What Are Credit Memos Used For?

Learn what Credit Memos in your Financials can be used for.

A Credit Memo is a document that a seller issues to the buyer, reducing the amount the buyer owes to the seller; this could be used in place of a refund, whether in the event of a pricing dispute or an allowance, for example. It can be used to partially offset an invoice or to offset a future invoice's total amount due.

Most businesses first record the issuing of the Credit Memo and then apply a payment to an Invoice, including the credit in payment.

If the customer would like a check or credit card return, then you would record a refund separately. This can be done by adding a line item (labeled "refund", for example) to the Invoice and logging the price as a negative dollar amount.