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Creating and Applying Credit Memos

For customer balances that need adjustment, create a credit memo.

  1. Go to “Reports” drop-down menu. Go to “Customers and receivables”. Then choose “Open invoices”. Print this report. (You can, as an alternative, keep this report open for the following steps.)
  2. Go to the “Customers” drop down menu. Choose “Create credit memos/refunds”.
  3. Enter the customer name as it appears on your “Open Invoice” report.
  4. Use the same item as was used in the open invoices. (This is not critical as long as this is item is linked to an income account.)
  5. Enter the amount of bad debt (the amount you will not collect). Save the transaction.

 

To apply credit memos to outstanding invoices, use these steps. This is necessary when a customer has a zero balance and is still shown on the “Open invoice” report. When these credit memos (or payments) are applied to open invoices, the customer will not appear on this list. This part of QuickBooks is not intuitive so read these steps closely.

 

  1. Go to the “Customers” drop-down menu. Choose “Receive Payments”.
  2. Enter the customer name.
  3. You'll notice that there is an “unused credit” amount toward the bottom of this form equal to the amount of the outstanding invoice.
  4. Click on the outstanding invoice line (not on the check mark column). This should highlight the invoice line in black. This tells QuickBooks which invoice you want to apply the credit.
  5. Click the button named “Set Credits”.
  6. Check the credit amount you wish to apply. Then choose “Done”.
  7. Now, your “Open invoice” report should not show this customer (if the balance is zero and all payments/credits have been applied).

     
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