![]() The negative impact of not using up credit memos Teams and departments that can’t successfully make credit memo transactions end up moving to higher priority tasks on the to-do list instead – with negative results for the business. In the world of credit memos, where standards can be ill-defined, human grit and determination isn’t enough. Without a Marvel-esque memory, or sophisticated tech to keep track for you, you're onto a loser. You’re now getting additional memos and you (and your systems) aren’t sure what to do with the original one for the total amount. Mismatched amounts: The six-figure memo is great to have but your next purchase from the vendor is for half that. Late to the game: If the six-figure credit comes in months after you’ve stopped using that vendor, imagine having to face the rigmarole of procurement for a one-off purchase using a credit memo. If you can’t easily find the memos, your chances of using them are slim to none. Funnily enough, this is where problems can start – here are three common reasons why.Ĭrouching credit, hidden memos: Not all credit memos get stored in the same way, and some only exist in an email hiding out in your inbox. There's a nice, accurate six-figure credit amount in the financial records of your customer account. Picture this: you’re working in the Accounts Payable function for a Shared Services Center and your vendor sends you a credit memo for the value of the goods you returned. Let’s go through a simple scenario to get to the bottom of it. Since we’re talking about business services not the latest dunks, the dollar value of unused credit memos is dizzying – if not totally maddening. We’ve established what a credit memo is and the common reasons they get issued – now for the reasons they can go unused.Īpproximately $3 billion worth of gift cards go unused every year in the United States alone. The seller was late in completing the delivery – and the buyer no longer needs the item The seller accidentally overcharged the AP department Here are some top reasons – there are many more – that would lead to the issuance of a credit memo for a future invoice and future purchases: ![]() ![]() For business goods and services it’s a similar story. We return things for all sorts of reasons. Sometimes it's size, other times it’s color, and sometimes you simply change your mind within 30-days. You were being overly polite when you told the sales assistant they fit perfectly. You unbox the sneakers, slide them awkwardly on, wiggle your toes around, and realize you’ve made a big mistake. They will also include the reason for the creation of the credit memo. It's different from a refund because it provides credit for a future invoice amount, not cash, to the customer account.Ĭredit memos contain important information, including: the purchase order number, date of purchase, the original invoice number, corresponding invoice date, payment terms, billing details, buyer shipping address, prices, quantities, and more. How is it different from a refund? Glad you asked. That money can be applied to future purchases of goods and services. What a credit memo isĪ credit memo, short for credit memorandum and occasionally known as a credit note, officially acknowledges a customer is owed money. It's time to make more of credit memos – here's what you need to know to better manage them. Sellers apply a credit memo to a future purchase but the buyer never takes them up on it. The same goes for business-to-business transactions. We’re all guilty of it: we buy something, return it for store credit, and then swiftly forget about the store credit. Learn what credit memos are, why companies create credit memos, and how to cash in every single one. Writing off credit memos is a little like turning on the incinerator when there’s cash inside.
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