What is a Delayed Credit in QuickBooks Online & How to Set It Up?

Errorgenie-What is a Delayed Credit in Quickbooks

At times, your customers demand credit instead of refunds. Such credits can be applied by creating delayed credits. A credit memo is also used to give credits, however, the requirements for this can be different. To get more insights on this, we will explain what is a Delayed Credit in QuickBooks Online.

Furthermore, we will highlight the difference between credit memos and delayed credits while showing how to create and apply credit memos and delayed credits in QuickBooks Online.

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What is Delayed Credit in QuickBooks Online?

Some customers choose to receive a credit in preference to a refund so they can use it to reduce the balance in the next invoice(Create Invoice in QuickBooks). There are a number of ways to handle such credits. You can either set up the Credit Memo to reduce the current balance of your customer or you can add the Delayed Credit so it can be used by the customers in the future. There are numerous reasons that you may need to use a credit memo or delayed credit. Let us take you through the main differences between these two.

Difference Between Credit Memos and Delayed Credit in QuickBooks Online

Both credit memos and delayed credits are used to give credits to the customers. By any chance, you got confused between these two, let us clarify some differences:

QuickBooks Online Credit Memos

Credit Memo can be used by you and your customers for a number of reasons. Below are the main reasons for creating and applying the credit memos in QuickBooks Online:

  • If the customer prefers to reduce the current open balance immediately then you can use the credit memo.
  • Your customers can also use the credit memo as a payment for the invoice. In addition, customers can use either all the credit memos or a portion of this.
  • A credit memo can also be applied when you record the payment for the invoice of your customer.
  • Even if you do not apply credit memos to invoices, they still impact the sales reports.

QuickBooks Online Delayed Credit

Your customers and you can use delayed credits for different purposes. Here are the key reasons for using delayed credits in QuickBooks Online:

  • Delayed credits can be used when your customers are not in a hurry to affect the currency open balance and you also wish to track the credit of your customer for future use.
  • Customers can also use the delayed credit in order to reduce the invoice balance.
  • Delayed credits can also be added as a line item to future invoices.
  • Also, delayed credits do not impact the sales reports until they are applied to invoices by you.

Now that you know the differences between credit memos and delayed credits, you can create and apply them to invoices based on your business preferences.

How to Create and Apply QuickBooks Online Delayed Credit?

Delayed credit can be used to reduce the invoice balance. There are other reasons too for using this. If you want to create and apply delayed credit in QuickBooks Online, check out the following details:

1: Set Up the Delayed Credit

To create the QuickBooks delayed credit, one has to select the appropriate customer and specify the necessary details and save it. Check out the detailed steps:

  • Click on the “+New” menu.
  • Then, click on the “Delayed Credit” option.
  • Select the “Customer” drop-down to pick your customer’s name.
  • After that, you can mention important details such as the amount and date.
Set Up the Delayed Credit in QuickBooks Online

Tip: You can set up the custom credit service item in order to add it quickly to the delayed credits as your single line item.

  • Once done, you can click on the “Save and Close” button.

This will save your delayed credit in QuickBooks Online. Later, you can apply it when you invoice your customers.

2: Apply Delayed Credit in QuickBooks Online

This should be noted when you add the delayed credit to the invoice from the previous accounting period, it might affect the balance of that particular period. Pursue the following steps to apply QuickBooks Online delayed credit:

  • Click the “+New” button.
  • Choose the “Invoice”.
  • Then, pick your customer from the “Customer” drop-down menu. This will open a new window with the open transactions for your customer. It also includes the delayed credits and invoices.

Note: In case you don’t find this option, click on the small arrow located next to your invoice balance.

  • After this, you can search for the delayed credit and click on the “Add” button. This will add the credit as your line item in the invoice.
  • Later, you can fill in the remaining fields of the invoice as required.
  • Once done, click on the “Stamp” or “Save and Close” button.

By pursuing the aforementioned steps, you can easily create and apply the QuickBooks Online delayed credit. In case your customer wants a refund, you can return the customer’s payment as well.

How to Create and Apply the Credit Memo in QuickBooks Online?

To set up credit memos in QuickBooks Online, you can perform two different ways. For instance, you can enable the Automatically Apply Credit feature and QuickBooks will handle the credit memos or add the details manually if the feature is disabled. Let’s go through more information for the same:

Create and Apply Credit Memo with Auto Apply Feature

QuickBooks provides an Automatically Apply Credits feature. By enabling this feature, QuickBooks applies the credit memos automatically to the open invoices or customer’s balance. In the following details, you will learn to turn on this feature to apply credit memos to invoices in QuickBooks Online.

1: Enable the Auto Apply Feature

To automatically apply the credit memo to invoices, turn on the Automatically Apply Credit feature by following these steps:

  • Click on the “Settings” menu.
  • Then, select the “Account and Settings” option.
  • Switch to the “Advanced” tab.
  • Press the “Edit” button located in the “Automation” section.
  • After this, click on the “Automatically Apply Credits” option
  • Hit the “Save” button.
  • Click the “Done” button.

Tip: If you prefer to decide what open invoices you wish to apply to the credit memo then you can disable this feature.

2: Create the Credit Memo

To create the credit memo, you can select the customer and enter the required details in the dedicated fields. Here are the steps for that:

  • Click the “+New” button.
  • Click on the “Credit Memo” option.
  • Select the “Customer” drop-down to pick your customer’s name.
  • After that, you can mention important details such as the amount and date.

Tip: You can set up the custom credit service item in order to add it quickly to the delayed credits as your single line item.

  • Once done, you can click on the “Save and Close” button.

3: Apply the Credit Memo to the Invoice

Now that you have enabled the credit memo auto-apply feature, QuickBooks will automatically apply the credit memos to your invoices. In case you have disabled this feature, we will also show you to apply the credit memo to invoices manually. Continue reading to learn more.

Create and Apply Credit Memo Manually

If you are using the Automatically Apply Credits feature, QuickBooks will automatically apply the credit memo. However, if the Automatically Apply Credits feature is disabled, you can apply the credit memos manually to the invoice. To apply the credit memo to the invoice manually, you can perform the following steps in QuickBooks Online:

  • Click the “+New” button.
  • Then, click on the “Receive Payments” option.
  • After this, you can choose the customer by clicking on the “Customer” dropdown option.
  • Switch to the “Outstanding Transactions” area and click on the open invoice to which you wish to apply a credit memo.
  • Now, go to the “Credits” section and choose the credit memo that you wish to apply for.
  • Once done, you can go to the “Payment” section and specify how much credit you wish to apply for an open invoice.
  • You can leave the following details blank:
    • Payment method
    • Deposit to
    • Reference no
    • Amount received
  • Thereafter, you can fill out the remaining fields. Make sure you add the “Payment Date” as well.
  • After you apply the credit memo, the total should be correct.
  • Once done, click on the “Save and Close” button.

These are the easy steps for creating and adding credit memos in QuickBooks Online. Whether you enable or disable the credit memo auto-apply feature, you can give credits to the customers by using both ways.

Conclusive Lines

Delayed credits can be used by the customers in the future whereas you can use the Credit Memo to reduce the current balance of your customer. In this article, we have shared some knowledge on what is a Delayed Credit in QuickBooks Online. Along with this, we have explained the difference between credit memos and delayed credits while showing how to create and apply credit memos and delayed credits in QuickBooks Online.

To know more about QuickBooks features such as deposits and unapplied payments, you can go through the following links: