Credit Memo

What is Credit Memo?

A credit memo is a document issued by a seller to a buyer that reduces the amount the buyer owes. It is used to correct invoicing errors, account for returned goods, or apply discounts after an invoice has already been generated.

Why It Matters

• It provides a formal accounting record for why an invoice amount was reduced.

• It ensures that the accounts receivable balance remains accurate in the financial ledger.

• It allows for partial adjustments to an invoice without needing to void and recreate the entire document.

• It serves as a clear communication to the customer about their updated payment obligation.