Applying Credit Memos to Invoices

Overview

Applying a credit memo to an invoice means you're using a credit you've previously issued to reduce what the client owes. This formally converts credits into an active reduction on a specific invoice, updating both the client’s balance and your books.

Why Apply Credit Memos to Invoices

• Faster Payments – Credits reduce the client’s out-of-pocket total, which often leads to quicker payments.

• Professional Experience – Clients appreciate when you proactively apply available credits, especially if they’ve asked.

• Cleaner Account Balances – Keeps receivables accurate and reduces the risk of overstatement.

• Accurate Reporting – Applied credits leave a clear audit trail, improving your financial transparency.

When to Apply Credit Memos

Apply to Existing Invoices

• Client requests to use credit on an open balance

• You’re cleaning up old or unpaid invoices

• Client is unable to pay in full but has credit available

Apply to New Invoices

• You're billing for new work and credit is on the account

• Credit was issued for a canceled project or returned product

• You want to reduce the total due from the client before sending

How to Apply Credit Memos to Existing Invoices

Step 1: Locate the Credit Memo

• Go to Clients & Projects

• Select the appropriate client

• Under Sales History, click the Credits tab

• Find the credit memo you want to apply

Step 2: Start the Application

• Click the three-dot menu next to the credit memo

• Choose Apply to Invoice

Step 3: Choose Invoice and Amount

• Select the invoice you want to apply the credit to

• In Amount to Apply, enter how much to use

• (Optional) Split the credit across multiple invoices

• Click Save

✅ What Happens After You Apply the Credit

• The invoice balance is reduced by the applied amount

• The credit memo’s remaining balance is updated

• The invoice status may update to Partial Payment if not fully paid

How to Apply Credit Memos to New Invoices

Step 1: Create the Invoice

• Go to Clients & Projects

• Select the client and click + Invoice under Sales History

• Enter invoice details (items, quantities, rates, etc.)

Step 2: Apply Available Credits

• If the client has available credit, it appears near the invoice total

• Click Apply Credit and enter the amount to apply

Step 3: Review and Send

• The invoice total will reflect the credit

• Review and send the invoice as usual

💡 Best Practices

• Check With Clients – Some clients prefer to approve credit usage first

• Communicate Clearly – Let clients know when credits have been applied

• Use Partial Applications Thoughtfully – Spread credits across multiple invoices when appropriate

• Document the Source – Keep original credit memo details clear

• Review Accounts Regularly – Don't let usable credits sit unused

⚠️ Important Considerations

Credit Memo Scope

• Client-level credits can only be applied to client-level invoices

• Project-level credits are limited to their original project

Credit Limits

• You can only apply up to the credit memo’s available balance

• Remaining balances are tracked automatically

Invoice Impact

• Applying credits may change invoice status to Partial Payment

• All credit applications are recorded for audit and reconciliation

🔍 Where to Review Applied Credits

• Sales History > Billed Tab – Shows invoices with applied credits

• Credit Memo view – Shows updated balances after each application

• Client Overview – Displays real-time credit availability

• Reports – Applied credits appear in revenue and AR reporting

🛠 Troubleshooting