Everything You Should Know About Types of Credit Memo

One of the most used and common reasons for issuing credit memos is price disputes. Several times, prices are changed after the transaction is done; for such a situation, the seller issues a credit note to the buyer.

For instance, the buyer company has purchased a good of $8000 from the seller company, before delivering of good the price of the good got reduced and now its price is $6000. Now the deal is done, the seller company will issue a credit memo of $2000 as a price dispute.

Not all days in business are successful and happy, right? Some days you have to deal with defective or damaged products and thus, you have to refund your customers. Now, once the transaction is sealed you cannot return it completely, so in this situation, a credit memo is issued. The reason for a refund could be also different like the wrong supplies or inappropriate goods.

As a business owner, you may or may not be aware of the 4Ps (Price, Promotion, Place, and People) of marketing. But do you know there is a link between a marketing allowance and a credit memo? Yes, a credit memo can be issued by providing a marketing allowance to the buyer/ customer. In marketing allowance, you get a certain amount of discount and offer.

Internal credit memo is an alien term to many because not all business owners are aware of it. So, what is an internal credit memo? It is a form of document that is created to write off an outstanding receivable balance. The sole purpose of an internal credit memo is to keep track of inventory and that's the reason the copy remains with the seller and is not sent to the buyer.

A bank credit memo is a little different from other credit memos as it is issued by a bank only. A bank credit memo is a document sent by the bank after a customer deposits funds, earns interest, or receives a loan credit to their account.

An overstated credit memo is an accounting document issued when the price written in the invoice is incorrect or the reported amount is more than or less than the actual amount. This type of memo corrects billing errors and ensures accurate financial records.