Credit memos are an important aspect of running any business, allowing you to amend an invoice to reduce the amount due from the customer. Business software like ours can make this essential part of doing business much easier, automatically adding the updated invoice information directly to your accounting records to save you time on duplicate entry and ensure all of your records are as accurate as possible.

Keep reading to learn more about what a credit memo is, when it should be used, and how easy it is to create one using RB’s pool and spa software.

What is a Credit Memo?

Sometimes, mistakes happen and a customer is overcharged on an invoice. Or they may purchase a product to find that it is damaged or defective and want to return it. These are just a couple of instances when a credit memo can be useful. Sometimes called credit invoices, credit memos are negative invoices you can send to your buyers that reduces the price of a previous invoice. Anytime a buyer has a legitimate reason not to pay the total amount of the original invoice, a credit memo is usually appropriate. Examples include when the buyer returns products or is unsatisfied with services rendered, the price quoted on the original invoice is incorrect, or they overpaid in some fashion.

A debit memo is a different kind of correction to an invoice which increases the payment due amount. A debit memo is appropriate if the cost of a product or service has increased or the original invoice amount was too low.

How to Create a Credit Memo

RB pool and spa software makes the creation of credit memos extremely simple. You can apply a credit memo to multiple invoices or multiple line items with just a few clicks. Keep in mind that credit memos can only be generated if the order has already been invoiced. If the order hasn’t been invoiced yet, then it can be canceled instead.

There are two types of credit memos: online and offline refunds. Online refunds can be issued to any customer who paid through a credit card. An offline refund can be used for credit card customers as well as those who paid using a check or cash. RB software also automatically generates credit memo usage reports, so you can track how many credit memos your team creates over a period of time and evaluate whether there are ways to reduce the number of memos created to improve the accuracy of original invoices.

You can customize the software to use only the features you need. If you’re using RB’s accounting features — or QuickBooks, which RB is compatible with — the software also automatically records the credit memo for your accounting records. This way, your records are as accurate as possible without any duplicate entry needed from your team.

If the buyer has already paid the full invoice amount, they can use the credit memo on future payments or receive the difference between the credit memo and the original invoice as a refund. If they haven’t yet paid, the credit memo will apply to the original invoice to reduce the amount due — they just pay the remaining balance.

Example of a Credit Memo

The format of a credit memo doesn’t differ greatly from a standard invoice. The primary difference is that it references the original invoice it is intended to amend. A credit memo should include:

• The words “Credit Memo” at the top of the document so the buyer is clear about what they’re receiving
• Your company’s information
• The customer’s information
• Date issued
• The credit memo number
• The original invoice number
• A description of the goods or services rendered
• Total amount credited

Simplify Accounting for Your Pool and Spa Business

RB’s software offers a variety of features from point-of-sale to accounting to marketing and more! It will help you get your business organized and keep it running smoothly. Learn how in our eBook, Your Ultimate Guide to Running a Smooth and Streamlined Pool & Spa Business. If you’re ready to see the software in action, schedule a no-strings-attached demo with us today.