PSA A/R - Credit Memo: How to issue a credit when a customer is canceling their account

How to issue a credit when the customer is canceling their account

  • If you are issuing a credit due to an overpayment, we suggest you follow the steps in the article on How to apply a credit due to an overpayment.
  • Only issue credit for the balance still owed by the customer or less. 
    • Create the Credit Memo for the balance owed by the customer. If the customer has already paid part of the bill, do not include that amount in the Credit Memo.

The following example will show the process if the customer decides to withdrawal or cancel from the service after making an initial payment. If the initial Customer Invoice was for $525, with a $25 Registration Fee and a $500 Service Fee, and the customer has paid the $25 Registration Fee, you would create a Credit Memo for only the $500 balance.  Instead of including the $25 Registration Fee which you have already received, you would refund the $25 to the customer. 

How to apply the credit

  1. In the Payments screen, select the customer. The credit will automatically display.
  2. Instead of entering the credit payment in the Payment Amount field, enter the credit payment in the Credit Amount field. (Images A-B)
  3. Select the Auto Apply link which will fill in the Applied Credit field and Submit. (Image B)applycredit.png 



How to refund the initial payment

Use the Ledger & Payables Module, Bills screen to create the customer refund. Since the payment received created a transaction which debited cash and credited the first income account listed on the invoice, use that income account on the line item of the bill.

So, if the invoice grid was entered as follows:

And the resulting Deposit Register after Applying the Payment was this:

The Bill created to refund the $25.00 would look like this:

You can see in the following Account Audit Report, the amount is reversed when the refund check is issued:

What to do if you created the Credit Memo for the full amount of the initial invoice even though the first $25.00 was already paid by the customer

You may create a negative Credit for the Balance. You still then must pay the customer back.


 Related Articles

How to resolve missing credit after you create a refund bill then delete the bill (technical issue)

How to remove a credit memo

How to apply an overpayment

Entered payment for incorrect customer

How to enter invoice distribution properly to ensure the correct accounts are credited when payment deposit is submitted



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