How to Issue Refunds and Credit Memos

Tyler MacDonald Updated by Tyler MacDonald

When a customer has made a payment for a purchase, but due to certain circumstances, they are entitled to receive their money back, a refund is issued. This process involves returning the actual amount of money to the customer that they paid for the purchase.

On the other hand, a Credit Memo is a useful tool for recording a credit or adjustment that can alter the balance of an invoice. This formal statement serves as a record of the credit or adjustment, and it helps in keeping track of any changes in the balance of an invoice.

It is important to note that Credit Memos can only be created for invoices and not for any other type of transaction. This means that if you want to make a credit or adjustment to a purchase order or a sales order, you will need to create an invoice first, and then create a Credit Memo against that invoice. By doing this, you can ensure that your records are accurate and up-to-date.

Understanding Credit Memos and Refunds in shopVOX

When a customer is entitled to receive their money back due to certain circumstances, a refund is issued, which involves the actual transfer of funds back to the customer. However, it's important to clarify that shopVOX does not hold or process these refunds. Instead, the platform provides a Credit Memo feature that serves as a record-keeping tool for adjustments or credits that can alter the balance of an invoice. This formal statement helps track any changes in the invoice balance without involving the actual monetary transaction. Therefore, while shopVOX helps manage and document these credits and adjustments, the actual refund process must be handled separately outside the platform. This distinction ensures that all financial records are accurately maintained without shopVOX being directly responsible for holding or transferring funds.

How to Create a Refund

You can only create a refund when there is an over-payment or additional funds available from the customer's payment.

Let's convert a Sales Order to an Invoice. Apply a payment, and issue a refund

  1. Open up a Sales Order. Transactions > Sales Orders > Select a Sales Order, select the blue action button, and select "Convert to Invoice"
  2. On the Convert to Invoice screen, select the Green "Convert to Invoice" button.
  3. Your Sales Order will be converted into an invoice. Now select Transactions > Payments from the top toolbar
  4. From the Payments screen, select "+Add New Payment"
  5. From the New Payment Screen, select the invoice you wish to pay and enter the "Amount to Apply", as well as the "Amount Paid", then "Save Payment"
    It's very important to uncheck "Calculate Amount Paid" and enter in a value that's greater than the "Amount to Apply". Remember, this is an example of overpayment. Without doing this step, you will not be able to see how a refund is created
  6. You will see a new window with your Payment #. It will show the Amount Paid as well as the Balance.
  7. Select the blue action button and choose "Add Refund"
  8. The next screen will show you the Refund that's available. Adjust any details, and select Add New Refund
  9. Your payment will be adjusted with the new Balance and Refunded amount showing.

How to Create a Credit Memo

You can only create a Credit Memo from an Invoice, not a Quote or a Sales Order. A Credit Memo is issued to raise or lower the invoice balance. You may also use a Credit Memo in the event the order was canceled or modified by you or the customer after the Sales Order was converted to an Invoice.
  1. Select Transactions > Invoices from the top toolbar.

  1. Select the Invoice that requires a Credit Memo
  2. Click on the Blue Actions button and select - Create Credit Memo.
  1. Select the check box beside the lit item(s) you would like
  2. Click on Create Credit Memo.

  1. Review the balance on the bottom of the invoice to see how the Credit Memo is calculating

  1. Click on the "Related Tab" to review anything associated with the Invoice.

Here are some situations to consider when you might use Credit Memos:

  • Your customer has already paid the full amount, and you agree to give a credit to be used on future orders. In this scenario, create a credit memo and then record some sort of refund on the invoice.
  • The customer made a partial payment, and an agreement was made to credit part of the order. In this scenario, create a credit memo for the credit amount. If done properly, this credit memo will now show that the invoice balance owed is $0. This credit memo represents your company taking a loss on the invoice, and it also satisfies the remaining balance so it falls off the collections module.
  • Sometimes customers make payments that are nominally short or over (+/- $1 depending on your currency). In these instances, credit memos allow you to correct/reconcile these discrepancies toward the invoice so that they are removed from your collection reports. They are a great way to get invoices to a zero balance.
A negative balance on an invoice would mean that the Credit Memo was greater than the balance and would be the refund amount for a customer.

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