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Credit Memos

Credit memos record a credit you owe a customer — for returned goods, a billing error, a service issue, or goodwill — and let you apply that credit against their invoices. Each memo tracks a reason, an issue date, and how much has been applied versus what's remaining, so partial applications across several invoices stay clean. They're the audit-friendly alternative to silently editing an invoice.

Key capabilities

  • Draft → issue → apply lifecycle, with partial applications tracked per memo
  • Eight standard reasons (returned goods, damaged goods, service issue, pricing error, billing adjustment, goodwill, duplicate charge, other)
  • Customer-level credit by default; a memo created with an invoice link (for example through Regent) is applied to that invoice automatically when issued
  • Apply across multiple invoices until the credit is exhausted; applied/remaining amounts always reconcile
  • Applying a credit reduces the invoice's balance due — partial keeps it open, full marks it paid
  • Inventory restock on issue for line items tied to product variants (none for service credits)
  • Auto-generated memo numbers (for example CM-0001) and optional internal notes
  • Void draft or issued memos (with a required reason); voiding an issued memo reverses its journal entry and restock. Applied memos can't be voided
  • Delete draft or voided memos; issued and applied memos can't be deleted
  • Customer credit summary showing total available credit and the memos behind it
  • AI Suggest panel that flags likely credit situations from customer patterns
  • List filters by status (All, Draft, Issued, Partial, Applied, Void), with search by memo number

How it works

A memo is drafted, then issued (which restocks inventory where applicable). Once issued, you apply it to invoices; each application reduces both the memo's remaining balance and the invoice's balance due.

flowchart LR
  draft["Draft"] --> issued["Issued"]
  issued -->|"apply part"| partial["Partially applied"]
  issued -->|"apply full"| applied["Applied"]
  partial -->|"apply remainder"| applied["Applied"]
  draft -->|"cancel"| void["Void"]
  issued -->|"cancel"| void["Void"]

How to use it

  1. Open Credit Memos and click Create Credit Memo.
  2. Select the Customer, enter the Amount ($), pick a Reason, and add an optional description. To return stock, tick Restock returned inventory and choose the variant and quantity.
  3. Save the draft, open it, and click Issue to make it available for application (Edit is available while it is a draft).
  4. Click Apply to Invoice, search for the target invoice, and enter the Amount to Apply.
  5. Repeat against other open invoices until the remaining balance reaches zero.
  6. Use the status filter to track where each memo stands. You can also apply an issued credit from an invoice with Apply Customer Credit.

Pro tips

  • A credit memo doesn't reverse the original invoice — to cancel an invoice entirely, void the invoice instead.
  • Apply available credit before sending the next invoice so the customer sees the net amount due.
  • Issue restocks inventory only for line items tied to a product variant; service refunds and billing adjustments restock nothing.
  • You can't void a memo once any amount is applied. If you applied it to the wrong invoice, use Remove (un-apply) on the application — from the credit memo's Invoice Applications list or the invoice's Credits Applied list — to restore both balances, then re-apply it correctly.
  • Application is capped twice: it can't exceed the memo's remaining balance or the invoice's remaining balance, so an over-application is rejected with a clear message.
  • Issue a customer-level credit (no invoice link) when you owe goodwill that isn't tied to a specific invoice; apply it later wherever it fits.

In-depth guide

Lifecycle & state transitions

  • Draft — editable and deletable.
  • Issue — moves it to Issued and triggers inventory restock for variant line items.
  • Apply part of the balance — moves it to Partially Applied.
  • Apply the full remaining balance — moves it to Applied and stamps the applied date.
  • Void — draft or issued memos can be voided with a reason; voiding an issued memo posts a reversing entry and takes any restocked units back out. Once applied, a memo is locked.
  • Delete — only draft or voided memos can be deleted; deleting a voided memo also removes the journal entries it posted.

Applying credit to invoices

  • Each application records the memo, invoice, amount, timestamp, and applying user.
  • The amount is validated against both the memo's remaining balance and the invoice's current balance due.
  • After applying, the invoice's balance recalculates: within a small penny tolerance of zero it's marked fully paid; otherwise it becomes Partially Paid.
  • Because an invoice's balance due subtracts credit applications, credits and recorded payments work together on the same invoice.

Removing (un-applying) credit from an invoice

  • Use Remove on an application to undo a mistaken link — available on the credit memo's Invoice Applications list and the invoice's Credits Applied list.
  • Un-applying deletes the application record(s) for that invoice, returns the amount to the memo's available balance, and rolls its status back to Issued or Partially Applied.
  • The invoice's status is recomputed from its remaining balance (back to Open or Partially Paid). Accounts Receivable was adjusted when the memo was issued, so un-applying does not post another journal entry.

Accounting & inventory

  • Issuing a credit memo posts Dr Sales Returns & Allowances / Cr Accounts Receivable for the full memo amount.
  • Applying credit to an invoice is operational (reduces invoice balance due) and does not post an additional journal entry.
  • Credit memo applications reduce the receivable carried on the linked invoice, lowering what's collectible without deleting the original invoice's revenue posting.
  • On issue, memos with variant-linked line items return units to your default location's on-hand (re-issuing won't double-count stock), and an inventory activity entry records the restock.

AI & automation

  • The suggest action reviews customer patterns and proposes likely credit memos, so common situations (such as duplicate charges or service issues) can be turned into memos quickly.
  • Suggestions are advisory — you still create, issue, and apply the memo yourself.

Limits & edge cases

  • The credit amount must be greater than zero.
  • Updates are restricted to draft memos; issued or applied memos are immutable except for voiding (when still voidable).
  • The customer credit summary aggregates issued/partially-applied memos with remaining balance, giving a single available-credit figure per customer.
  • Lists can be filtered to memos with a remaining balance.

Developers and Regent

Developers can create, issue, apply, unapply and void credit memos over the API; see the Credit Memos API guide. Regent can do the same in chat, asking you to approve each change.