Customer Credits

Something went back, something was billed wrong, or you simply decided to make it right. A customer credit puts the money back on their account and books the accounting at the same moment.

Raising a Credit

Where a vendor credit is money owed to you, a customer credit is money you owe them. You will reach for one when:

Stock came back from a customer
An invoice went out at the wrong price
A discount was settled after the fact
Something arrived damaged and crediting beat reshipping
A service went badly and you are making a gesture

The steps:

Open Customers → Credits
Choose the customer
Hit Create Credit Memo
Fill in the Amount and Credit Date
Set a Reason Code — this drives which income account absorbs the credit
Write a one-line Reason; it is mandatory and it is what you will read back on the list months later
Either point it at an open invoice now, or leave it on Hold for later
Save

Kantivo assigns the next CM- number and the credit is instantly part of that customer's available balance.

The Entry Behind It

Saving the credit writes the journal entry — there is no separate bookkeeping step and nothing to remember at month end:

Account	Debit	Credit
Sales Returns & Allowances (or Sales Discounts)	Credit amount
Accounts Receivable (customer)		Credit amount

Receivables fall by the credit; the debit lands in contra-revenue, where it nets off sales in the P&L rather than masquerading as an expense. The upshot is that the A/R control account and your customer list never drift apart.

Created, not applied — and here is why it matters. A customer's balance already reflects an unapplied credit the second it exists. If the entry waited until you matched the credit to an invoice, receivables in the ledger would sit overstated for as long as the credit went unused — days, sometimes months. Booking it at creation keeps the two in step. Matching it to an invoice later is pure allocation: it says which invoice the credit went against, and posts nothing further.

Returns vs Discounts

Goods coming back and money given away are not the same story, so Kantivo keeps them apart. The reason code decides the account:

Reason Code	Debit lands in
Return	Sales Returns & Allowances
Adjustment, Promotional, Billing Error, Goodwill, Other	Sales Discounts

Missing either account? Kantivo adds it to your chart of accounts as contra-revenue the first time it is called for. No setup step, no configuration screen.

Worth doing properly: a month where returns jumped is a product problem; a month where discounts jumped is a pricing or service problem. Same dollar total, completely different conversation — and you only get to have it if the two lines are separate.

Giving the Tax Back

Tax charged on the original sale has to come back off with the credit. Skip it and your GST/PST liability sits higher than it should — you would be holding tax on a sale that partly unwound.

Choose a Sales Tax Code on the credit form, usually whichever code the original invoice carried. What you type into Credit Amount is the figure before tax; Kantivo adds the tax and updates the Total Credit underneath as you type, so there is no arithmetic to do in your head.

The posting splits three ways:

Account	Debit	Credit
Sales Returns & Allowances	Pre-tax figure
Each tax component — GST/HST Payable, PST Payable, and so on	Its portion
Accounts Receivable (customer)		Gross

Codes with several components stay separate on the way out, the same way they were separate on the way in. A BC credit unwinds 5% GST and 7% PST into their own liability accounts rather than one combined 12% line, which is what your remittance actually needs.

For a credit where no tax was ever charged — a goodwill gesture, say — leave the code on None. Receivables then move by exactly the figure you typed.

Use the invoice's code, not today's. You are unwinding a particular sale from a particular date. If the rate has changed since, or the customer has moved, the rate that applied at the time is still the rate that has to come off.

Naming What Came Back

A credit can carry lines rather than just a lump sum. List the products that came back and Kantivo returns them to stock and pulls their cost back out of cost of goods sold — so a return shows up on the shelf and in gross profit, not only on the customer's balance.

Per line:

Product — the tracked item that came back
Quantity and Unit price — what you are crediting
Restore to inventory — on for resaleable goods, off for anything returned broken

Lines set the credit's value when they are present, so there is no separate total sitting alongside them waiting to disagree.

Plenty of credits have no lines and never will — a mis-priced invoice, a courtesy discount. Those behave exactly as they always have.

The damaged-goods case: switch Restore to inventory off. The customer is credited and your revenue comes down, but a broken unit does not quietly rejoin your sellable stock and get promised to somebody else.

Putting It Against an Invoice

Any credit with a balance can be set against an open invoice for the same customer:

Customers → Credits, choose the customer
Click Apply on the credit
Pick the unpaid invoice
Enter how much of the credit to use
Confirm

The invoice balance drops and its status follows to Partial or Paid. Whatever is left of the credit stays on the customer's account, ready for the next invoice.

Worked example

$150 of goods comes back from a customer carrying two open invoices:

Document	Amount	Applied	Left
Invoice #2041	$100	$100	$0 — Paid
Invoice #2055	$400	$50	$350
Credit CM-0007	$150	$150	nil available

Credits on Account

The credits screen shows every credit still carrying a balance for the chosen customer — number, date, reason, face value and what is left — with a Total Available Credit figure beneath.

Those unapplied credits are also deducted from the customer's outstanding balance elsewhere in Kantivo, so nobody sitting on a large credit ever appears to owe more than they really do.

Undoing a Credit

Wrong customer, wrong figure, entered twice — click Void beside the credit, confirm, and note a reason if you want one on file.

The reversal is complete, and it copes with a credit you have already partly spent:

A reversing entry backs out the original, line for line — tax lines included
Every application is unwound and each invoice gets its balance due back
Any stock the credit put back comes off the shelf again, because a cancelled return never happened
Whatever was still unapplied comes off the customer's credit balance
The credit itself remains, flagged voided, with its reason and its reversing entry attached

Voided, not deleted, and deliberately so. Both documents stay in the audit trail, so the next person to look at that account can see precisely why the balance moved and moved back.

In practice: if the customer is owed a different figure rather than nothing at all, void the original and raise a fresh credit at the right amount. Cleaner in the books, and far easier to explain later.

When a Customer Pays Too Much

Overpayments create credits on their own, numbered CRD-. They behave like any other credit on account and can be applied to whatever the customer is invoiced next.

One difference: they cannot be voided from the credits screen. That cash genuinely arrived and the payment record proves it, so the payment is what needs reversing — Customers → Payments, locate it, void it there.