Creating a Vendor Memo
A supplier sent you a credit note — now record it. This walkthrough creates a Vendor Memo using Meridian's real case: Summit HVAC Inc overcharged $300 on a maintenance bill and issued credit note SH-CM-114. New to memos? Start with Understanding Vendor Memos.
Access you'll need. Creating, editing, and posting these requires the Accounts Payable v2 permission set (AP clerks & managers) or Accounting Admin v2 (system administrators). The Accounting Controller v2, Accounts Receivable v2, and Read Only v2 sets can view but not create or post.
Choose your starting point
| Route | When |
|---|---|
| From the invoice being corrected — open it and click Create Vendor Memo | The credit relates to a specific bill (an overcharge, a return against it). Vendor and context carry over, and the two documents stay linked. |
| From scratch — Purchase Invoices tab → New → Invoice Type = Vendor Memo | A general credit not tied to one bill — an annual rebate, a goodwill credit. |
Filling it in
Header: the same form, one difference
The memo uses the familiar purchase invoice form. Set (or confirm) Invoice Type = Vendor Memo, pick the Vendor and Entity, enter the credit note's date, and put the vendor's credit note number in Reference — SH-CM-114 for Meridian's case. A clear Description pays off later: "Credit for overcharged maintenance visit (SH-8802)".
Lines: flip the credit toggle
Add a line for each credited item, exactly as printed on the credit note — product, quantity, unit price all positive. Then switch on the credit line toggle beside the line number: its badge flips to Vendor Memo, the line turns negative, and the totals follow. Meridian entered one line: HVAC maintenance, quantity 1, unit price 300, toggle on → total −$300.
Check the total is negative, then post
The Invoice Summary must show a negative total — a memo that isn't negative won't post. Save Draft if it needs review; Post to put the credit on your books. Posting debits Accounts Payable (you owe less) and credits the original expense accounts.
Use the credit
A posted memo is available credit. Apply it now (Apply Vendor Memo), let it auto-apply (Auto Apply Memo), or leave it as Remaining Credit for future bills. Details: Applying Vendor Memos.
The fields that matter — the reference
| Field | Required? | What it does |
|---|---|---|
| Invoice Type | Yes — Vendor Memo | What makes this document a credit rather than a bill; it enforces the negative total |
| Entity | Yes | Whose books hold the credit — the memo can only ever offset this entity's invoices |
| Vendor | Yes | Who issued the credit note; applications are restricted to this vendor's bills |
| Invoice Date | Yes | The credit note's date; the Accounting Period derives from it automatically |
| Due Date | Yes (auto-suggested) | Defaults from the vendor's payment term; adjustable, but never before the Invoice Date |
| Reference | Recommended | The vendor's credit note number (SH-CM-114) — the link back to their paperwork |
| Description | No | The why, for humans: "Credit for overcharged maintenance visit (SH-8802)" |
| Line: Product | Yes, every line | What's being credited — same catalog as invoices |
| Line: GL Account | Yes | Where the correction lands — use the account the original cost hit; it must be active |
| Line: Quantity / Unit Price | Yes | Both entered positive, exactly as printed on the credit note |
| Line: credit line toggle | Yes, to make it a credit | Flips the line's sign — the badge reads Vendor Memo and the totals go negative |
| Line: Tax Profile | If the original had tax | Reverses tax proportionally, to the same tax accounts |
| Line: Cost Center | No | Dimension stamp, if your reporting slices costs by dimension |
The messages you might meet — verbatim
| The message | What it means |
|---|---|
| "Vendor Memo must have a negative total. Use Is_Credit lines to produce a negative total amount." | No line has the credit toggle on (or too few do) — the memo's overall total must be below zero to post. |
| "Quantity must be greater than zero when provided." | Don't type negatives to force the sign — quantities stay positive; the toggle handles the credit. |
| "GL Account is inactive and cannot receive new postings. Select an active account or reactivate this one." | The original bill's account has since been retired — pick its active replacement. |
| "Entity is inactive and cannot receive new transactions. Select an active entity or contact your administrator to reactivate it." | The entity is switched off — a setup conversation, not a data fix. |
| "Invoice Date must fall within the selected Accounting Period date range." | Date and period disagree (usually after editing the date on a draft) — let the period re-derive. |
| "Due date cannot be before the invoice date. Please review the payment terms and due date." | A credit can't fall due before it exists — fix whichever date is wrong. |
| "Voided Purchase Invoices cannot be modified." | A voided memo is frozen forever — create a fresh one if the credit is still real. |
Common mistakes to avoid
| Mistake | Why it hurts | Do this instead |
|---|---|---|
| Typing negative quantities or prices | Validation refuses them — and it hides what was actually credited | Positive numbers, credit toggle on; the sign is the toggle's job |
| Booking the credit to a generic account | The original expense stays overstated while some other account goes negative | Mirror the original bill's GL accounts — start from that invoice with Create Vendor Memo |
| Entering the vendor's credit note as a negative Invoice type | It won't behave like credit — no Remaining Credit tracking, no memo applications | Invoice Type = Vendor Memo, always |
| Skipping the Reference | When the vendor's statement arrives, nobody can match your credit to their credit note | Record their credit note number — it's the shared key |
| Leaving the memo in Draft after the review | Draft credit is invisible to applications and payment runs — you'll pay gross | Post it; then apply it before the next payment run |
Where to go next
- Applying Vendor Memos — using the credit.
- Understanding Vendor Memos — the concept and the accounting.
- Posting & Voiding a PI — lifecycle rules that memos share.
Frequently asked questions
No — keep quantity and price positive and switch on the credit line toggle. The toggle handles the sign, and validation keeps everyone honest: quantities and prices themselves must always be positive numbers.
Enter what the credit note says: quantity 2 at the chair's unit price, credit toggle on. The memo doesn't need to mirror the whole original line — only the part being credited.
Yes — if the original purchase carried tax, the credit note usually reverses it proportionally, and the memo's lines calculate tax the same way invoices do. Match the credit note's tax figures; the reversal posts to the same tax accounts.
Reopen it to Draft (its accounting entries are removed and any applications unwound), correct it, and post again. Posted and voided memos can never be deleted — a wrong memo that shouldn't exist at all is voided, with a reason, and stays as a frozen record.
Anyone with the Accounts Payable or Accounting Admin permission set — the same as other purchase documents. Accounting Controller is read-only on subledger transactions.
Once posted and applied, yes — the credited invoices show lower balances due, so the run proposes less cash. A posted-but-unapplied memo doesn't reduce anything yet; apply it first (see Applying Vendor Memos).
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