Credit Memos

Credit memos are used to give refunds to customers, back out incorrect invoices and clear bad debt. Each of these tasks start with the creation of a credit memo.

Giving Refunds

The easiest way to give a refund is to create a credit memo and base it on the original invoice. This can be done as follows:

  1. Find and recall the invoice on the Sales Invoicing screen.
  2. Click Activities and select Create Credit Memo. This will create a credit memo with all the same items the original invoice had.
  3. If you don't want to give a full refund or return all the parts, simply delete the ones the customer is keeping.
  4. Save the credit memo to apply the credit to the customer's account or click here for more information on how to refund payments already made by the customer.

Backing Out Incorrect Invoices

Sometimes invoices are not entered correctly. When that happens you need a way to fix the invoice. If the invoice is still unpaid and in an open period you haven't paid tax on yet, you may be able to modify the invoice itself. A safer bet though is to create a credit memo to counter-act the original invoice, then recreate the invoice the right way. Complete the following steps to do this.

  1. Find and recall the invoice on the Sales Invoicing screen.
  2. Memorize the invoice as a template so you can recreate it easily.
  3. Click Activities and select Create Credit Memo. This will create a credit memo with all the same items the original invoice had.
  4. Leave the date alone and save the credit memo. This reverses the original invoice in the current period.
  5. Create the new corrected invoice using the invoice template you previously memorized.
  6. Delete the memorized invoice template.

Clearing Bad Debt

Occasionally you will find customers that are unwilling or unable to pay what they owe you. When this happens you have to write off the bad debt. To do this you will need to create a special account and billing code before creating the credit memo.

Creating the Account

If you don't already have a bad debt account you will need to create one. If you are integrating with QuickBooks or Peachtree, add the account in that software then run the Integration Wizard (under the File menu) and add the account to ESC. If you are using no accounting integration or ESC accounting, go to the Company pull down menu and select Enter Chart of Accounts. Create the account using the Other Expenses category.

Creating the Billing Code

To create the billing code go to the Sales pull down menu and select Enter Billing Codes. Create a new billing code with the settings shown below.

Bad Debt Billing Code

Creating the Credit Memo

  1. To create the credit memo go to the Sales pull down menu and select Enter Credit Memos.
  2. Click the Add New button and select the customer you want to write off.
  3. Add the Bad Debt billing code to the body of the credit memo with a quantity of 1. Set the price to the amount you want to write off.
  4. If this results in a total value that is different from what you entered due to tax, add a discount billing code to the credit memo on the next line. Set the discount percentage to match the tax rate and the invoice total should be corrected.
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