Credit Memos & Office Refunds 101
Credit Memos and Office Refunds are topics that many Tyler users find confusing and sometimes intimidating. Naturally you don’t want to make a mistake that will cost your store money. For that reason, it’s important to know the right steps to take. In this article, we’ll try to clear things up for you.
What is a Credit Memo?
A Credit Memo is a term used by Tyler to describe a store credit; a refund that you may only use within the store where the customer purchased and returned an item. A shopper might prefer this refund method if they know they will be purchasing a replacement item from the same business, often on the same day as the return.
Unlike other refunds, except for cash, the Credit Memo is immediately available to the customer once it has been entered through Point of Sale. The returned transaction will generate a temporary credit memo number (an asterisk (*) followed by the first six digits of the return transaction) for the customer to use when they would like to purchase another item.
Overview
The following tutorial describes how to issue a credit memo using Tyler’s Enhanced Return process.
Video
Step-by-Step
Scenario: A customer wants to return a piece of merchandise that she purchased a short time ago. She intends on purchasing another item soon and requests that the return is issued as a credit she may use immediately in the store.
- Enter the Header and Customer information as described in the ‘Enhanced Return Process: Introduction’ tutorial.
- In the ‘Item Number’ field, enter the item that is being returned.
- To search for an item number, click the Search button.
- To start the return process, you have two options: you can click the Return Product button, or enter a negative quantity in the ‘Qty’ field and press Enter.
- The Return Merchandise window appears. A list of previous customer transactions (that contain the entered item) appear in the results box. Click the transaction number on which the item was originally sold.
- At the top of the screen you will notice three fields: ‘Customer #, ‘Transaction # of the return merchandise’ and ‘Item # of the return merchandise.’ Use these fields to filter the transaction information that appears on this screen. The customer information that you already entered displays here by default.
- If the entered item is found on only one transaction, this screen is skipped and the detail lines for the transaction appear.
- At the bottom of the screen you will notice the Over Ride button. This feature should only be used if you cannot find the transaction on which the item was originally sold. For more information on this feature, please see the ‘Using the Override Feature’ tutorial located in this document.
- The detail lines for the selected transaction appear. Enter the return quantity for the appropriate item(s) (as a positive number) in the ‘Qty Return’ column.
- If you started the return process by entering a negative quantity in the ‘Qty’ field (instead of clicking the Return Product button), that quantity automatically appears in the ‘Qty Return’ column for the item.
- Click the Return All Lines button at the bottom of the window to return the entire order.
- If an Environmental Tax is attached to an item being returned, the system automatically returns the Environmental Tax.
- Notice that the ‘Each’ and ‘Extension’ fields show the original selling price of the item and cannot be modified.
- Verify the condition of the item (Box, Floor, Damaged) or change it if necessary.
- Click the ‘Accept’ button.
- If Reason Codes are set up and activated on your system for returns, the above screen appears. If Reason Codes are not set up and activated on your system, skip to step 11.
- Select a reason for the return.
- The reason codes that appear on this screen are set up in the Order Maintenance Reasons selection (02-08-90-04).
- The fields that now appear on the screen vary depending on how the reason codes are set up. Enter the required information (Employee Number, Markdown Code, etc) and click Done.
- The returned item appears at the bottom of the Detail tab. Repeat steps 2-10 until all items are returned.
- Currently, items from only one transaction can be returned on a single ticket. For example, since item 0XXX was returned from transaction ‘XXXXXX,’ only items from ‘XXXXXX’ can be returned on this ticket. To return items from another transaction you will need to enter a new ticket.
- If the customer must pay a restocking fee, enter the restocking fee in the Item Number field and process the item as you normally would.
- When you are finished returning items, click ‘Done.’
- In the Tender Entry window, select ‘Credit Memo’ from the ‘Payment Type’ drop-down list.
- The amount to be refunded to the customer appears in the ‘Amount’ field. Accept or modify the refund amount for the Credit Memo.
- Leave the account number field blank. A temporary account number for the credit memo will be generated by the system using an asterisk plus the order number.
- Click ‘Accept’ and the refund appears on the right side of the window.
- Enter the Manager code, if required, to approve the return.
- When you finish entering all information, click ‘Done’.
- Depending on how your Invoice Preferences (02-18-01, Field 8) are set up, one of the following now occurs:
- The invoice is automatically printed.
