Keeping track and maintaining the accuracy of financial records are the two most important tasks in modern business operations. Today, credit memos play a crucial role in efficiently tracking and managing bill invoices while performing and handling financial accounting systems. In the USA, small and medium-sized businesses (SMBs) efficiently manage various tasks by maintaining a proper track record and regularly monitoring financial accounting systems with the help of Quickbooks. The essential feature of Credit memos in QuickBooks (QB) is that they provide a systematic approach for handling customer refunds of incorrect transactions and credits.
This blog is helpful for QuickBooks users to streamline their financial business operations. Firstly, they should know what Credit Memo on Quickbooks is used for in the accounting software, and their different types and laterally explain a comprehensive guide on creating quickbooks credit memos.
What are Credit Memos in Quickbooks and Uses?
A credit memo is a document, commonly used in QB software to record customers’ and clients’ refund details and minimize the incorrect amount entered in the transaction. This document is generally used when a customer returns the products after purchasing them on a cash or credit basis. It is also used when business owners charge the wrong price mistakenly and update it later.
In other words, it is an official document, issued from the seller to the buyer and used to make amendments to invoices by minimizing the amount, customers already pay. The seller makes changes in price that may occur due to human errors, returning products, or price adjustments while performing sales transactions.
Another use of credit memos in Quickbooks is to record the discount amount, which may be applied to a product sold to a customer. Many business enterprises charge customers the exact price and adjust their accounts using credit memo features. It can help businesses to maintain records of sales and discounts, customers’ refunds, and modifications in their accounts.
Some customers may prefer to take a credit memo from the seller’s end instead of refunding their amount. They do so because they want to adjust their balance of the amount on the next bill. To easily handle credit memos in QuickBooks software, many tools are available, which are widely used. A seller can instantly create a credit memo to the current balance.
Types of Credit Memos in QuickBooks
Many types of Credit memos can be created in Quickbooks. These are as follows:
- Recurring Credit Memos
This type of credit memo is used when applying a discounted amount on products from the seller’s end and returning the adjusted amount to the buyer’s account directly.
Recurring credit memos are particularly beneficial for those businesses, whose customers are subscription-based and pay the amount at fixed intervals.
- Standard Credit Memos
This type of credit memo is the most common and effectively used in QuickBooks software. Standard credit memos are issued from the seller’s end and are used to record buyers’ refunds, credits, and adjustments applied to their accounts. These credit memos in Quickbooks can be printed on paper or by email according to the type of transaction carried out by a customer.
- Void Credit Memos
If any credit memo is already issued once from the seller’s side, then this type of credit memo can be canceled immediately.
Void credit memos can be issued when a seller refunds the amount to the customer and the credit is no longer required. It can also be issued when the customer has already received the credit and refund amount.
- Discount Credit Memos
This type of credit memo can help in applying a discount to a customer’s account. Small and medium-sized businesses can use this type of credit memo, which offers discounts to their customers for returning products after adjustments or buying products in quantity.
Discount QBO credit memos can act as a record of the sale transaction and help maintain the accuracy of financial account records.
Steps for Creating Credit Memos in QuickBooks Software
A credit memo is a significant document used in QuickBooks (Intuit), issued to a customer from the seller after performing the sale transaction. This memo indicates that the seller owes the buyer money because of situations like extra payment made and returning the products after purchasing. In QuickBooks, sellers can easily create credit memos to reflect such situations and adjust buyers’ accounts accordingly.
Here is a quick guide with some steps that should be followed sequentially for creating a credit memo in QuickBooks:
Step 1: Login to QuickBooks Account:
The first step is to open the QuickBooks application and log into the account by entering the correct credentials.
Step 2. Customize the Sales Transactions:
After login, the next step is to go to the main QuickBooks dashboard and click the “Sales” or “Invoicing” button to customize all the sales transactions.
Step 3. Select the Credit Memo Option
To create a new transaction, search for the credit memo option. QuickBooks has two versions namely, QuickBooks Online and Desktop. The user will choose the version of QuickBooks accordingly. Depending on the version of QuickBooks selected by the user, it is categorized with either the “Create” or “New” tab. Then, the user will click on the tab and choose the option of “Credit Memo” from the list of all sale transactions.
Step 4. Enter the Customer’s Details in
The next step is to choose the customer to create a credit memo in Quickbooks. If there is any new customer, that is not added earlier then add it now only at this step.
Step 5. Fill in the Credit Memo Details
After entering all customer details, the next step is to fill in all the necessary information, which is required for creating a credit memo. The credit memo includes a few details such as the credit memo date, the number (commonly created automatically), and any other additional information related to the credit memo.
Step 6. Select either Products or Services
The next step is to add only those products or services for the customers whose credit memo has been issued by the seller. Also, a seller can select from the list of products or services and add new ones, if not added previously.
Step 7. Enter the Products Quantity and Rates
After selecting products, enter the quantity and rates for each product and service. The QB software will automatically calculate and sum up the credit amount, based on the quantity and rates entered by the seller.
Step 8. Review and Save the Credit Memo
The next step is to review the credit memo to ensure that all information given by the seller is correct. After reviewing it completely click either the “Save” or “Save and Close” tab to successfully save the credit memo.
Step 9. Send or Print the Credit Memos in Quickbooks
After saving the credit memo the seller can give the command to print the created credit memo and send it to the required customer in physical form. Sellers can email it directly to customers by using QuickBooks software.
Step 10. Apply the Credit Memo to Invoices
The credit memos in QuickBooks are applied to all unpaid bills or invoices in this last step so that the balance amount can be paid to the customer from the seller.
The software will quickly prompt a message on the screen to apply for the credit memo of invoices when the seller receives the payment from its customer.
Note: The above steps may differ slightly depending on the version of QuickBooks the seller is using. Also, any further customizations can be made to account settings.
Conclusion
Credit memos are not only considered for tracking the financial records of businesses or enterprises. However, they efficiently manage the records in QuickBooks accounting software depending on the version. They also help the business owner to effectively manage their refund value, discount amount, and other adjustments for how much to charge their customers.
Hence, properly understanding and efficiently using credit memos in QuickBooks ensures the financial accounting record is up-to-date and accurate.
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