Creating Credit Memo
A credit memo is created for issuing credit to the customer. Depending on whether an invoice exists in the system, you can create an invoice credit memo or credit memo. It's important to note that if the credit memo contains inventory items, they are also credited back into the system.
The credit memo process involves various status indicators that indicate whether it is available to be used on an invoice or refunded to the customer.
Creating Credit Memo
When entering a credit memo, you'll begin by entering essential header-level information, such as the store, return type, customer details, account, and reference number. Once the basics are set, you can add item(s) to the memo and proceed with the return process.
Credit Memo Header Fields
Main
Select Store
This is the Store from which the Credit is being processed. Any Inventory Items will be Returned to this Store.
Main
Return Type
This lets you choose among 2 types of RMA processes for the returned goods. “Direct” will ask you for a location when you add an item, so you will have to put away the item immediately. “Warehouse” will give you the option of generating an ASN for putting away the goods into the warehouse at a later time. Choose the option which best suits your warehousing workflow.
Main
Select Customer
Type a Name, Phone number, or email here to select a Customer for the Credit Memo. Click on 
icon for more details on the selected Customer.
Main
Select Account
This fields allows you to select the account from which the credit amount will be credited.
Main
Ref No
This field allows you to assign a unique reference number or identifier to the credit memo for easy tracking and reference purposes.
Main
Date
The date on which the credit memo was created or initiated is captured in this field.
Main
Sales Rep
This is the Sales Rep associated with this credit memo. Once a customer has been selected this field will automatically be filled and will require authorization to edit.
Main
Project/Class
Select a project or class to associate this credit memo.
Main
Link To Invoice
This field allows you to link an invoice with the credit memo.
Main
Third Party Notes
This field displays the third-party notes for the orders created using an integration like Shopify, etc.
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Ship To Address
The "Ship Address" field shows the shipping address for the credit memo. When a customer is selected, this field is automatically filled with the corresponding shipping address. You can choose other addresses from the drop-down menu or edit the address by clicking on it
Footer
Memo
The "Memo" field provides space for writing notes or any additional information related to the credit memo.
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Exchange Rate
If the credit memo is for a foreign customer, the "Exchange Rate" field allows you to specify the conversion rate for currency exchange.
Inventory Log
The Inventory Log tab records all stock movements related to the credit memo. It helps users trace how the credit memo has impacted inventory levels. The log contains the following columns:
Column
Description
Type
Indicates the nature of the transaction (e.g., Return, Adjustment).
Store Name
The store or warehouse where the transaction took place.
Item #
The unique item number involved in the credit memo.
Description
A short description of the item.
Qty
Quantity affected by the credit transaction.
Location
Specific location within the store/warehouse.
Txn Date
The date of the transaction.
Create Source
The origin or source of this transaction record.
Create Datetime
The date and time the record was created.
Custom Fields
The Custom Fields tab allows you to store additional, user‑defined information for the credit memo. In XoroERP, you can configure custom fields for different data types. For Credit Memo, the available custom fields include:
Field Name
Type
CF1‑CreditMemo‑Text
Text field for additional notes or references.
CF2‑CreditMemo‑Number
Numeric field for storing quantities, codes, or other numbers.
CF3‑CreditMemo‑List
Dropdown list for selecting predefined values.
CF4‑CreditMemo‑Date
Date picker field for recording specific dates.
Linked Orders
The Linked Orders tab displays all sales orders that are connected to the current credit memo. This is useful for tracking the origin of the credit and understanding which transactions are impacted.
Function: Shows a structured, tabular list of linked sales orders, purchase orders, or other documents related to the credit memo.
Purpose: Maintains a clear audit trail between the credit memo and its source transactions.
To link a Credit Memo to a Sales Order, refer to the section “Linking a Credit Memo to a Sales Order.”
Adding Item(s) to the Credit Memo
After inputting the header-level information in the credit memo, you'll proceed to enter line-level details, which encompass adding the item(s) returned by the customer. In case no product returns are involved, you can add non-inventory or service item(s). In the line-level section, you can add individual items, and specify their quantities, unit cost, and any applicable taxes.
Credit Memo Details Header Fields
Item Type
Specify the type of item you want to add to the credit memo- Inventory, Non-Inventory, Service or Labor.
Item Number
This field allows you to search for and add the item to the credit memo.
Qty
Enter the quantity of the item that you are adding to the credit memo.
