Different Types of Credits

This article will walk you through the different types of credits that can be created as well as how to reverse credits.


Topics in this article include

• System Credits

• Credit Types

• Saved Contracts Mods as Adjustments

• Reversing Credit Adjustments

• Writing off a Credit

• Reversing a Credit

• Reversing a Credit Payment

System Credits
 

It can be confusing to determine the difference between a credit on a customer’s account and a credit as a refund. Credits can be created in different ways throughout the software – each type has a different meaning. It is important to understand the differences between these types of credits and how the software processes them. 

There are two types of credits that can be created in Point of Rental software:
 

• Credit Payments
• Credit Adjustments.

Credit Payments

Credit Payments are payments made through Accounts Receivable that are not applied to any invoice. This will leave a credit on the customer account to be applied to either current or future invoices. 

Credit Adjustments

If enabled, Credit Adjustments are created when the value of a contract is either raised or lowered. Credit Adjustments are not dependent on whether the contract has been paid or not. When the adjustment is created, you'll be asked the reason for the adjustment and a credit will be created on the customer’s account. For more information on adjustments see the topic below, Save Contract Modifications as Adjustments.
 

 Important information to remember when creating a Credit Adjustment
 

• Manually creating a credit contract is not recommended as it can easily be abused. You should adjust the contract value.

•  When creating an adjustment, the accounting will be affected. If using Closed Accrual accounting and you adjust a contract, the Adjustment contract will create a reverse post to totals and affect the G/L account.

•  You cannot modify the Adjustment contract once it has been created. 

Credit Types
 

What’s the difference between a Credit, Credit Memo, Credit Contract, and an In-Store Credit?

There are different methods for creating credit. Each one will produce a “C” before the contract or invoice number, letting you know credit has been created (i.e., C1234 would be an example of a Credit Contract). 

Credit - Credits on customer accounts can be entered as a payment received (but not applied to any invoices) or payment received and partially applied towards invoices, leaving an overpayment of the funds. These overpayments will become Credits on the customer’s account. 

Credit Memo - A Credit Memo is a credit entered on a customer account that can be used to pay current or future invoices. No monies are returned to the customer through a credit memo. The following are normally associated with a credit memo:

Disbursements - You can create a disbursement type and associate this type when creating the credit. The disbursement will print out the reason the credit is to be given. A copy will go to your accounting department (see Accounting Configurations).

Cash Drawer - The credit memo can be used to move money from one customer account to another without affecting your cash drawer. 

In-Store Credit - In-Store Credit can be created from within a contract at the payment screen. You will have the ability to either refund the customer out of the rent/sales field or the deposit field. From the drop-down selection, you can choose In-Store Credit. This will add a credit to the customer’s account. 

Applying for Credit - From the Accounts Receivable screen, if there are no credits on the customer account, then “Apply Credits” will be grayed out. Once a credit is added to the customer account, then the “Apply Credits” button will be displayed in bold.  By default, if this button is selected, then the credits will be applied to the oldest invoice first.

Credit Contract - A credit contract is a negatively valued contract or a credit adjustment used when no cash has been given back to the customer. A copy of the credit contract will be given to the accounting department for a check to be issued back to the customer.
 

Note: Manually creating a credit contract is NOT recommended. Typically these are used for new onboarding customers who did not bring over transaction information. The original contract should be modifiable, if applicable. In order to use this feature in Elite, you will have to enable a security setting.
 

Credit Adjustments - If enabled, Credit Adjustments are created when the value of a contract is either raised or lowered. Credit Adjustments are not dependent on whether the contract has been paid or not. When the adjustment is created, you'll be asked the reason for the adjustment and a credit will be created on the customer’s account. For more information on adjustments see the topic below, Save Contract Modifications as Adjustments.

Save Contract Modifications as Adjustments

This allows you to create a contract adjustment as a form of refunding a customer versus taking money out of the cash drawer. Some companies have a cash drawer or till that they allow a counter person to refund money if needed. Other companies prefer NOT to let their counter personnel handle any money.  An adjustment contract is created and given to the accounting department to refund the customer by check. This form of adjustment can be set in the software under Parameters to save Closed Contracts for (Cash/Account) customers as adjustments.
 

