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PinkyK
PinkyK
February 15, 2025
Solved

Vendor Credit applied to a Customer Invoice

  • February 15, 2025
  • 2 replies
  • 0 views

We have a vendor who is also our customer.  They paid their invoice (for the work we did for them) with a credit memo (to be applied to any future bill that we receive from purchasing product from them).  How do I record this credit memo to reflect as a payment towards their invoice?

Best answer by Rainflurry

@PinkyK 

 

It sounds like you're trying to offset the amount you owe them (A/P) with the amount they owe you (A/R) or vice versa.  Am I understanding that correctly?  If so, credit memos are not the best way to handle it.  The easiest way IMO is to create a bank account in QB called "Clearing Account".  Then, pay their vendor bill using the Clearing Account.  Then, Receive Payment on the invoice in the same amount and deposit it into the Clearing Account.  You now have their vendor bill paid, the Clearing Account is $0, and their customer invoice has been paid down by the amount of the bill.  The amount due on their invoice should be invoice total less their vendor bill. 

 

If their vendor bill is more than their customer invoice, just reverse the process - receive payment on the invoice in full and deposit it into the Clearing Account.  Then pay down their vendor bill by the same amount from the Clearing Account.  Now, the balance due on the vendor bill is the total bill amount less their customer invoice.   

2 replies

I
Ivan_G
February 16, 2025

I've got the procedures so you can record a credit memo and apply it to your vendor's invoice, Pinky.

 

Do you mean your vendor recorded a Vendor credit (money you owe them) and has used it to pay their invoice? If so, you can create a Credit memo for them and then apply it to their invoice using the Receive payment feature. This allows you to reduce or clear off their balance using the credit amount.

 

Here's how:

 

  1. Go to the + New menu, then Credit memo.
  2. Choose your Customer and enter the Credit Memo Date.
  3. Enter the Service Date, Product/Service, and Quantity.
  4. Double-check the accuracy of the Rate and Amount.
  5. Once done, hit Save and close.

     

After that, link the Credit memo to the invoice:

 

  1. Go back to the + New menu, then Receive payment.
  2. Choose the appropriate Customer.
  3. Select the invoice from the Outstanding Transactions section and the credit memo from the Credits portion.
  4. Double-check everything, and once done, hit Save and close.

 

However, if you mean directly linking a vendor credit to an invoice, this is not an option in QBO. Customer and vendor credits are tracked separately for financial accuracy. You can check with an accounting professional to help you handle this matter accordingly.

 

You can also review this article to guide you through processing exchange products or services between you and your vendor: Record a barter transaction.

 

Additionally, you may run and customize your reports to check your company's profitability and upcoming expenses. This way, you can track your business's cash flow accordingly.

 

Finally, you can also explore our QuickBooks Live Bookkeeping offering, which can help you manage your accounting needs. Our dedicated experts are ready to assist in tracking your record's preciseness so you can run your business confidently.

 

If you have more questions about handling customer credits in QBO, hit the Reply button. We are always here to help.

W
whiteghost
February 17, 2025

This is similar to my issue. I do warranty repair for XYZ company. I also purchase parts from the same company. The twist is I use projects to track the item, and the end user as a sub-customer of XYZ company that will ultimately pay the invoice for the repair. When XYZ pays for the repair, it is done by credit memo. Then, I must balance the books by applying it to the repair invoice and the bill for the parts ordered and purchased through XYZ company.  thus my vender is also a customer. How do I do that?

thank you

 

 

A
Anonymous
February 18, 2025

I appreciate the details that you've provided on your concern, whitegost. You can accomplish your goal by making the expense transactions billable to the created project. I'll explain more details about this.

 

Since you've already created a profile for your customer, all you need to do is create a vendor profile as well for the XYZ company.

 

Next is to create an expense transaction for the purchase that you've made and make it billable to the created project.

 

Here's how:

 

  1. Go to the + New button and select Expense.
  2. Choose the vendor that you've created.
  3. Select the service that you've offered then checkmark on the BILLABLE column and select the specific project.
  4. Once done click on Save and close.

 

Lastly, if you convert it into an invoice you can just change it to service instead of the product.

 

Here's how:

 

  1. Go to the + New button and select Invoice.
  2. Choose XYZ Project as your customer.
  3. In the product or service, you can just change it to service instead of the product.

 

Additionally, you may run and customize your reports to check your company's profitability and upcoming expenses. This way, you can track your business's cash flow accordingly.

 

I'm still available if you have further questions about handling customer credits in QBO. Simply click on the Reply button and I'll make sure to answer your queries promptly.

    Rainflurry
    RainflurryAnswer
    February 16, 2025

    @PinkyK 

     

    It sounds like you're trying to offset the amount you owe them (A/P) with the amount they owe you (A/R) or vice versa.  Am I understanding that correctly?  If so, credit memos are not the best way to handle it.  The easiest way IMO is to create a bank account in QB called "Clearing Account".  Then, pay their vendor bill using the Clearing Account.  Then, Receive Payment on the invoice in the same amount and deposit it into the Clearing Account.  You now have their vendor bill paid, the Clearing Account is $0, and their customer invoice has been paid down by the amount of the bill.  The amount due on their invoice should be invoice total less their vendor bill. 

     

    If their vendor bill is more than their customer invoice, just reverse the process - receive payment on the invoice in full and deposit it into the Clearing Account.  Then pay down their vendor bill by the same amount from the Clearing Account.  Now, the balance due on the vendor bill is the total bill amount less their customer invoice.   

      PinkyK
      PinkyKAuthor
      February 17, 2025

      YES! This is it! Thank you!

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