve as a deposit in your bank register, or you can send it to Undeposited Funds to be included in a batch deposit. You can see the entire process of receiving a payment in the QuickBooks video tutorial or from the article here.

Credit Memo
This is a multi-purpose transaction for crediting a customer balance. If the customer paid more than what was owed on the invoice, if they're returning a product or requesting a credit for a service, or if you're rewarding/gifting them with store credit, the Credit Memo can fulfill all of these roles. They're applied from within the Receive Payment screen by selecting any mix of open invoices and available credits for a given customer. For more information on creating and applying Credit Memos, check out video guide here or look into this article.

This information will help you decide which transaction to use for a given scenario. There are more common examples that can be found in the video links above. If you have any questions, or need any assistance getting these transactions created, be sure to let me know. Thanks for reaching out, have a wonderful rest of your day.
 

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Re: Credit Memo's and Receiving Payments

Love your simple, no-nonsense explanation of receiving payment vs credit memo :) I'd like to take this one step further by explaining our situation as a non-profit neighborhood security program.  While it is not required in our neighborhood, we encourage all households to participate in our off-duty police officer security program.  We do this by e-mailing 500+ households every January with an "invoice" for $250, but also offer the ability to pay at different tiers ($350, 500, 750 and 1,000).

 

Our big issue comes at the end of the year when, let's say, 200 households made payments of $240 and up and the other 300 households paid $0.  The way we are currently "getting rid of" those 300 unpaid invoices is to apply individual credit memos to all 300; tedious and leaves a lot of room for error.  What alternative ways could we "invoice" or request contribution from our neighbors that would make it easier to remove the unpaid invoices at the end of the year (not issuing credit memos)??  Brainstorming is much appreciated! :)

QuickBooks Team

Re: Credit Memo's and Receiving Payments

Hello @LinWesty,

 

As of this time, there isn't any alternatives you can invoice to your neighbors as you request for contributions.

 

However, you can start creating an estimate then convert it to an invoice once you receive the payment. I'm here to walk you through the steps.

 

To start, here's how you can create an Estimate:

  1. Go to the Plus icon.
  2. Under Customers, choose Estimate.
  3. Enter information as needed such as the Customer, the Expiration date, and the PRODUCT/SERVICE.
  4. Click Save and close.

Secondly, create an invoice to change the status of your estimate once the contribution has been issued.

 

Here's how:

  1. Go to the Sales page, then All Sales.
  2. Find the estimate.
  3. Under the ACTION column, click Create invoice.
  4. Choose the Remaining total of all lines option for the pop-up message.
  5. Select Create invoice.
  6. Check and verify the information on the invoice.
  7. Click Save and close.

Once done, you can click the Receive payment option on the invoice to record the payment received.

 

I've attached an article you can read to learn more about the steps above: Set Up and Use Estimates and Quotes.

 

You can check out this article for future reference: Import Custom Form Styles for Invoices or Estimates.

 

I'll be always around here in the community if you have any other questions.
 

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Re: Credit Memo's and Receiving Payments

Thank you for the steps to create an Estimate! This could possibly be very helpful!

Big question: In creating the "estimate", let's say we issue the estimate on 1/1/19 and set the Expiration Date to 12/31/19..... on 1/1/20, what happens to that estimate and do any additional actions need to be taken to be effectively balanced and not have this attributed to accounts receivable in any way? Looking for how this plays out :)

 

Also, let's say we send an "estimate" of $250 but receive a $60 quarterly payment? Can this be done with issuing an invoice for a partial amount and then the remaining estimate will still be there? Again, looking for the actions we need to perform here :)

 

And then there's the reverse scenario: an "estimate" is sent for $250, but $500 is received...do any additional steps need to be taken to complete this "estimate" to "invoice" conversion?

 

THANK YOU THANK YOU THANK YOU in advance for this valuable feedback!!! Cheers and happy accounting!

QuickBooks Team

Re: Credit Memo's and Receiving Payments

Good day, @LinWesty.

 

I appreciate you coming back to us for additional support. Allow me to join this thread and clear this up for you.

 

An estimate is a non-posting transaction. This will only affect your Accounts Receivables after being converted as an invoice. If your customer pays more or less than the estimate's amount, you can just manually edit the transaction when creating an invoice.

  1. Click Sales.
  2. Click the Estimates tab.
  3. Look for the estimate.
  4. Click Create invoice.
  5. Select the appropriate option on the pop-up window and click Create invoice.
  6. On the invoice transaction, you can update the transaction amount.
  7. Click Save.

That should correct your transaction's recording, LinWesty. For more insights about creating estimates in QBO, please refer to this article.

 

Let me know if there's anything else you need. I'm still here to help you more. Just add a comment or mention my name. Wishing you all the best and take care!

 

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