Note: In Elite credit modifications will be made if you have Sequential Invoicing, Accounting API Integration, or Tax Integration. 

Here's how to get there
Expert: Program Menu > Configuration > System Configurations > Parameters > Accounting Tab
Elite: Configuration Gear > App Configuration > System Configurations > Parameters > Accounting Tab

Save Closed Account Mods as Adjustments - With this parameter set, each time a Closed Account contract is modified an adjustment contract will be created. The adjustment contract will list any items that were modified, the price adjustment, and any change in totals such as taxes or damage waiver. The contract number will follow the credit contract format where it starts with a “C.”
 

Note: If the contract has been billed, then NO modifications can be made. You will only be able to write off the credit.
 

Save Closed Cash Mods as Adjustments - With this parameter set, each time a Closed Cash contract is modified, an adjustment contract will be created. The adjustment contract will list any items that were modified, the price adjustment, and any change in totals such as taxes or damage waiver. The contract number will follow the credit contract format where it starts with a “C.”
 

No Adjustments for Unbilled Contracts - With this box checked, and if the contract has not been billed, you can modify the contract and avoid a credit adjustment.

Save Inventory Quantity Changes to Pending - This setting applies to your inventory. To learn more, read our article "Accounting Tab - Parameters".

If the box in Parameters is checked to Save Closed Contracts as Adjustments when a contract value is lowered, a credit adjustment contract will be created and you will be asked the reason for the credit. The credit contract will be displayed on the customer account.

 

Reversing Credit Adjustments

The steps below only apply to Credit Adjustments. For more information, see the section above, Save Contract Modifications as Adjustments.

1. From the Customer  Dashboard, you can select the credit memo. The credit memo will show the amount of money due back to the customer or if the customer owes more than the contract total.

2. The contract will appear, where you can select “Modify the Contract” from the Tools menu.

3. You will be prompted, “Would you like to remove the credit?” Select Yes. This will nullify the credit memo, removing its total balance due.
   

4.  Press OK to save the contract. Press OK again on the payment screen to get through it. And then, when you're prompted, "Finished with changes?" press Yes.

5. Return to the Customer Dashboard from the Done menu to confirm the changes. In the Dashboard, the Closed Credit Adjustment will display the Job Number as "Cancelled."

Writing off a Credit

Sometimes it is necessary to write-off a credit balance when a refund will not be given to the customer. The following instructions will not affect your cash drawer. You will be able to run a report later to view credit write-offs. You will need to set up a disbursement item called Credit Balance Write-Off. See Disbursement for help.

Here's how to get there
Expert:  Program Menu > Accounts Receivable > Accounts Receivable Manager or Counter System > Customer Dashboard > Tools
Elite: Left Menu > Accounts Receivable

1. Choose Make Account Payment.
 

2. Select Make Payment.


 

3. Enter a payment amount.

4. Select a payment method of Credit Memo.

5. When prompted, select Disbursement Items to choose your Credit Write-Off Disbursement from the drop-down menu. 
 

Note: See disbursements on how to add a new disbursement to the list.

6. You must add a comment describing the write-off.

7. You will be prompted with a window asking, 'do you want to automatically apply the write-off for this payment?'

8. If there is more than one credit to apply this to, answer NO, and manually apply for payment.

Note: If you answer YES, payments will be applied to the oldest credits first.

9.  Use the money in Funds Remaining to refund the credit balance, effectively zeroing it out.

10. Once the credit(s) have been refunded, the funds remaining at the bottom of the screen should be zero.

11. Press OK to finish. 

• You can now run the Disbursement Report in Accounting Reports to see Credit Write-Offs.

Reversing a Credit

There are times when a credit might need to be reversed. It is important to remember that you can’t modify a credit contract once it has been created. Below are the steps to reverse both a credit payment and adjustment. 

Reversing a Credit Payment

To reverse the credit, you will need to make an account payment and enter a negative dollar amount. Enter a payment type of credit memo and apply it to the existing credit on the customer account. You will not be able to remove a credit by right-clicking on the credit and selecting “Modify.”