Working with Vendor Credits
Vendor credits represent money a vendor owes you that can be applied toward future purchases. Credits typically arise from returned goods, overpayments, pricing adjustments, or negotiated allowances. AccuArk tracks vendor credits with full financial detail and integrates them into the purchase order payment workflow.
How Vendor Credits Are Created
Vendor credits can be created in several ways:
- From a PO negative balance — When a PO has a negative balance (vendor owes you money due to returns or overpayment), choosing "Apply Vendor Credit" from the Manage Negative Balance menu creates a credit automatically
- Manually — Credits can be created directly when recording vendor allowances, pricing adjustments, or other non-PO credits
Credit Fields
Each vendor credit record contains the following fields:
| Field | Description |
|---|---|
| Vendor | The vendor this credit belongs to. Credits are vendor-specific and can only be applied to purchases from the same vendor. |
| Amount | The total credit amount issued. |
| Date | The date the credit was created. |
| Credit Applied | The cumulative amount of this credit that has been applied to PO payments. Starts at zero and increases each time the credit is used. |
| Credit Available | The remaining usable balance: Amount minus Credit Applied. Decreases as the credit is consumed. |
| Linked PO | The purchase order that generated this credit (if applicable). Null for manually created credits. |
| Linked Bill | The accounts payable bill associated with the credit source. |
| Credit To Asset Account | The GL asset account that is credited (debited) when this vendor credit is recorded. Links to the chart_master table. |
| Credit From Account | The GL account that the credit comes from. Represents the expense or liability being offset. |
| Notes | Free-text notes explaining the reason for the credit. |
| Cancelled | Whether this credit has been cancelled (is_canceled flag). Cancelled credits cannot be applied. |
Applying Credits to PO Payments
The most common use of vendor credits is applying them when making a payment on a purchase order. The workflow is:
- Open a purchase order and click Pay or Save & Pay
- Before the payment form appears, the system calls GetVendorCreditBalance() to check if the vendor has any available credits
- If credits are available, a prompt appears offering to apply the available credit toward this payment
- If you accept, the ApplyVendorCredit() method is called, which:
- Increments the Credit Applied amount on the credit record
- Decrements the Credit Available amount by the same value
- Appends a note to the credit record with the user who applied it, the date, and the PO it was applied to
- Reduces the amount you need to pay on the PO
- The payment form then opens with the reduced balance, and you pay any remaining amount
Credits are applied on a first-available basis. If a vendor has multiple credits, they are consumed starting with the oldest.
Reversing a Credit Application
If a credit was applied in error, it can be reversed using the ReverseVendorCredit() method. Reversing a credit:
- Decrements the Credit Applied amount (restoring the credit balance)
- Increments the Credit Available amount
- Adds a reversal note to the credit record with the user and timestamp
- Adjusts the PO payment records accordingly
Reversing a credit does not delete any records. The original application and the reversal are both preserved in the credit history for audit purposes.
Cancelling a Credit
If a vendor credit is no longer valid (for example, the vendor disputes the credit or it was created in error), you can cancel it by setting the is_canceled flag. When a credit is cancelled:
- The credit no longer appears as available when making PO payments
- Any unapplied balance becomes zero
- Previously applied amounts are not reversed automatically — you must reverse them separately if needed
- The cancellation is logged for audit purposes
Checking Vendor Credit Balances
You can check a vendor's total available credit balance in several places:
- Vendor form — Payments tab — Shows all credits with their amounts, applied values, and available balances
- PO payment workflow — The system automatically checks and reports available credits before every payment
- GetVendorCreditBalance() — Returns the total available credit across all active (non-cancelled) credits for a vendor
GL Account Integration
Each vendor credit links to two general ledger accounts:
- Credit To Asset Account — Typically an accounts receivable or vendor prepayment asset account. This account is debited when the credit is created, reflecting money the vendor owes you.
- Credit From Account — Typically a cost of goods sold or expense account. This account is credited when the credit is created, offsetting the original expense.
When the credit is applied to a PO payment, the GL entries are reversed proportionally, moving the amounts from the asset account back to the appropriate expense accounts.
Tips
- Let the system prompt you — AccuArk automatically checks for available credits during PO payments. You do not need to remember which vendors have credits.
- Review credits on the Payments tab — Before negotiating with a vendor, check their Payments tab to see if any credits are outstanding. This gives you leverage and ensures credits are not forgotten.
- Use notes generously — Record the reason for each credit (return of goods, pricing adjustment, quality issue, etc.) in the notes field. This context is valuable during audits and vendor reviews.
- Cancel rather than delete — If a credit is invalid, cancel it rather than trying to remove it. Cancellation preserves the audit trail.
- Set GL accounts correctly — The GL account links determine how credits affect your financial statements. Work with your accountant to ensure the correct accounts are selected.