A credit note records the return of goods by a customer or a credit adjustment (refund) to a customer’s account for goods or services previously invoiced. It makes all necessary corrections to inventory and income accounts. A credit note does not record actual payment of money to the customer, but only adjusts the customer’s balance in Accounts receivable. A credit note can be created regardless of whether the customer has yet paid for the goods or services.
A credit note should not normally be used if the original transaction was a cash sale, because the sale will not have been recorded in the customer’s subaccount in Accounts receivable. In such situations, a direct refund should usually be made via a bank or cash payment under the Receipts & Payments tab. However, if the cash buyer has also been defined as a customer and prefers an account credit rather than a cash refund, a credit note may be used.
Before credit notes can be created, the Credit Notes tab must be enabled. Click Customize below the left navigation pane, check the box for Credit Notes, and click Update below the list:
Manager offers two methods for creating credit notes:
The easiest way is to create a credit note directly from the original sales invoice. Go to the Sales Invoices tab:
Click the View button alongside the sales invoice issued for the goods or services being returned or adjusted:
Then click the Copy to button and select New Credit Note to open a credit note from the existing sales invoice:
A credit note entry screen will open, prefilled with information from the sales invoice. This avoids re-entering information manually. If the customer is to receive a full refund, no changes to the credit note are required, because the credit note will match the original sales invoice:
If a line item was allocated to Billable expenses on the original sales invoice, no account designation will transfer to the credit note. Manager cannot determine which account to post the expense to, since it is no longer billable. In this situation, select an expense account manually.
If a customer is to receive a partial refund or credit, reduce quantities or amounts on the credit note to match. Remove line items for goods or services not being adjusted. (If the price of an inventory item is being partially or fully refunded, but the item itself will not be returned, enter the refund amount and change the quantity to zero.)
When finished editing, click Create to issue the credit note. Manager can automatically apply a sequential
Reference number to the credit note. (See below.)
The credit amount will be applied to the original sales invoice. If the customer has not paid or only partially paid the invoice, the balance due on the invoice will be reduced by the credit note amount. If a credit note is applied to a fully paid sales invoice, the credit note amount will be credited to the customer’s subaccount in Accounts receivable. Any credit balance will be automatically applied to the next (or the oldest existing) sales invoice for that customer.
If no sales invoice exists or can be found, create a credit note manually. In the Credit Notes tab, click on New Credit Note:
Complete the form:
By default, today’s
Issue date is prepopulated.
Reference is optional and may be used for internal or external sequences. If the box within the field is checked, Manager will number the transaction automatically. The program will search for the highest number among all existing credit notes and add 1.
A previously defined
Customer must be selected in the dropdown box.
After a customer is selected, an optional
Invoice field appears. If the credit note applies to a specific invoice, select it there:
Billing address is filled automatically.
By default, a manually created credit note will show as Custom on the
Description line. This option is correct for most situations. The other option is Early payment discount, but should only be used when such a discount was offered on the the corresponding sales invoice. General information about the credit note can be entered in the other field on the
Line items can be completed semi-automatically by selecting predefined inventory or non-inventory items in the
Item field and entering quantities. Or, they may be entered manually.
Tax codes can be selected.
Tracking Code can be chosen.
Additional lines can be added 1, 5, 10, or 20 at a time.
Checkboxes at the bottom of the form offer the same options as when creating sales invoices.
Save the transaction by clicking Create.
If a customer requests a refund of the credit balance, record a payment from a bank or cash account and allocate the refund to Accounts receivable and the customer’s subaccount. When a refund payment is recorded, the balance of Accounts receivable for the customer will move in the positive direction: