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heartformusic
September 16, 2024
Question

Apply a credit memo to reduce an invoice before sending it to customer

  • September 16, 2024
  • 2 replies
  • 0 views

I have a customer that overpaid on a previous invoice. Rather than return they asked me to apply it to a future invoice. I am using QuickBooks Online and I do not see an option to apply credits to an invoice which will reduce the balance the client owes on the invoice.

 

For example: balance owing of $75.00 but client has a previous credit memo of $37.50. I would like to reduce the balance left on the invoice by using credit. They would only owe $37.50 instead of the original $75

2 replies

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GenmarieM
September 16, 2024

Thank you for reaching out to the Community space, @heartformusic. I appreciate your inquiry and am here to assist you with the process of applying a credit memo to your customer's invoice in QuickBooks Online.

 

If a customer has made an overpayment, returned a product, requested a refund, or if you wish to provide them with store credit as a reward, you have the option to create a Credit Memo in QuickBooks Online. Once you have generated the credit memo, you can then apply it to an outstanding invoice associated with that particular customer.

 

In your case, because your customer has overpaid their invoice, you won't need to manually create a credit memo. The excess amount from the overpayment will automatically generate a credit for your customer, which can be applied to future invoices.

 

Here’s how to apply credits to your customer's invoice:

  1. Click Sales from the left pane.
  2. Select Customers and click the customer’s name.
  3. Locate the invoice you want to apply the credit to and click Receive Payment.
  4. Enter the necessary information on the Receive Payment window.
  5. In the Outstanding Transactions section, make sure that the correct invoice is selected.
  6. Click Save and close.

 

The steps above will help you apply the credit to your customer’s open invoices. For your reference, you may check out this article: Apply a credit memo, credit or refund to a customer.

 

If you have other concerns about credit memos, invoices and other QuickBooks-related tasks, let me know by leaving a reply below. The Community is always here to help 24/7.

J
Just_me
September 16, 2024

@heartformusic   One thing that @GenmarieM  neglected to mention is that when you send your customer the invoice, even with the credit applied, it will still show the $75 balance.  

Try sending a statement, instead.  It will show the credit is being applied to the invoice and will reduce the total due to where it should be. 

    H
    heartformusicAuthor
    September 16, 2024

    Thanks for the suggestion. One of the other things I read was that there was an option under "automation" to apply credit note directly to the invoice. Will this do what I want it to?

    E
    Erika_K
    September 16, 2024

    It's nice to have you back, heart. I'm excited to discuss the possibility of automating the application of credits to your invoices. This feature can significantly streamline your billing process, saving you time and effort while ensuring accuracy in your financial records.

     

    Yes, you have the option to enable the auto-apply credits feature. Once done, you'll need to save the invoice, the credit memo, or the transactions beforehand. This step allows the system to match the credits and apply it to your customers' balances or open invoices. After that, you can send the updated information to your customers. 

     

    I'll show you how you can enable this feature:

     

    1. Go to the Gear and hit Account and settings.

    2. Choose the Advanced tab.
    3. Select Edit in the Automation section.
    4. Turn on Automatically apply credits if you want to automatically apply credits to customer balances or open invoices. Turn it off if you want to decide which open invoices you want to apply credit memos to.
    5. Click Save, then Done.

     

    Additionally, when you turn on auto-apply credits, here's what'll happen:

     

    • If you have older open invoices, QuickBooks applies the credit to the oldest open invoice. If none, QuickBooks applies the credit to the next invoice. 
    • If the credit matches the amount on the invoice, the credit memo and invoice show as Closed. If the credit is less than the amount of the invoice, the credit memo shows as Closed, and the invoice shows as Partial.
    • If the credit is more than the amount of the oldest open invoice, QuickBooks applies the remainder to the next oldest open invoice. If there are no more open invoices, the status of the credit memo shows as Unapplied.
    • If you create a credit and your customer owes nothing, they’ll have a negative balance.

     

    You can refer to this article to learn more: Create and apply credit memos or delayed credits in QuickBooks Online. 


    Finally, when credits are applied automatically to open balances or invoices, it won't specifically indicate that the exact credit has been used. Instead, it'll appear as a payment towards your invoice, and the transaction's status will be marked as Partially paid. I'll include a screenshot for your reference.

    PDF view:



    In QBO:



    If you have any further questions or need more information regarding the management of customer payments, please feel free to comment below, heart. Navigating the complexities of payment processing can sometimes be challenging, and I'm here to help you throughout this process.

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