- Invoice print is automatically skipped.
- You can choose to print or not print the invoice.
What if the customer forgot the Credit Memo #?
As great as it would be, we can hardly expect customers to always remember their credit memo number. Fortunately, there is an easy way for employees to look up that information using Sales Transaction Inquiry directly through Point of Sale. Employees can review and narrow down the customer’s previous orders using search criteria to locate the information quickly.
Overview
This tutorial describes how to search for a customer’s credit memo (store credit).
Video
Step-by-Step
- To begin, click search button to the right of the Order # field in Point of Sale Entry.
NOTE: You may also access this screen from Customer Master # Inquiry (02-16).
- On the Sales Transaction Inquiry screen, enter as much search criteria as you can. In this example, we know the approximate date of the transaction and the customer number, so we will enter that information in the appropriate fields.
- To search for a customer number, click the ‘Search’ button.
- You can enter additional information in the search fields to narrow the results.
- Click ‘Refresh’ to load the results.
- Look for a transaction with a negative total. When you find one, view the ticket details by double clicking on the Ticket #.
- Click ‘Payments’ to confirm that the refund was a credit memo.
- If this is the correct refund, write down the Order #. The customer’s Credit Memo Number is an asterisk followed by the refunded order number. In this example, it is *100185.
Overview
This tutorial describes how to apply a customer’s credit memo (store credit) to a new purchase.
Video
Step-by-Step
- On the POS Entry screen (02-02), enter the Header and Customer information as you would for a normal Take With or Delayed Delivery transaction.
- Click the Detail tab.
- Enter the items being purchased.
- After entering all of the items, click ‘Done .’
- Select ‘Credit Memo’ as the Payment Type.
- Accept or modify the amount being paid with the Credit Memo.
- Enter the customer’s Credit Memo Account Number (*XXXXXX).
NOTE: The Credit Memo Number is an asterisk plus the invoice number on which the credit memo was issued. If you don’t know the Credit Memo #, follow the steps in the Searching for a Credit Memo tutorial to look it up.
- Click ‘Accept.’ The applied payment appears on the right side of the window.
- When all payments have been applied and the Balance Due is zero, click ‘Done’ to complete the transaction.
What is an Office Refund?
An Office Refund is returned as a check that is prepared and mailed to the customer. The refund is entered by an employee through the Point of Sale application, but the check is not available to the customer on the same day. Additional steps need to be completed by the AP department in order to prepare the check before it is mailed.
Overview
The following tutorial describes how to issue an office refund using Tyler’s Enhanced Return process.
Video
Step-by-Step
Scenario: A customer wants to return a piece of merchandise that she purchased a short time ago. She does not intend on purchasing another item soon and requests that the return is issued as a check that will be mailed to her.
- Enter the Header and Customer information as described in the ‘Enhanced Return Process: Introduction’ tutorial.
- In the ‘Item Number’ field, enter the item that is being returned.
- To search for an item number, click the Search button.
- To start the return process, you have two options: you can click the ‘Return Product’ button, or you can enter a negative quantity in the ‘Qty’ field and press Enter.
- The Return Merchandise window appears. A list of previous customer transactions (that contain the entered item) appear in the results box. Click the transaction number on which the item was originally sold.
- At the top of the screen you will notice three fields: ‘Customer #, ‘Transaction # of the return merchandise’ and ‘Item # of the return merchandise.’ Use these fields to filter the transaction information that appears on this screen. The customer information that you already entered displays here by default.
- If the entered item is found on only one transaction, this screen is skipped and the detail lines for the transaction appear.
- At the bottom of the screen you will notice the Over Ride button. This feature should only be used if you cannot find the transaction on which the item was originally sold. For more information on this feature, please see the ‘Using the Override Feature’ tutorial located in this document.
- The detail lines for the selected transaction appear. Enter the return quantity for the appropriate item(s) (as a positive number) in the ‘Qty Return’ column.
- If you started the return process by entering a negative quantity in the ‘Qty’ field (instead of clicking the Return Product button), that quantity automatically appears in the ‘Qty Return’ column for the item.
- Click the Return All Lines button at the bottom of the window to return the entire order.
- If an Environmental Tax is attached to an item being returned, the system automatically returns the Environmental Tax.
- Notice that the ‘Each’ and ‘Extension’ fields show the original selling price of the item and cannot be modified.
- Verify the condition of the item (Box, Floor, Damaged) or change it if necessary.
