What is a credit invoice
By Andrew K.
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Content
When should you use a credit invoice?
Returned goods
When a customer returns goods, a seller may issue a credit memo to show what is due to the customer. This is important for recording accounts receivable and account payables, inventory, and record keeping, as the memo will include details or reasons for the return of the product
Promotion discount
When giving a customer a discount on an already issued invoice, a seller issues a credit memo for discount purposes.
Pricing disputes
If you invoiced your client at a price that they do not agree on, you can use this to resolve mutual understanding or issue a credit memo for a price reduction.
Prepayment
when a customer pays for a product or service before an invoice is issued, the buyer can create a credit memo as a receipt for the payment until the invoice is completed
Balance write off
this is when the seller decides to write off the balance if the customer fails to pay or if the remaining balance is negligible and the seller decides to write it off.
This can become useful if the customer fails to make payment and the balance becomes uncollectable.
If an invoice was issued by mistake
Again deleting an invoice is a bad practice. And when you are ruining a business, mistakes are avoidable.
You can write a credit memo to inform customers that they don’t need to pay. This is considered best practice for accounting purposes for you and the cent.
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