Applying Vendor Memos
A posted Vendor Memo is credit sitting on the shelf. Applying it spends that credit against the vendor's open invoices — reducing what you actually pay. This article shows the manual and automatic routes, how the memo tracks its remaining credit, and the rules that keep applications clean.
Access you'll need. Applying credit creates subledger records, so it requires the Accounts Payable v2 permission set or Accounting Admin v2 (system administrators). The Accounting Controller v2, Accounts Receivable v2, and Read Only v2 sets can review applications but not make or remove them.
Manual application
Open the posted memo and click Apply Vendor Memo
The application screen lists the vendor's open invoices — posted, with a balance due, in the same entity.
Distribute the credit
Enter how much credit each invoice receives. Meridian applied its full $300 Summit HVAC credit to the original maintenance bill — so the $3,600 invoice needed only $3,300 of cash. You can split one memo across several invoices, or several memos onto one invoice.
Confirm
Balances update instantly: the invoices' balance due falls, the memo's Applied to Invoices rises, and Remaining Credit falls. The Vendor Memo Summary panel shows the utilization bar move.
Here's the arithmetic of Meridian's case, end to end — the pattern every memo application follows:
| Step | Document | Effect |
|---|---|---|
| Summit's $3,600 maintenance bill posts | Purchase Invoice | Balance due $3,600 |
| The −$300 credit note posts | Vendor Memo MVM001001 | Remaining Credit $300, waiting |
| The memo is applied to the bill | Application | Invoice balance due falls to $3,300; memo shows Applied to Invoices $300, Remaining Credit $0 — fully utilized |
| The bill is paid | Cash Disbursement MCD001013 | $3,300 of cash — not $3,600 — settles the invoice in full |
Automatic application
Tick Auto Apply Memo on a posted memo and REDA Financials spends the credit for you, across that vendor’s open invoices, until the credit runs out or no eligible invoice remains. It respects closed AP periods throughout.
The order it spends in. The queue is decided for you, in this order:
- Original Invoice — if the memo names the invoice it relates to, that invoice is settled first, ahead of everything else.
- Application Priority — a lower number means higher priority. Invoices with no priority fall to the back of this step.
- Invoice date — oldest first, which is the ordinary case when nothing above applies.
Two settings change what the queue contains, rather than its order:
- Dimension Match — when on, only invoices carrying the same cost dimensions are eligible, and each one accepts only as much credit as its matching dimensions justify. If nothing matches, the memo is left alone rather than applied somewhere convenient.
- Match Lines on Apply — when on, the memo is matched product by product: each memo line finds invoice lines carrying the same product and credits those. Leave it off and the memo is applied at header level against the invoice balance. Turn it on when a credit is genuinely about specific items — a returned appliance, an over-billed service — and you want the credit to land on the same product it came from.
The rules
| Rule | Why |
|---|---|
| Same vendor | A memo is that supplier's promise — it can't offset another supplier's bills. |
| Same entity | Each of your companies settles its own payables. Cross-company balances move through the cash side — see Cross-Entity AP Settlement. |
| Posted documents only | Draft memos hold no usable credit; draft invoices have nothing to settle. |
| Same ledger | Credit and bill must sit in the same ledger — a memo in one book cannot quietly settle a balance in another. |
| Same currency | When multi-currency is on, the memo and the invoice must share a currency. Credit is never converted on its way to a bill. |
| No refunds | Memo credit only offsets invoices. A vendor paying you back in cash is a banking event, not a memo application. |
Following the credit
- On the memo: the Vendor Memo Summary shows Total Credit, Applied to Invoices, and Remaining Credit as a utilization bar; the Applications tab lists each application.
- On each invoice: applied memo credit appears as Memo Applied in the Invoice Summary, and the applications are listed under its Applications tab.
- Unapplied credit across vendors: the Vendor Memos (Unapplied) list view shows every memo with credit still to spend — worth a look before any payment run.
Undoing an application
Delete the application row (from either document's Applications tab): the invoice's balance returns and the memo's remaining credit is restored. Reopening or voiding either document unwinds its applications automatically.
Common mistakes to avoid
| Mistake | Why it hurts | Do this instead |
|---|---|---|
| Paying the payment run before applying memos | Cash goes out for balances the credit could have covered — and the credit lingers unused | Sweep the Vendor Memos (Unapplied) list view before every run |
| Waiting for the vendor to "refund" the memo | That refund never comes through this document — memo credit only offsets invoices | Apply it to the vendor's next bill; a genuine cash refund is recorded through banking |
| Trying to apply a draft memo | Drafts hold no usable credit — the application screen won't offer anything | Post the memo first; then apply |
| Applying credit to a disputed invoice | The dispute now includes the credit, and unwinding means deleting applications later | Apply to undisputed bills; the credit doesn't expire |
| Expecting a memo to settle a sister company's invoice | Memo applications never cross entities — the screen simply won't list those bills | Keep credit within its entity; cross-company balances move through the cash side (Cross-Entity AP Settlement) |
Where to go next
- Understanding Vendor Memos — the accounting behind the credit.
- Creating a Vendor Memo — recording the credit note.
- Applying Disbursements — the cash-side sibling of this workflow.
Frequently asked questions
Before — then the payment run only asks for the net cash. If the invoice was already paid in full, apply the memo to the vendor's next bill instead; the credit doesn't expire.
Check the three usual suspects: is it posted (not draft)? does it still have a balance due? is it the same vendor and entity as the memo? If dimension matching is enforced, differing cost centers also filter it out.
Nothing special — unapplied credit simply carries forward as a negative payable on your balance sheet until it's used. If a vendor relationship ends with credit outstanding, ask the vendor to refund it and record that refund through banking.
Yes — each memo's application is its own record, and an invoice happily collects several. Its Memo Applied figure in the Invoice Summary totals them, and the Applications tab lists each one.
No — settlement discounts are recorded on cash payments (see Settlement Discounts & Terms). A memo simply reduces the balance due; any discount applies to the cash portion you still pay.
The Accounts Payable or Accounting Admin permission sets — applications are subledger records. Accounting Controller can review every application but is read-only on subledger transactions.
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