- Click the ‘Accept’ button.
- If Reason Codes are set up and activated on your system for returns, the above screen appears. If Reason Codes are not set up and activated on your system, skip to step 11.
- Select a reason for the return.
- The reason codes that appear on this screen are set up in the Order Maintenance Reasons selection (02-08-90-04).
- The fields that now appear on the screen vary depending on how the reason codes are set up. Enter the required information (Employee Number, Markdown Code, etc) and click Done.
- The returned item appears at the bottom of the Detail tab. Repeat steps 2-10 until all items are returned.
- Currently, items from only one transaction can be returned on a single ticket. For example, since item 0XXX was returned from transaction ‘XXXXXX,’ only items from ‘XXXXXX’ can be returned on this ticket. To return items from another transaction you will need to enter a new ticket.
- If the customer must pay a restocking fee, enter the restocking fee in the Item Number field and process the item as you normally would.
- When you are finished returning items, click ‘Done.’
- In the Tender Entry window, select the ‘Office Refund’ method from the Payment Type drop-down list.
- The amount to be refunded to the customer appears in the ‘Amount’ field. Accept or modify the refund amount for Office Refund.
- Click Accept and the refund appears on the right side of the window.
- Enter the Manager code, if required, to approve the return.
- When you finish entering all information, click Done.
- Depending on how your Invoice Preferences (02-18-01, Field 8) are set up, one of the following now occurs:
- The invoice is automatically printed.
- Invoice print is automatically skipped.
- You can choose to print or not print the invoice.
How do you know which one is best?
For the most part, the customer will request which refund method will work best for them based on your company’s policies. It is key to remember if your store has policies that will dictate which refund payment option to choose. For instance, for returns older than 30 days, your business might have a policy to only refund the item as a Credit Memo. Or, your store might not allow a cash refund for a transaction that was originally paid for with a credit card. These types of policies are used to avoid fraud and should be covered with every new employee.
Often it will depend on the time frame it takes to receive the refund. For example, if a customer returns an item and the transaction is refunded to a credit card, it may take several days before the customer’s bank processes the return. Likewise, it may be several business days before a customer’s Office Refund check is mailed. In that case, the customer may request cash or a Credit Memo.
An Honest Mistake
A question we often encounter from our clients is whether you ‘can create a Credit Memo from an Office Refund that you have issued’? The answer is yes, as long as the check hasn’t already been prepared and mailed by the Accounts Payable department.
This is a scenario that comes up regularly and with the help of the Accounts Payable and Accounts Receivable departments, can be processed quickly. However, you will need to close the business day before you can create the Credit Memo, as it cannot be created on the same day the Office Refund was issued through Point of Sale.
Overview
This tutorial describes how to correct a transaction that was entered as an office refund, but should have been entered as a credit memo.
Video
Step-by-Step
Scenario: A sales representative returns an item for a customer but accidentally issued an office refund instead of a credit memo, like they asked. The sales day has closed and the employee who entered the office refund calls to ask the AP department to correct this issue.
Table of Contents
- Step 1: Identifying the Refund in AP
- Step 2: Offsetting the Office Refund Invoice in AP
- Step 3: Update the Changes to AP
- Step 4: Create an AR Account for the Customer
- Step 5: Apply the Adjustment to the Customer’s AR Account
- Step 6: Update AR
Step 1: Identifying the Refund in AP
Once a sales employee has informed the AP department that there is an office refund that needs to be changed to a credit memo, the first step for the AP department is to identify the return and note the information they will need to offset the office refund.
- Open Disbursements Selection (11-10) from the Accounts Payable menu.
- Press Enter to confirm the ‘Check Date’ and the ‘Bank Account’ Range.
- Click ‘Select to Pay’ to load the results.
- If the office refund is not visible in the disbursement results, you may need to run AP Audit/Update (11-03) first.
- Locate the Office Refund in the results and carefully write down the Vendor Code (%XXXX), the complete Invoice # including any spaces, and the Pay Amount of the refund.
- Once you have confirmed the office refund is in AP, you will need to create an offsetting credit memo.
Step 2: Offsetting the Office Refund Invoice in AP
The next step is to create a credit memo invoice entry in AP to offset the amount of the office refund and link the two transactions together.
- Open Invoice Entry (11-01) to create an AP invoice of a credit memo to offset the office refund.
