Creating an actual credit memo from an existing credit on customer's account

A credit memo is issued when something previously sold to the customer is returned or credited for some reason. The opposite of a sale.

Why does the customer have a negative / credit balance?

RE:The statement showing credit on account is not good enough for them.

Why is it not good enough? What is it they want to see?

The negative balance was from a 100% prepayment. The invoice was then not shipped complete. My normal order of things is to put the received payment in the customer advance other current liability account. Then when it was time to ship, I created a credit, pulling the payment out of the customer advance account and applied it to the invoice, leaving the negative balance on their account.

It's a customer in Germany, a huge company. I'm not sure why the statement is not enough for them. They specifically asked for a credit memo document.

Well, there isn't any way to generate a credit memo in this case that makes any sense from an accounting point of view, since the customer didn't return anything, but instead basically just overpaid for the invoice - ahead of time.

You could create a credit memo and send it to them and void it, since it makes no sense in QB in this case.

Still, if you don't know why what you sent isn't good enough, then none of us know what exactly they expect in this case.  Perhaps a credit memo isn't what they want either?

Perhaps a statement would work for them. It will show the payment and the invoice and the negative/overstatement balance.

I'm sorry I wasn't clear in my original text. I did send them a statement, where they replied and said they need a document. I imagine it's so they can enter it in their own system as a credit? But why they just can't do that with the statement line item I wouldn't know. 

I'll have to think about creating/deleting a credit memo. My CFO wants to wring my neck when I delete things.

Yes, that works great!

Thank you again 

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@Maverick2 

It is not unusual for a large company to require a credit memo with a reference number - a statement is often not good enough. 

To fix this, just create a journal entry to clear the outstanding credit balance: debit accounts receivable, credit the current liability account.  Make sure to include the customer's name on the journal entry.  Then, issue a credit memo for the corresponding amount.  This credit memo reverses the journal entry and you are left with just the credit memo.  Voila.

@Rainflurry 

Except there isn't a credit memo in this case. The company didn't return or get a refund/credit for anything.

Instead, they prepaid and overpaid the invoice they eventually received later. They have a credit balance, and they already have all of the data in their accounting system (a payment and an invoice) to see that.

@BigRedConsulting 

A credit memo should be issued in this case - they have a credit balance - that's all that is needed to issue a credit memo.  I'm not sure the extent of your accounting background, but all a credit memo does is just document that the buyer has a credit balance (regardless of why they have it) with a seller and that they can use that credit memo to reduce the amount due to the seller.  This is a perfect example of when a credit memo can, and should, be issued regardless of QB's limitations. 

The OP has "... a customer who needs an actual credit memo. The statement showing credit on account is not good enough for them."  Telling them they should have everything they need is not resolving their issue.

Another clarification after I stared at things a while. There actually was a credit memo in that customer record. The "item" listed is called "Customer Advance Deposit" (redundant I know - it's just for keyword loading). That Item is tied to a liability account. That looks weird to me and might be to my customer.

When I saw the credit memo listed in the transaction summary, I saw the full amount of that credit, not a number that was close to the credit still on the account. Not until @BigRedConsulting offered his solution did I actually open up the memo and see that the amount on the document showed the original credit amount, amount applied, and THEN the credit balance. That's why I didn't understand that.

Thanks to @BigRedConsulting the rock star, and also to @Rainflurry for the help.

@Rainflurry 

RE:A credit memo should be issued in this case - they have a credit balance - that's all that is needed to issue a credit memo.

I see your point. However the type of thing the OP needed is different sort of "credit memo" than I was thinking about. It's literally a "memo" (a notice) to the customer, that they have an unapplied balance. But like a QuickBooks statement, it doesn't exist as an accounting transaction. Specifically, it results from an unapplied payment amount. This is probably why Intuit recently added the ability to print this type of "credit memo" from a payment that is only partially applied. You've clarified the need for such a feature.

RE: I'm not sure the extent of your accounting background,...

Well, I have an accounting degree and have been working in the small business world for a few decades...

RE: ...but all a credit memo does is just document that the buyer has a credit balance (regardless of why they have it) with a seller and that they can use that credit memo to reduce the amount due to the seller.

In QuickBooks, a credit memo transaction does more than that - than just notify or an account credit balance. It also functions as the way to record returns or other allowances against prior sales - where the customer may or may not have made any payments on account and may or may not have a credit balance. Its accounting impact is the opposite of an Invoice and it can be applied to an invoice to reduce its balance like a customer payment received can be.

RE: This is a perfect example of when a credit memo can, and should, be issued regardless of QB's limitations. 

Good news, I think! Given these two types of credit memos QB can print, I think now QB handles the required cases and workarounds won't usually be needed.