Credit Memos Overview and FAQs

Credit memos give you a structured way to manage invoice adjustments and keep a clear paper trail. 

When a client is owed a partial credit on a service due to something like a billing mistake, an overcharge, or a service issue, a credit memo lets you apply that credit directly to a specific line item on an invoice, record a reason, and leave internal notes.

Credit memos also come with built-in approval controls so you can decide which employees can create, approve, and apply them.

Before You Start

Here are a few things to know before you continue:

• We recommend that only the Account Owner(s) or Admin(s) set up or change the settings covered in this article.
• Credit memos are NOT enabled in Docket by default. You'll need to contact our Support team to have this feature turned on for your account.
• Credit memos are tied to specific line items on an invoice. A credit memo amount cannot exceed the value of the line item it's associated with.

Credit Memo-Related Settings

Before anyone on your team can create a credit memo, there are two settings that need to be configured:

1. Credit Memo Reasons
2. Employee Access for Credit Memos

These settings organize the paper trail around credit memos and give you control over who's allowed to create and apply credit memos.

Set Up Credit Memo Reasons

The first step in using credit memos is to add the reasons you might issue one to a client. 

These reasons act as categories that explain why a credit is being issued and they'll show up in your Credit Memos report for tracking purposes. 

To configure your credit memo reasons, just follow the instructions below: 

1. Click on “Account” in the bottom left corner.
2. Click on “Settings” at the top.
3. Click on “Company” right below.
4. Click on “View” on the Billing Settings card.
   
   
5. Click on “Invoice” at the top.
6. Click to expand the Credit Memos section.
   
   
7. Add your credit memo reason in the Add Reason field.
8. Click the + button to the right to add it to your list.
   
   
9. Don't forget to click "Save Settings" at the top of the page!
   
   

You can add as many reasons as your business needs to use when documenting credit memos. You can always add or remove reasons from the list as needed.

Set Up Employee Access

Docket gives you control over which employees can interact with credit memos. 

There are three separate permission toggles so you can mix and match access based on each employee's role.

To configure credit memo permissions for an employee, just follow the instructions below:

1. Click on "Employees" in the left-hand menu.
2. Click on the employee's profile to open it.
3. Click into "Access" at the top of their profile.
4. Click to expand the Permissions section.
   
   
5. Scroll down to the Credit Memos list and decide which permissions you want this employee to have.
   
   Turn off (grey) all of the settings if you don't want them to interact with credit memos at all.
   
   Keep them all on (blue) if you want them to have full access to credit memos. 
   
   
6. Click "Update Access" at the bottom to save your changes.
   
   

TIP: You change an employee's access as much as you need to.

Create a Credit Memo

Once you've configured the settings for credit memos in your Docket account, you're ready to start creating, approving, and applying them.

Credit memos are created from within an invoice and added to the line item that needs the adjustment.

To create a credit memo, just follow the instructions below:

1. Open the invoice that needs a credit memo and click on the "Credit Memo" button above the Line Items table.
   
   
2. In the prompt that appears, find the line item you want to apply the credit memo to and enter the credit amount you're giving to the client.
   
   Please Note: The credit memo amount cannot exceed the value of the line item itself.
3. Select a Reason from the drop-down menu.
   
   TIP: If the reason you need isn't listed, you'll need to add it to your settings before you can select it here.
4. Enter the Quantity of credit memos for this adjustment. In most cases this will be 1.
5. Add any internal notes in the Notes field.
   
   TIP: The Notes field is internal only. Your clients will not see it.
6. Click "Confirm" to add the credit memo to the invoice.
   
   

You'll now see a Credit Memos section appear on the invoice confirming the credit memo was created.

Approve or Reject Credit Memos

Track and manage credit memo requests and approvals.

Credit Memo Report Approvals

One way to approve pending credit memos is through the Credit Memos report. To start the report, select a date range and then click ‘Run Report’. A list of credit memos that have been created during that time range will populate. 

In this Docket report, if you click on a credit memo, you will see the credit memo information slide-out from the right side of your screen: 

Here you can click ‘Approve’ at the top, middle of the credit memo. You can also see the origin invoice, and notes left by the employee who made the credit memo, as well as who approved the credit memo. 

If you click the ‘Actions’ drop down in the upper, right corner, you will find shortcuts that will take you to the invoice and/or to the clients slideout. 

Credit Memos on the Invoice Approvals

Another way to view and approve a credit memo is by going to the customer's direct invoice. This way would require you to already be aware of an invoice that had a pending credit memo attached. 

Open the invoice, find the credit memo section of the Invoice and click directly on the credit memo. This will slide out the credit memo details from the right:

Here you can click ‘Approve’ at the top, middle of the credit memo. You can also see the origin invoice, and notes left by the employee who made the credit memo, as well as who approved the credit memo.

Applying Credit Memos

How to apply a credit memo to an invoice.

To start, open up the invoice where a credit memo needs to be applied.

1. Click ‘Apply Payment.’
2. Select from the credits option and choose between an available credit.
3. Click ‘Confirm’ on the pop-up.
4. To verify that the credit memo was applied to the invoice, look at the ‘Payments and Refunds’ section of the invoice and notice the decrease in owed amounts.

If you have any questions, please reach out to our Support team through the chat widget on the bottom of this page or by sending an email to support@yourdocket.com!