- Enter the Operator/Batch Number.
- Enter the Vendor Code.
- This is the same Vendor Code associated with the office refund.
- Enter the Invoice number for the credit memo.
NOTE: The Invoice Number has to be exactly the same as it was for the office refund. If the invoice numbers are not exactly the same it will not link properly.
- Change the Trans Code to CM.
- Enter the Payment Terms for the invoice.
- Enter the Total for the invoice.
- The Total must be the same as it was for the office refund.
- Enter your initials in the ‘Crdt No’ (Credit Number) field. This field cannot be left blank.
- Move through the remaining fields and then press Tab at the ‘Enter: (C)hange Header, Commen(T), or Tab’ prompt.
- Enter a G/L account number that belongs to a Misc. or Write Off expense account and press Enter.
- This step creates an offset entry so your net effect on this account will be zero. Although you may use a Write Off GL Account, you will not be writing this amount off.
- Go to General Ledger Inquiry (15-07) to search your company’s GL accounts. Search the accounts for an Expense Misc or Write Off account.
Step 3: Update the Changes to AP
The next step is to run an Audit/Update of the invoice in Accounts Payable.
- Run AP Audit/Update (11-03).
- If the information for the credit memo invoice was entered correctly, the invoices will link and no longer appear under the disbursements selection. If the information was entered incorrectly, the office refund and the credit memo will both appear in the results disbursement selection, with the two amounts net to zero, but the transactions will not be linked together correctly.
- Select a Printer.
- Enter “Y” to update the batch.
NOTE: You can search for the linked transaction in Transaction Inquiry (11-31) using the Vendor #.
Step 4: Create an AR Account for the Customer
The next steps are completed in AR Open. If this is not your department, you will need to pass on the information to an employee responsible for Accounts Receivable.
- In AR Open, access Master File Maintenance (12-20) to create an account for the customer.
- Enter the A/R Account number using the same format as a credit memo: an asterisk followed by the order/invoice number. (e.g., *XX0XXX).
- If the customer already has an AR account, you may enter that number instead.
- Enter the customer number of the customer receiving the credit memo.
- Confirm this is the correct Customer by typing “YES” and pressing Tab or Enter.
- Enter “RI” in the ‘Business Type’ field.
- This will mark it as a temporary account; Check (12-22) to see what temporary accounts you can use.
- Complete the remaining fields as required. For more details, please refer to the AR Open documentation.
- Enter a “Y” at the main prompt.
- Enter a field number if you need to make changes to the AR Account information.
- Enter “Y” or “N” at the ‘Ship to Demographics?’ prompt.
Step 5: Apply the Adjustment to the Customer’s AR Account
Next, you will need to create an adjustment to the AR account you created for the customer.
- Open Adjustment Entry (12-03).
- Enter your Employee Number and confirm it.
- Enter a Batch ID number.
- In the ‘Account #’ field, enter the temporary AR Account number created for the customer.
- In the ‘Auth# field,’ enter an authorization number, which is usually an employee number.
- Enter the invoice number in the ‘Invoice #’ field.
- Enter CM01 as the ‘Tran Type.’
- Enter the Amount of the credit memo as a negative number.
- In the ‘G/L Number’ field, enter the same Misc or Write Off G/L Account Number as was entered in AP.
- Enter ‘Fix’ or ‘Correction’ under ‘Cross Ref#’ as the reason why you are entering the adjustment.
- Enter “Y” if the information is correct.
Step 6: Update AR
The final step will be to update the adjustment you have just created in AR.
- Open Adj. Audit/Update (12-04).
- Press Tab or Enter to update all batches.
- Enter “Y” to confirm this update is correct.
- Select a Printer and press Tab or Enter.
- Type “Y” to update all batches now.
NOTE: See (15-10) to see how the adjustment appears in the General Ledger.
Is there anyway you can check the balance of the credit memo beside using 12-61. We have customers who don’t use the full balance of the credit memo and come back several times.
Hi Raquel,
If you know the credit memo number, you can enter it in the ‘A/R Account #’ field of POS Entry (02-02). A new ‘A/R Balance’ tab will appear, where you can view the balance for that credit memo. Just make sure to clear the ‘A/R Account #’ field before processing the transaction, or it will cause issues with the account.
If you do not know the credit memo number, there is no way to check the balance on a credit memo other than using the A/R Inquiry selection (12-61).