In Dynamics 365 F&O, a credit note (also known as a credit memo) is a document issued to correct or reverse an invoice, often used when there has been an overcharge, incorrect items shipped, or a return of goods by the customer. It serves as a formal acknowledgment that a credit has been issued, reducing the amount the customer owes.
Example:
Let’s assume your company, Lifestyles, sells furniture, and you issued an invoice for 10 chairs at ₹5,000 each, totaling ₹50,000. However, the customer informs you that 2 of the chairs were damaged and have been returned. You agree to provide a credit for the 2 damaged chairs.
In this case, you would issue a credit note for the value of those 2 chairs (₹10,000). This reduces the customer’s outstanding balance from ₹50,000 to ₹40,000.
How it works in Dynamics 365 F&O:
1. Create a credit note: In the Accounts Receivable module, you create a credit note against the original sales invoice.
2. Post the credit note: Once posted, the system adjusts the customer’s balance, reflecting the reduction due to the returned or damaged goods.
3. Inventory adjustment (if applicable): If goods are returned, the inventory will be updated to reflect the increase in stock.
In some cases, credit notes can also be issued for discounts, price adjustments, or service-related issues.