Vendor Credits and Refunds
Vendor credits and refunds reduce the amount you owe on a bill without making a cash payment. This guide explains what credits and refunds are, how to record them, and how they affect your bill balances.
What Is a Vendor Credit
A vendor credit is a reduction in the amount owed to a vendor. Credits can arise from:
- Returned merchandise that the vendor accepted back
- A pricing error on the original bill that the vendor has corrected
- A discount applied after the bill was created
- A service that was not delivered as agreed
Credits reduce the bill balance without requiring a cash outflow from your business.
Recording a Credit
To record a vendor credit against a bill:
- Open the bill from the Bills Browser
- The bill form displays a Credits and Refunds total in the payment summary area
- You can enter credits through the Returns field on the bill form, which directly reduces the effective balance
The Returns field on the bill form is the primary way to record vendor credits. Enter the total credit amount and save the bill. The balance recalculates automatically.
How Credits Affect the Balance
The bill balance formula is:
Balance = Amount - Returns - Total Payments
When you increase the Returns amount, the balance decreases by the same amount. For example:
| Field | Before Credit | After $50 Credit |
|---|---|---|
| Amount | $500.00 | $500.00 |
| Returns | $0.00 | $50.00 |
| Payments | $200.00 | $200.00 |
| Balance | $300.00 | $250.00 |
The credit reduces the balance from $300 to $250 without any additional payment being recorded.
Refund Processing
A refund is different from a credit. A refund means the vendor has returned money to you, typically when you overpaid or returned merchandise after payment. To record a refund:
- If the vendor issues a check or bank transfer back to you, record this as a negative payment or adjustment
- The refund amount should be reflected in the Credits and Refunds total on the bill
Refunds and credits are tracked together in the Credits and Refunds display on the bill form. Both reduce the effective amount owed.
Credits vs Payments
| Aspect | Payment | Credit/Refund |
|---|---|---|
| Cash outflow | Yes | No (credit) / Inflow (refund) |
| Reduces balance | Yes | Yes |
| Recorded via | Payment Transaction form | Returns field on bill form |
| Appears in | Payment history grid | Credits and Refunds total |
When Credits Fully Cover the Balance
If credits and returns bring the balance to zero without any cash payments, the bill status updates to Paid. The system treats a zero balance as fully settled regardless of whether the settlement came from payments, credits, or a combination.
What to Read Next
- Recording Payments on a Bill — Record cash payments against a bill
- Editing and Updating a Bill — Modify bill amounts including returns
- Canceling a Bill — Cancel a bill instead of crediting it