136: Issuing Customers Credit In QuickBooks Whether You Are Starting A Business Or Side Hustle
136: Issuing Customers Credit In QuickBooks Whether You Are Starting A Business Or Side Hustle, A Solopreneur, Entrepreneur, Mompreneur, Freelancer, Bookkeeper, Virtual Assistant, Business Owner, Or Self-Employed
Making sure that your customer’s balances are correct will not only ensure your financial statements are accurate, but you will have fewer inquiries from customers about their balances as well and less cleanup on your Accounts Receivable Aging Report down the road. Over the next few weeks, I am going to help you gain a deeper understanding of your Accounts Receivable Aging Report as well as how you can make any adjustments so that your customer’s balances are accurate, and we are going to start this week off with how to issue a customer a credit in QuickBooks. In today’s podcast episode, I’m covering what a credit memo is, when you need to issue one, and how you can properly apply a credit memo to an outstanding invoice. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA, understanding when it is appropriate to issue your customers a credit memo and how to do it correctly will help ensure your customers are happy and your books are accurate. These tips are essential whether you are using a computerized software system like QuickBooks, Xero, Wave, FreshBooks, or HoneyBooks for your business finances; or doing your bookkeeping manually with an Excel spreadsheet or even a Google Document…
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Show Notes:
Making sure that your customer’s balances are correct will not only ensure your financial statements are accurate, but you will have fewer inquiries from customers about their balances as well and less cleanup on your Accounts Receivable Aging Report down the road. Over the next few weeks, I am going to help you gain a deeper understanding of your Accounts Receivable Aging Report as well as how you can make any adjustments so that your customer’s balances are accurate, and we are going to start this week off with how to issue a customer a credit in QuickBooks. In today’s podcast episode, I’m covering what a credit memo is, when you need to issue one, and how you can properly apply a credit memo to an outstanding invoice. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA, understanding when it is appropriate to issue your customers a credit memo and how to do it correctly will help ensure your customers are happy and your books are accurate. These tips are essential whether you are using a computerized software system like QuickBooks, Xero, Wave, FreshBooks, or HoneyBooks for your business finances; or doing your bookkeeping manually with an Excel spreadsheet or even a Google Document…
Welcome Back…Have you taken a look at your Accounts Receivable Aging Report in QuickBooks lately? If not, you may be surprised at some of the balances that are showing up for your customers. You can view your Accounts Receivable Aging Report in the reports section under customers in QuickBooks. In a perfect world, you should be able to view this report, and the balance that is listed for each customer should be the exact balance that they owe you. This total amount is reflected in your Accounts Receivable Balance on your Balance Sheet, so it is important to ensure that these balances are correct. There may be times when your customer returns an item or asks for a refund for one reason or another, and you need to issue a credit memo so that their overall balance is reduced by this amount. A credit memo is simply a credit amount that is applied to your customer’s account. This credit may reduce the original invoice if it has not been paid yet, the credit may be applied to a future invoice, or you may need to refund the credit amount to the customer if there will be no additional amounts incurred on their account to apply the credit to. Whenever you issue a credit memo for a customer, you are reducing the overall Accounts Receivable balance.
I receive questions about how to issue a credit memo for customers all the time. I understand that it is not something that you do every day, and that makes it even harder for business owners like you to remember how to do it from one time to the next. You may only need to issue a credit memo for your clients once a year, or maybe even less than that if you don’t have any situations where your customers are requesting refunds, and that is always a good thing, but when you do need to issue a credit memo, I want to make sure you know it can be a relatively simple process, and it is something you can definitely do on your own. Some examples of when you may need to issue a credit memo are when a customer is requesting a refund, when a customer didn’t receive what they originally ordered, when a customer is unsatisfied with their purchase, when a customer ordered the wrong product, when the wrong product was sent to a customer, when the product or service was damaged, defective or didn’t meet the customer’s expectations, when a customer receives their order too late, or when your customer no longer needs the product. You will also want to make sure that you have a good refund policy in place for your business so you know exactly when you will or will not issue a refund or credit to your customer, and your customer should be able to view these policies when they place their order so you know they are accepting and understand your policies.
When you are creating a credit memo in QuickBooks, whether it is QuickBooks Desktop or QuickBooks Online, you can easily go to the customer center and select the customer that you need to issue a credit memo for. When you have selected the customer, you can then create a credit memo. It may be helpful for you to view the original invoice so that you know what the customer had originally purchased from you so that when you issue the credit memo, you can select the same items for the credit. This will help keep your income statement accurate as you will be crediting the same product or service that you originally created for your customer.
The last step when issuing a credit memo for a customer would be to apply this credit memo to an outstanding invoice. When you issue the credit memo, you will notice that the overall customer balance is reduced, but until you actually apply the credit memo to an outstanding invoice, it will show that it is unapplied. To apply the credit memo to an invoice, you will need to Receive Payment so that the credit memo can be applied to an open invoice. When you do this, you will see that the invoice amount due will be reduced and the credit memo has been applied or closed.
Having your systems and processes in place for your business will help you create an efficiently running business. If you are looking for help so that you can increase your efficiencies in your business and allow for more time in your personal life or other higher priority work in your business, make sure that you sign up for one of my free consultation sessions, you can go to www.FinancialAdventure.com and click on the work with me button. I’m looking forward to meeting with you soon and digging deeper to see where you currently are in your business and start creating the steps so that you can reach your vision and goals for the future, not only in your business but in your personal life as well. I’m ready to work with you and see all of your successes. We’ll work together so that you can create your best work-life balance. I’ll post links to this and other valuable resources for business owners and accountants where you are listening to this podcast.
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