Credit Memo is not being properly applied

I looked at another help page, and it explicitly says: "Leave the Payment method, Reference no, Deposit to, and Amount received fields blank."  That's the field that is auto-filled in after I save it.  Seems like a buy.

1. Select + New.
2. Select Receive payment.
3. In the Customer dropdown, select the customer.
4. In the Outstanding Transactions section, select the open invoice you want to apply the credit memo to.
5. In the Credits section, select the credit memos 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 credit memo.
10. When you're done, select Save and close.

Thanks for reaching out to us, Mark.

You're on the right track. I'll help you in applying the credit memo to the invoice.

When the Automatically apply credit feature is enabled, the credit memo you created will be applied to the customer's open invoices or future invoices. Let's ensure it's turned off before creating a credit memo for the bad debts.

Here's how:

1. Go to the Gear icon.
2. Select Account and settings.
3. Click the Advanced tab.
4. Go to the Automation section and toggle the radio button to off if the Automatically apply credit is enabled.
5. Once done, hit Save and then Done.

After that, locate and delete the credit memo for the bad debts. Then, recreate and apply it to the appropriate invoice.

Please follow steps 4 and 5 in this article to guide you through the process: Write off bad debt in QuickBooks Online.

If you want to run and personalize your report to show only the information you need, you can read this resource for future reference: Customize reports in QuickBooks Online.

You're welcome to post again if you need anything else. We're available to help you.

The setting is off.  And the steps I have done are exactly Steps 4 & 5.  So that's not the issue.

Thanks for getting back to us, @markfleming.

Usually, the credit memo will show under Undeposited Funds (UF) when the item of that credit is linked to it. 

Undeposited Funds hold money until you are ready to deposit them. It serves as the default Deposit To account when you receive payments, uses a payment item on an invoice, or enter a sales receipt.

To clear the amounts, you have to create a deposit transaction:

1. Go to the +New button.
2. Under Other, select Bank deposit.
3. From the Account drop-down arrow, choose the account you want to put the money into.
4. Put a checkmark on the boxes for each transaction.
5. Hit Save and close.

Here's an article for more information about recording bank deposits: Record and make bank deposits in QuickBooks Online.

For more details about undeposited funds in QBO, check out this guide here: Deposit payments into the Undeposited Funds account in QuickBooks Online.

Moreover, feel free to visit these helpful resources that can help you along the way in managing payments and other transactions in QBO: 

• Record invoice payments in QuickBooks Online
• Unmatch downloaded bank transactions or move them to another account

If you have any other questions about managing your transactions in QBO, please feel free to leave a comment below. I'll get back here as soon as I can to help you again. Take care.

deleted - ignore

@Maybelle_S   (not sure why this reply to your message does not show up under your message.  But here it is.

"Undeposited Funds hold money until you are ready to deposit them. It serves as the default Deposit To account when you receive payments, uses a payment item on an invoice, or enter a sales receipt."

I'm not understanding this.  If I am creating a credit memo (in my case for recording a bad debt), there is no money coming in.  That's why someone creates a credit memo.  So if no money comes in, there is nothing to deposit to a bank.

Thank you for getting back, @markfleming.

Let me add further information about credit memos in QuickBooks Online (QBO).

If the amount of the credit memo shows under the Undeposited Funds (UF). It could be that the transaction you’re writing the bad debt for is in that account or the Bank. 

At the very least, most of the time, that item is meant to be connected to income. Since it reverses a sale, the income is negative. To clear the AR balance, you’ll want to create a check on top of it to do so.

I also recommend you seek your accountant's advice to guide you with the process.

If the issue persists, you can reach out to our Technical Support Team. This way, they can thoroughly check your concern about applying a credit memo to bad debt. Our phone representatives can check your account securely, and initiate a further investigation if needed. Here’s how:

1. Go to the (?) Help icon in your QuickBooks Online (QBO) account.
2. Select the Search tab, and click Contact Us.
3. Enter a brief discussion of your concern and click Continue.
4. Select either Chat with us (if you prefer messaging) or Give us a call.

You’ll want to check their availability to get assistance at the time of your convenience.

Feel free to add a comment if you need further assistance with the credit memo. The Community always has your back. Stay safe!

@RoseJillB 

It turns out that it looks like a bug in Quickbooks.  I deleted and reentered the "Receive Payment" Credit Memo against the invoice a couple more times.  On the last try, I got it to work without entering an "Amount Received" amount and it did not after the update pop in the amount there and pick the Undeposited Funds account.  I can't say with 100% certainty what the difference was--and I don't want to delete my successful entry and test it again--but I believe the successful attempt was a result of me placing my cursor in the Amount Received field and not entering anything, resulting in a zero in the field, rather than a blank or null.  Seems odd, I know, but that is what I recall.

Also, don't get hung up on the Undeposited Funds account that it chose on my unsuccessful entries. I think it just chose that because it was at the top of the list of accounts that are available in that field and it simply grabbed it.  And there was no balance in the Undeposited Funds account before doing any of this.