If a customer has partially paid for the items sold, then partial cash settlement has occurred. In those circumstances, you should reverse out the related accrued revenue through the use of a credit memo (for unpaid portion) and payable (for paid portion) and record the return of the physical product to your inventory. To do so, follow these steps:
- For the unpaid balance of the Billing, create a Billing Credit Memo - The process to create a Billing Credit Memo is almost the same as creating a manual Billing. The main difference is that when the Billing Lines are entered, they are entered with negative values. This will automatically change the type from invoice to credit memo. The transactions created when posting a credit memo are:
DR Revenue GL account set on the Billing Line
CR AR Control GL Account set in Accounting Settings
Tip - To reference the original billing on the credit memo place "Credit Memo for Billing number xxxxxxxxxx" in the Proprietary Billing Number field.
- Apply the credit memo to the Billing by clicking on the Apply Credit Memo button from the Credit Memo record.
- For the paid balance of the Billing, create a Payable to the customer for the amount originally paid and to be refunded. The amount to refund on the Payable Line should be positive. Set the “Expense GL Account” on the Payable line to the Revenue GL account that was credited on the original Billing. The value for the product on the Payable Line should be left blank or null.
Tip - In the Payee Reference field of the Accounts Payable, indicate the Billing and reason for the refund to the customer. This explanation will be printed on the check or if a credit card transaction can be useful in reconciling the account.
- Create a Cash Disbursement by following the standard instructions for creating a single or batch cash disbursement(s).
- Create a new Inbound Inventory Movement for the product, warehouse, and location you are returning the inventory goods to.
- From the Inventory Quantity Available list view, select the Inventory Quantity Available record for the item(s) you are returning to stock. If there is not an Inventory Quantity Available record for the product, warehouse, and location combination, you need to create a new record.
- After selecting the record you wish to return the goods to, create a new Inbound Inventory Movement from the Inventory Quantity Available related list.
- Enter the quantity you are returning to stock and the unit cost for the product. The unit cost should be obtained from the original Sales Order’s Sales Order Inventory Movement record.
- Select “Accounting” as the Type from the drop-down menu.
- Set the Debit GL account to your Inventory GL account and set the Credit GL account to the same account used to record Cost of Goods Sold on the original allocation of the Sales Order.
- Change the movement date to the same date as the credit memo you issued (step 1 above).
- Save this record.
This will do the following:
- Increase the quantity available for that product;
- Add it back to your inventory GL balance at the correct weighted-average cost;
- Reverse the revenue recorded on the original Billing; and
- Reverse the Cost of Goods Sold recorded on the original Sales Order Inventory Movement.
- The Inventory Balance object has been renamed to Inventory Quantity Available
- When returning inventory to stock, users must:
- Set the Inbound Inventory Movement Type to “Accounting”; and
- Enter the weighted-average cost from the original Sales Order Inventory Movement record as the Unit Cost on the new Inbound Inventory Movement