Rate
Enter the price of the item you are adding to the credit memo.
Return Notes
Add any notes or reason for return for the item here. Typically these are notes about the item (damaged, missing parts, etc.).
Tax
Select the tax code of the item you are adding.
Project Class
Select a project or class to associate this credit memo line with.
R Code
Choose the item return code for the item being added. The available options are: CS (Customer Satisfaction), DG (Damaged), ICU (Incomplete Unit), and RC (Recall). This is an editable field, allowing users to update the return reason during processing. If DG (Damaged) is selected, the inventory will be received as “Not Available” in the damaged area.
Credit Memo Details Line Fields
Amount
Displays the calculated amount, which is the result of (Unit Price * Qty+Tax Amount).
Description
This is an editable input field that displays the description of the item.
EUP
Indicates the Effective Unit Price for the item.
Item#
The unique identifier for the item.
Item Type
Specifies the type of item, such as inventory, non-inventory, etc.
Project/Class
Allows you to select a project or class to associate with the item line.
Income Return Account
This column allows users to specify the return income account for each line item individually. The default value for this dropdown is set to "Auto Select," which automatically selects the appropriate return income account for the item. However, users can edit this field to select a different return income account as needed.
Qty
This is an editable input field that specifies the quantity of the item.
RCode
This displays the item return code of the item that you are adding.
Re-stocking Fee
This field allows you to add an absolute or percentage re-stocking fee for the item.
Return Note
Add any return notes for the item here. Typically these are notes about the item (damaged, missing parts, etc.).
Tax
This is the tax code of the item you are adding.
Tax Amount
Displays the calculated tax amount for the item.
Unit Cost
This is an editable input field that displays the price of the item.
Uom
Specifies the unit of measure for the item (liter, unit, kilogram, etc.).
After completing the header fields and adding items, click on the "Save" button to create a credit memo.
Linking a Credit Memo to a Sales Order
You can link a Credit Memo to a Sales Order to apply the credit against the order amount. This helps in adjusting customer balances and ensuring accurate financial tracking.
Navigate to Menu → Sales → Credit & Deposit → Credit Memo and open the required Credit Memo.
In the Credit Memo page, go to the Options menu and select the Link Sales Order option.
The Credit Memo Linking window will open, where the Credit Memo# field will be auto-filled.
In the Sales Order field, select the order number you want to link. Only the orders with the same Customer and Store will be available for selection.
Enter the Linked Amount and ensure it does not exceed the Sales Order total. Click on "Link" to create the linkage.
If you want to remove the linking, click on the delete icon next to the linked record.
Once linked, the Credit Memo is associated with the Sales Order and will be applied during invoicing. The linked credit memo is also visible under the Linked Credits/Deposits tab in the Sales Order.
To link a Credit Memo from the Sales Order page, refer to the section “Linking a Sales Order to a Credit Memo.”
Credit Memo Header Level Options
The Options menu provides additional actions that can be performed on the Credit Memo after it has been created.
Void: Voids the Credit Memo and reverses its financial impact. Voided Credit Memos can no longer be used for refunds or invoice applications.
Refund Balance: Allows users to refund the available credit balance to the customer.
Apply on Invoice: Applies the Credit Memo amount against one or more customer invoices to reduce the outstanding balance.
Show Applied on Invoice(s): Displays the list of invoices on which the Credit Memo has been applied.
Show Refund(s) from Credit: Displays all refund transactions that have been processed against the Credit Memo.
Show Credit Transfers: Displays any credit transfer transactions associated with the Credit Memo.
Add To Email Queue: Adds the Credit Memo to the email queue so it can be sent to the customer at a later time.
Show Transactions: Displays all accounting transactions generated by the Credit Memo.
Show Audit Trail: Displays the complete audit history of the Credit Memo, including all changes, updates, and user actions performed on the document.
Link Sales Order: Allows users to link the Credit Memo to a Sales Order. The linked credit can then be applied against the Sales Order during invoicing.
Create Duplicate: Creates a duplicate of an existing Warehouse-type Credit Memo, including its header information, item lines, quantities, return details, and related transaction data. During the duplication process, the system also generates the corresponding inventory transactions and records them in the Inventory Change Log. This option is available only for Credit Memos with the Warehouse Return Type and is not available for Direct Return Type Credit Memos.
Show Activity: Displays the activity history associated with the Credit Memo, including user actions and system-generated events.
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