Credit Memo and Debit Memo

Credit memos and Debit memos are part of Billing Process in SD life cycle.

• Credit memo: A sales document created on the basis of a customer complaint. This reduces receivables in Financial Accounting.
• Debit memo: A sales document created on the basis of a customer complaint. This increases receivables in Financial Accounting.
• Debit Memo – It is a sales document used in complaints processing to request a debit memo for a customer. If the prices calculated for the customer were too low, for example, calculated with the wrong scaled prices, you can create a debit memo request. The debit memo request can be blocked so that it can be checked. When it has been approved, you can remove the block. It is like a standard order. The system uses the debit memo request to create a debit memo.
• Credit Memo – A transaction that reduces Amounts Receivable from a customer is a credit memo. For eg. The customer could return damaged goods. A debit memo is a transaction that reduces Amounts Payable to a vendor because, you send damaged goods back to your vendor.
• Credit memo request is a sales document used in complaints processing to request a credit memo for a customer. If the price calculated for the customer is too high, for example, because the wrong scale prices were used or a discount was forgotten, you can create a credit memo request.
• The credit memo request is blocked for further processing so that it can be checked. If the request is approved, you can remove the block. The system uses the credit memo request to create a credit memo.

How to creating Credit and Debit Memo Requests ?

Prerequisites

• You can enter a credit or debit memo request in one of the following ways:
  • Without reference to a preceding document
  • With reference to a preceding document, such as:
  • Sales orders – Contracts – Contract release orders – Billing documents

Procedure

• Use the same procedure that you use for creating sales orders. You can use the following order types in the standard system:
  • CR for credit memo requests
  • DR for debit memo request
• The following entries are important for creating a request:
  • Customer number of the business partner who requests a credit memo or to whom a debit memo is to be forwarded
  • Order reason (why the request is necessary)
  • Material and the quantity in the request

Creating a Credit Memo / Debit Memo

• When you create a credit or debit memo, you can refer to an invoice or a credit memo request. You can either refer to all items, or select only certain items or a certain quantity.
• Select the credit memo request procedure if you want to use the release process in order processing.
• Note : When you create a credit or debit memo, you must specify the date on which services are rendered. This is because credit or debit memos can refer to previous business transactions, and the taxes in the debit or credit memos must be determined according to the tax situation at the time the services were rendered.
• The credit memo request is blocked for further processing so that it can be checked. If the request is approved, you can remove the block.

Credit Memos

Purpose, Benefits, and Key Process Steps
Purpose

• The Credit Memo process is used for applying a credit to a customer account once a determination has been made that a customer has been overcharged as a result of a pricing or sales tax rate error.

Benefits

• System integrated credit memo processing

Key process flows covered

• Create credit memo request
• Remove billing block (review credit memo request)
• Billing

Detailed Process Description

Credit Memo Processing

• A Credit Memo Request is created with the amount to be credited, and placed on a billing block for review. It must then be released to become billing relevant, and appear on the billing due list. Periodic billing process creates a Credit Memo to be sent to the customer, and posts an accounting document

 

Debit Memos

Purpose, Benefits, and Key Process Steps
Purpose

• The debit memo process is used for applying a debit to a customer account once a determination has been made that a customer has been undercharged as a result of a pricing or sales tax rate error.

Benefits

• System integrated debit memo processing

Key Process Steps

• Create debit memo request
• Remove billing block (review debit memo request)
• Billing
• Excise Invoice

Detailed Process Description



Debit Memo Processing

• A debit memo request is created with the amount to be debited, and placed on a billing block for review. It must then be released to become billing relevant, and appear on the billing due list. Periodic billing process creates a debit memo to be sent to the customer, post the excise JV to adjust the excise invoice with reference to debit memo, and posts an accounting document.