What is (Invoice) Credit Memo?

What is Invoice Credit Memo?

An (Invoice) Credit Memo is a Credit that is given to a Customer. This is usually created when an Item is returned. It can be created on an existing Invoice in the system (Invoice Credit Memo) or it can be created on its own (Credit Memo). A credit memo can be issued to a customer, typically in the scenario of a return or a damaged item. The customer can then use that credit for future orders or request a refund. There are two modules that can be used to create a credit memo: Invoice Credit Memo and Credit Memo.

Credit Memo: A credit memo is a general term that refers to a document issued by a seller to a buyer, indicating a credit or refund for goods or services previously provided.

Invoice Credit Memo: An invoice credit memo is a specific type of credit memo directly linked to a particular invoice. It is used to correct or reverse charges explicitly associated with that invoice.

Once the Credit Memo is created, it can be used in one of two ways:

Applied to a Future Invoice: The credit amount can be applied to a future purchase by the customer. This reduces the total amount owed on the next invoice.

Refunded to the Customer: In some cases, the customer may request a refund for the credit amount instead of using it towards future purchases.

Credit Memo: Types

There are 2 types of credit memos:

• Direct: In the case of a Direct credit memo, inventory can be immediately put away in the warehouse or store. This means the inventory becomes immediately available for resale, and there are no inventory-related issues to address.

• Warehouse: In the Warehouse credit memo scenario, inventory is received in the Return location. You can then generate an ASN for putting away the goods into the warehouse at a later time.

Different Ways to Create a Credit Memo:

Create a credit memo from invoice

If the invoice already exists in Xoro and you are returning inventory into stock, then you will want to create an Invoice Credit Memo to process your return.

Create a new, individual credit memo

If the invoice does not exist in Xoro or if you are giving a credit to a customer without returning any inventory into stock, then you will want to use the Credit Memo module. Add a service type item, and adjust the credit amount to process the return in this case.

Please consult your accounting team when creating the Service type item to ensure the correct accounts are set up.