How to Apply a Credit Memo to an Invoice

When a customer has an approved credit memo with an open balance, you can apply it toward their open invoices during payment processing. Applying a credit memo reduces the amount the customer needs to pay on that invoice — or can close the invoice entirely if the credit covers the full balance.

Credit memos are applied during the payment application process, not directly from the Credit Memos section. You will need to have an open payment for the customer whose credit you want to apply. If no payment has come in yet but you still want to apply the credit to an invoice, you can create a $0.00 payment and apply the credit through it—contact your administrator if you are unsure whether that approach fits your company's workflow.

The credit memo must be approved and must have an open balance to appear as an available option. Unapproved or fully used credit memos will not appear.

1. Go to Receivables. Click Receivables in the left sidebar.

2. Open the customer's payment. Go to Payments by Account, click the customer, and open the payment you want to process. On the Payment Distribution screen, click Apply to Items.

3. Review the Credit Memos section. At the top of the Apply Payment screen, above the invoice list, there is a collapsible Credit Memos section. Click to expand it if it is not already open.

📸 Screenshot suggestion: The Apply Payment screen showing the Credit Memos collapsible section expanded, with one approved credit memo visible showing its type, number, and available balance.

4. Select the credit memo to apply. Check the box next to the credit memo you want to use. The Credits Applied tile in the summary bar at the top of the screen will update to show the credit amount being applied. The Open Balance tile will decrease accordingly.

💡 Note: If you see an amber notice in the Credit Memos section rather than a selectable credit, it means the customer has credit memos that are not yet approved. You cannot apply them until they are approved. Contact whoever manages credit approvals at your organization.

5. Select the invoice to apply the payment and credit toward. In the invoice list below, check the invoices you want to apply the payment to. The credit memo amount will be counted alongside the payment amount — together they cover the total being applied.

📸 Screenshot suggestion: The Apply Payment screen with both a credit memo selected and an invoice checked, showing the five summary tiles updated: Payment Total, Previously Applied, Applying Now, Credits Applied, and Open Balance.

6. Confirm the totals. Review the summary tiles at the top to make sure the amounts look right before saving:

7. Save. Click Save or Apply. The credit memo balance reduces by the amount applied, and the invoice balance updates accordingly.

Return to the Credit Memos section to confirm the credit memo balance has decreased. If you used the full balance, the memo will no longer appear in the Open Balance Credit Memos list. If a balance remains, it stays available for future use.