Credit Memo Invoice Template for Excel

What is a credit memo invoice?

A credit memo is a document that is used in different businesses to calculate the total amount of credit, sales tax, and a lot more. This document assists in reimbursement.

How does a credit memo invoice work?

When the buyer receives the defective items, the seller issues the credit memo invoice to the seller in which the amount that the buyer owes is reimbursed. The credit memo invoice clearly states why the seller is issuing it. The reason for reducing the price is specified in the memo.

A credit memo invoice is an abbreviation of the term credit memorandum that is a document generated by the seller of services or goods to the buyer, reducing an amount that the buyer has to get from the seller according to the terms and conditions of some earlier invoice.

The credit memo invoice generally includes the details that why exactly the state amount on the memo has been issued and later can be used to aggregate the information of credit memos to ascertain why the seller is generating these invoices.

A credit memo invoice can also be issued if the buyer returns the goods to the seller or there occurs a dispute over pricing or marketing allowance or due to some other reason and that results in a situation in which the buyer is not paying the seller the whole amount as per invoice.

The seller considers and records the credit memos as a reduction in the balance of its accounts receivables while on the other hand, the buyer records it as a reduction in the balance of its accounts parables.

The seller must always review all of its open credit memo invoices at the closure of each reporting period to assess whether they are linked to accounts receivables or not.

If the buyer has yet to pay the seller, the buyer should use these memos as a partial offset to its payment to the seller that is invoice-based.

If the buyer has paid the whole amount as per memo invoice, the buyer can use the memo to offset an upcoming payment to the seller.

Why does a seller use a credit memo invoice?

Sometimes, the buyer returns the items purchased to the seller because of fault. Since the mistake is at the seller’s end, the seller has to reimburse the amount paid by the buyer earlier. There are also many other situations such as price disputes etc. in which the buyer does not pay the complete amount to the seller.

The seller issues the credit memo with the amount which the seller is liable to pay. It is usually a reduced amount. The credit memo is also useful for the seller because he can keep a record of all the reductions in the accounts payable.

Moreover, the buyer can also use the credit memo if he has not paid the seller. However, if the buyer has already paid the seller, then the credit memo can be used to get a reduction in future payments or can ask the seller to pay the money back through the credit memo.

Benefits of credit memo invoice

The credit memo invoice is very beneficial for the buyer as he gets the reimbursement if he receives a faulty product from the seller.
The seller uses the credit memo invoice to keep a record of account receivables.
The credit memo is also very beneficial when the buyer wants to get a reduction in future payments.

It is a common practice to use credit memo invoices in any business. Therefore, downloading a credit memo invoice template can be very useful if anyone wants to avoid creating one from scratch.

Credit Memo Invoice File: 87 KB

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