A Vendor Credit Note is a document sent by the supplier to you, the business, notifying that you have been credited a certain amount due to an error in the original invoice, returns, or other reasons. These can reduce a bill payable or record a credit balance for future purchases.
Recording vendor credit notes
To record a vendor credit note,
Record vendor credit
- In the main menu, go to Purchases, then click on Credit Notes.
- In the Credit Notes list, click on the (+) Button.
- In the dialog screen, choose an AP invoice or bill to create the credit note form and click Create.
- In the header, on the right, choose if you need to exclude taxes and select the credit note type.
The Exclude Taxes option is used to exclude any purchase tax when the credit note has been created on a different fiscal period then the invoice or when you have already paid those taxes.
The credit note Type option sets the credit note transaction type; this could be Damaged goods, Void Invoice, Returns, or Discount on Purchase.
Note: If you’re creating a credit note for a paid bill, the “discount on purchase” option won’t be available.
Content Items Tab
In the Content section, you’ll see a list of items copied from the original AP invoice or bill.
- Click on the Content Tab,
- Remove all the items except for the returned items.
- Set the return quantity in the quantity column field for each item.
- Once done, let’s click on Save.
 Remove Items: When creating a credit note from an AP invoice or bill, Cashflow pulls in all the items in the original invoice. You need to retain the items being returned and remove the other items.
Note: If the credit note is for a Discount on Purchase or to Void an AP invoice or bill, you don’t need to remove these items.
If we’re creating a credit note from a non-paid AP invoice or bill, Cashflow will automatically apply the credit note to this invoice and reduce the accounts payable.
However, If the AP invoice or bill has already been paid, the credit note will remain open and can later be applied to a future purchase, thus generating an account receivable from this vendor.
Applying credit notes to unpaid bills
To apply a credit note to an unpaid bill,
Apply a credit note to unpaid bills
- In the main menu, go to Purchases, then click on Expenses / Purchases.
- Choose the AP invoice or bill to apply the credit note to, click on the options menu, and then click on the Apply Advance option.
- In the Apply Advance window, choose the credit note from the document list by clicking on the checkbox.
- In the amount column set the amount to apply to this invoice.
- Once done, click on Save.
 Amount Column: By clicking on the checkbox for a particular credit note you enable its amount column. In this column, you can set the amount to apply to the invoice from the remaining available credit note balance.