Purchase Credit Notes and Refunds

A credit note is considered a negative invoice. In the same way that payments are applied to close out an invoice balance, refunds are issued to close out a credit note balance. 


Credit notes are a way to amend the details of a purchase order invoice after it has been authorised.


There are four scenarios where a credit note can be applied to a purchase order in DEAR. These are:

  • For individual items – when a unit price has been overcharged.
  • For part of a shipment – when part of the shipment has either been short-shipped, or damaged goods were received.
  • For a whole shipment – when an entire shipment was received incorrectly, or it was shipped out incorrectly.
  • For a discount applied to an order after the invoice has been authorised.


Each scenario will generate different transactions and leave different stock availability levels. Follow the instructions below to make sure you issue the credit note that matches your situation. You can combine these methods in the same credit note if required. 


Finally, credit notes can be issued that are not associated with any particular purchase. 


If you need to process multiple credit notes for the same purchase order, you will need to convert the purchase order to an Advanced Purchase

To add a credit note as part payment of an invoice, see Applying credit notes as part payment - Purchases


NOTE: Credit notes can be voided at any point by clicking Void Credit Note. Voiding a Credit Note does not void the associated purchase order. 

NOTE: It is not currently possible to display credit order notes on documents for the supplier, when the credit note is applied to a purchase order. We recommend using the purchase order memo field to make notes that need to be shown on supplier documents. For standalone credit notes/credit note purchases, Credit Memo field text can be added to Purchase Return document template. See Managing document templates for more information. 


Prerequisites


Table of Contents


Unit price overcharge

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A supplier can issue a credit in the case of the unit price of an item being overcharged. This type of credit note will have no effect on your stock levels. 


To issue a credit note for unit price overcharge:

  1. Navigate to Purchase -> Purchases and select the purchase order you wish to apply the credit note to.
  2. Select the Credit Note tab of the purchase order.
  3. Enter the credit note number and date as provided by your supplier.
  4. Add the overcharged items to the credit note by clicking + or +Add more items. 
  5. In the Price field, enter the difference between the correct price and the overcharged price, and the quantity of overcharged units. 
  6. Click Authorise to process the credit note.



Credit note for partial shipment

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When part of the shipment has either been short-shipped, damaged goods were received, or stock items returned to the supplier a credit note should be issued for the incorrectly received/returned items. Authorising this credit note will trigger an Unstock action, removing the items from your stock levels. The Unstock quantity can be changed, for example, if a refund has been issued by the supplier but the items remain in your inventory. 


To add a credit note for a part of a shipment:

  1. Navigate to Purchase -> Purchases and select the purchase order you wish to apply the credit note to.
  2. Select the Credit Note tab of the purchase order.
  3. Enter the credit note number and date as provided by your supplier.
  4. Add the incorrectly received or returned items to the credit note by clicking + or +Add more items. You can also click Copy to add all of the order lines from the shipment, then delete the correctly received lines.
  5. In the Quantity field of the item line, enter the number of items that were incorrectly received.
  6. Click Authorise.
  7. You will be automatically prompted to Unstock the credit note items. Check that the Quantity field indicates the true number of items unstocked.
  8. Click Authorise to complete.


The unstocked items will be removed from your inventory and your accounts updated.


NOTE: Doing unstock will result in negative stock on hand. Thus, lines can only be unstocked if the products have not been used yet. If the stock has been transferred or some other transaction involving the stock has been performed, unstock may fail. In this case, the credit note can be authorised without an unstock and inventory adjustment can be processed to offset stock level.


Credit note for full shipment

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When an entire shipment has either missing, damaged, or stock items returned to the supplier a credit note should be issued for the incorrectly received/returned items. Authorising this credit note will trigger an Unstock action, removing the items from your stock levels. The Unstock quantity can be changed, for example, if a refund has been issued by the supplier but the items remain in your inventory. 


To add a credit note for a whole shipment:

  1. Navigate to Purchase -> Purchases and select the purchase order you wish to apply the credit note to.
  2. Select the Credit Note tab of the purchase order.
  3. Enter the credit note number and date as provided by your supplier.
  4. Copy the invoice items across to the credit note tab.
  5. Click Authorise.
  6. You will be automatically prompted to Unstock the credit note items. Check that the Quantity field indicates the true number of items unstocked.
  7. Click Authorise.

All of the unstocked items will be removed from your inventory and your accounts updated.


NOTE: Doing unstock will result in negative stock on hand. Thus, lines can only be unstocked if the products have not been used yet. If the stock has been transferred or some other transaction involving the stock has been performed, unstock may fail. In this case, the credit note can be authorised without an unstock and inventory adjustment can be processed to offset stock level.


Discount applied to an order

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To add a discount to the whole order:

  1. Navigate to Purchase -> Purchases and select the purchase order you wish to apply the credit note to.
  2. Select the Credit Note tab of the purchase order.
  3. Enter the credit note number and date as provided by your supplier.
  4. Make a note of the total cost of the shipment.
  5. In the additional costs section, add an item line.



  6. Fill in the Description field with the discount value. 
  7. Insert the discount value into the Price field.
  8. Check that the correct Account and Tax Rule are applied.
  9. Click Authorise.

Your accounts will be updated, and your inventory levels will stay unchanged. 


Standalone credit note

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In some cases, you will need to process a credit note from a supplier that is not associated with any particular purchase order. 


To issue a standalone credit note:

  1. Navigate to Purchase -> Credit Note Purchase.
  2. Add lines to the credit note. Only non-inventory items can be selected. 

NOTE: We recommend creating a generic service item to use for supplier credit.

  1. Click Authorise to continue.


Refunds

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Refunds are applied to credit notes in the same way that payments are applied to invoices. Credit notes must be authorised before refunds can be applied. 


NOTE: If using Xero as your accounting system, ensure Xero payment settings are set to Synced both ways or Pushed to Xero. QuickBooks Online payments are set by default to sync both ways. Some users prefer to entirely manage their payments/refunds through their accounting system. If this is the case, you can leave this section blank.


Credit notes can be issued as a refund or as a supplier deposit to be used against future purchase order with the selected supplier.


To issue a credit note refund to a supplier deposit:

  1. Return some or all of the value of the credit note to a supplier deposit by clicking +Supplier Deposit.
  2.  A pop-up window will open, fill in the fields and click Create to continue.
  3. The supplier deposit value will be added to the Refund section.


To issue a credit note refund as payment:

  1. Return some or all of the value of the credit note to your payment accounts by clicking +Refund.
  2. Enter the account details and date paid, then click Save to finish.


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