A credit memo is a formal record that reduces what a customer owes. You would create one when a customer returns a product, when a billing error needs to be corrected, or when a dispute has been resolved in the customer's favor. Once created and approved, a credit memo can be applied to an open invoice or converted to a cash refund.
Steps
1. Go to Credit Memos. Click Credit Memos in the left sidebar.
2. Open the credit memo creation form. Click the New Credit Memo button in the toolbar. The Create Credit Memo modal opens.
3. Fill in the Memo Details. The Memo Details section is expanded by default. Complete the following fields:
CM Type — Select the reason for the credit. Common types include Return, Price Adjustment, Dispute, and Miscellaneous. Choose the type that most accurately describes why the credit is being issued.
Issue Date — The date the credit is being issued. Defaults to today.
Approved — Check this box if the credit memo is ready to be used. An approved credit memo will be available to apply to invoices immediately. Leave this unchecked if the memo needs review before it can be used.
Sales Agent — Select the sales agent associated with this customer account, if applicable.
Comments — Internal notes about the credit. These are not customer-facing.
Message — A message to the customer explaining the credit, if needed.
📸 Screenshot suggestion: The Create Credit Memo modal with the Memo Details section expanded, showing the CM Type dropdown, Issue Date field, and the Approved checkbox.
4. Add line items. Click the Add line item button to document what the credit covers. A dropdown gives you two options:
From item list — Select from items already in your system. Use this when the credit is for a specific product or service that exists in your catalog.
Free-form entry — Type in a description and amount directly. Use this for one-off credits or situations where a catalog item does not apply.
Each line item row includes a description, quantity, unit price, item total, revenue class, and a taxable checkbox. The credit memo amount is calculated from the line items — you do not enter it directly.
📸 Screenshot suggestion: The line items table with one free-form row added, showing the description, quantity, unit price, and item total fields in edit mode.
💡 Note: The credit memo amount shown on the memo is the sum of all line items. If the amount looks wrong, check your line item quantities and unit prices rather than editing the total directly.
5. Review the Record Details (optional). Click the Record Details section to expand it. This contains additional tracking fields such as created date and last updated. You typically don't need to edit anything here.
6. Save the credit memo. Click Save. The credit memo is created and appears in the customer's credit memo list. If you checked Approved, it is immediately available to apply to invoices.
After Creating
If the credit memo was saved without approval, it will be visible in the customer's history but cannot be applied or refunded until it is approved. To approve it, open the memo, enter edit mode, check the Approved box, and save again.
If the credit memo is approved and ready to use, see How to Apply a Credit Memo to an Invoice.