How to Convert a Credit Memo to a Refund

If a customer has a credit memo with an open balance and would prefer to receive the money back rather than keep the credit on their account, you can convert the credit balance to a cash refund. You can do this directly from the credit memo detail page, without going through the payment application process.

The credit memo must be approved and must have an open balance greater than zero. If the memo is unapproved or fully applied, the refund option will not be available. Contact your administrator if you need to approve the memo before you can proceed.

1. Go to Credit Memos. Click Credit Memos in the left sidebar.

2. Find the customer and open the credit memo. Click the Credits by Account tab, then click the customer name. Click the credit memo you want to convert to a refund.

3. Locate the Issue Refund option. On the credit memo detail page, a notice will appear near the bottom showing the open balance and an Issue Refund button. If this notice is not visible, the memo is either unapproved or has no remaining balance.

📸 Screenshot suggestion: The credit memo detail page showing the open balance notice with the Issue Refund button, appearing below the applied items section.

4. Click Issue Refund. The Issue Refund modal opens, pre-filled with the customer name, the credit memo as the source, the CM number as the source reference, and the open balance as the refund amount. The method defaults to Check.

5. Complete the refund details.

Review and update the following fields as needed:

📸 Screenshot suggestion: The Issue Refund modal showing the pre-filled Customer, source reference (CM number), and Amount fields alongside the Method and date fields.

6. Add refund items (optional). To document the refund at the line-item level, use the Add Item button in the Refund Items table. Enter a description, quantity, and unit price. The Item Total calculates automatically.

⚠️ Warning: If the total of your Refund Items does not match the Amount field when you click Issue Refund, a dialog will appear asking which figure to use. When converting a credit memo, the Amount field — which reflects the credit memo's open balance — is generally the correct figure.

7. Click Issue Refund. Click the Issue Refund button. The refund is created with a status of Issued. You are taken to the Refunds tab, where the new record is visible and shows the credit memo as the source.

The refund will appear in the Refunds register. When the check clears the bank, mark it as cleared — see How to Mark a Refund as Cleared.

💡 Note: Converting a credit memo to a refund means the credit is no longer available to apply to invoices. Make sure the customer and your team are aligned on this before proceeding — once the refund is issued, the credit balance is gone.