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Level 3

How to issue a credit memo for billable expenses with markups?

We add certain billable expenses to our customers invoices and mark them up by 10%. Our P/L shows both the original cost plus the markup as a separate item. I need to issue a credit memo for a billable expense. How do you create the Markup and Expense credits? QBO support doesn't know.
6 Comments 6

How to issue a credit memo for billable expenses with markups?

I've got steps to ensure you can create a credit memo for a billable expense, @k-handler.


You'll have to simply create a credit memo by selecting the item manually, and then apply it to the invoice associated with a billable expense. 


First, create a credit memo. Here's how:


  1. Click the +New icon, and then choose Credit Memo under the Customers section.
  2. Enter all the info needed such as the customer name, the item, etc.
  3. Select Save and Close once done.

Once done, apply the amount to the created invoice. You can do it either manually or using the auto-apply credits feature. To do it manually, here are the steps how:


  1. Click + New, and then select Receive payment.
  2. Enter the customer’s name, and then fill out the required fields.
  3. In the Credits section, choose the credit memo from Step 1. Then, in the Payments column, enter how much credit your customer wants to use.
  4. Hit Save and close.

On the other hand, you can turn on the Automatically apply credits option in the Account and settings page to auto-apply these credits to a newly created invoice. Below are the steps how:


  1. Go to Settings , and then select Account and Settings.
  2. Choose the Advanced tab, and then tap Edit ✎ in the Automation section.
  3. Pick Automatically apply credits.
  4. Hit Save, and then Done.

For more details, please check out this resource: How to create and apply credit memos.


You'll also want to customize your invoices and reports to personalize their info and formats.


Feel free to get back here in the Community if you've got more QuickBooks concerns. Take care and have a nice day.

Level 3

How to issue a credit memo for billable expenses with markups?

No John, that doesn't do it.  That's because the line items that are on the bill are added from a "billable expense" item on the right side--they are NOT individual product or service lines that can be added to the creditm memo. They include both the billable expense (say $100) and the "markup" say $50.   I can type these in the description on the credit memo, but then the customer will see the line items "Expense" and "Markup" on the credit memo.  Net, doesn't mirror the original bill.  Also, lets assume this is the only transaction we have. If I just add those together and put down a credit for "Expense- $150", then the "Expense" line item on the p/l will say -$50 because only $100 was charged there, and the markup line will still say $50.

PLEASE...truly research this and try before posting an answer.


How to issue a credit memo for billable expenses with markups?

Thanks for getting back to us, @k-handler,


I can help you account for this credit in QuickBooks, but I will need a few information to make sure we're heading to the same direction. First, are you processing a return for a client? Also, are you giving them the entire amount they paid, which is the $100 billable expense and $50 markup?


I need your confirmation for this. Add the details in the comments below.


In the meantime, check out this workaround, where you can process the credit memo for $100 and add the $50 for mark up as a journal entry to clear it in the Profit and Loss report. See these sample screenshots of the series of process for reference:




When you apply the credit memo and journal entry to the invoice, choose both transactions in the Credits section. It looks like this:



Otherwise, if you are the one who receive a credit from a vendor, you can simply use a vendor credit for it. The following links will help you with the process:

I want to hear back from you about this, as I want to make sure this is resolved. Connect with me again by clicking the Reply button below. Have a good one!

Level 2

How to issue a credit memo for billable expenses with markups?

Did you ever get this solved? I'm in the same situation here in 2022 where I needed a vendor credit to be added to a credit memo for the customer and there does not seem to be a way to do it.

QuickBooks Team

How to issue a credit memo for billable expenses with markups?

Hello there. Thanks for reaching out to us. 


Keeping track of your customers' payments is relevant in handling your business in QuickBooks Online (QBO). Currently, the feature to apply a vendor credit to a customer credit memo isn't available in QuickBooks Online. Let me give you a workaround to ensure you can add vendor credit to your customers through invoices. 


Utilizing a clearing account to help transfer or apply a vendor credit to customer invoices is the best way to manage this in QuickBooks Online. I'll show you how:


1. Create a Bank account called Clearing Account.


  1. From the Accounting menu, click Chart of Accounts.
  2. Click the New tab, then choose Bank for the Account Type.
  3. In the Account Name field, enter Clearing Account.
  4. Select Save & Close.


2. Create two journal entries.


  1. Click the +New option, then select Journal Entry under OTHER.
  2. Debit the Clearing account (created in Step 1) and credit Accounts Receivable for the amount of sale.
  3. Choose Accounts Receivable in the Account row, then enter the customer in the Name field.
  4. Create a second general entry. This time, debit Accounts Payable and credit Clearing Account for the amount of the sale.
  5. In the Name field on the Accounts Payable row, enter the vendor name that needs the bill credit created.
  6. Click Save & Close.


3. Apply the credit to an invoice


  1. From the Customer & Leads menu, click Customers.
  2. Find the specific customer, then click Receive Payments.
  3. Click Set Credits and select the credits to apply.
  4. Select Done, then, click Save and close.


Moreover, it's better to consult your accountant for expert guidance about this. They can assist you in managing situations like this effectively. If you don't have one, you may find an accountant through this link: ProAdvisor.


Check out this article to learn how and when to give a credit memo to customers: Create and apply credit memos or delayed credits in QuickBooks Online.


Please get back to us if you have further questions or concerns about handling payments and journal entries in QuickBooks Online. I'm always here to help you. Keep safe!

Level 2

How to issue a credit memo for billable expenses with markups?

I am the accountant, and I have to give a big "yikes" to creating false bank accounts in the general ledger and doing this many journal entries. How crazy that you cannot add items marked billable on a customer transaction, invoice and credit memo. Clearly it's been a problem for awhile since I'm commenting on a question from 2 years ago.

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