This will cover the cost of the item or service performed for the customer.Ī credit memo (or a credit note) is an actual “credit” to a customers account.

A refund receipt in QuickBooks shows a refund that you gave that customer. Refunds are given back to the customer after an item or service did not meet their expectations. Both deal with added funds to a customers account, but the funds are handled differently in each scenario.Ī refund is a reversal of a previous charge for an item or service. People often get confused as to the difference between credit memos and refunds. How is a credit memo different from a refund? Or a delayed credit? This means the buyer can exchange the item or service for other offerings from the seller. This keeps records straight because invoices cannot be deleted or edited after they are sent to the customer.Īnother reason why sellers would issue credits to a buyer would be because don’t have a refund policy put together for returned items. One of the main reasons businesses use credit memos is because they need to cancel part or all of a past order. After it’s added to the customers account, it will be there until it’s applied to a future invoice or payment.Ī credit note is technically a legal document that is provided to customers to let them know that a credit is being added to their account. This can be any amount the seller specifies. What is a credit memo and why is it important?Ī credit memo (credit memorandum) can be added to a customers account at any time. Let’s take a look at why credit memos are useful and how you can set them up in QuickBooks Desktop and Online. In QuickBooks, creating a credit memo is easy. Or, if you need to give a customer a credit as a reward or incentive, a credit memo could be applied to their account.Ī credit memo is a great way to reduce the amount they owe you, or will owe you in the future. One that you might repeatedly come across is a credit memo.Ĭredit memos are useful when you need to reduce a customer’s invoice. There are a lot of types of payments you’ll have to deal with as a small or medium sized business.

Define credit memo