I find difficulty with recording credit note every time I use the system. Raising a negative purchase invoice requests a bank account to create a refund. This seems to leave me with a cash in the bank account which is alien to the banck statement transactions uploaded from the bank records. In any case I never get a refund for credit notes, but rather, it is kept to my credit till a settle unpaid invoices or new purchases, against which I offset the credit notes.
I am aware that if on the other hand a credit note is related to an invoice, and the invoice is viewed, one can pass a credit note and tick the box to Hold funds on account. This seems to work and no refund to the bank account is forced by the system. But what if I made some returns for damages and I cannot link the credit note issued by the supplier to a specific invoice? Seems this option to Hold the funds on account is not available, thus generating an bank receipt. To bypass this, I just pick up an unpaid invoice and create a CN against it to avail myself of the option to Hold the funds on account. I am not sure I will have consequences when paying that invoice though.
Can there be a way not to allow the system to generate a cash refund? Or whether the cash refund can be posted back to the supplier account on account?
Are you able to elaborate on the situation please? Are you able to provide an example where you would have a credit note, but not an original invoice? I’m just trying to understand the situation a bit better and hopefully point you in the right direction.
In many cases, an invoice would normally be issued by the supplier so there would be some record of the transaction prior to a credit note being issued. You would just create the invoice and then credit it.
Saying that, it’s not unheard of for a credit note to be issued without an invoice. For example, in a situation of a goodwill credit note being issued.
Whenever you raise a credit note against an invoice, it will reduce the outstanding balance. So if you have an invoice for £100.00 and then credit £60.00 against it, the outstanding balance will only be £40.00. So this could cause you an issue, but it depends on your situation (e.g. would the credit from the original invoice then be used to pay this new invoice?).
For the first question, sometimes I have to return items from multiple invoices but one credit note is issued to me. It is quite difficult to go to specific original invoices. Also, it may happen that the invoice of the item purchased is already paid. The CN is normally issued on account. Therefore when paying other unpaid invoices, I agree with the supplier to deduct the CN from the payment. But I never get a refund and that is why I find it difficult to accept a cash refund in my bank account as this entry will not be reconcilable with the official bank statement.
The secon question. As explained above, the CN is set off against a payment to the creditor, but not necessarily against the one I choose randomly to avail myself of the Hold on account option.
Think I understood, but for better clarity, if I may, I outline my understanding.
So better way to just picking an unpaid invoice at random and issuing a CN against it to avail myself of the Hold funds on account, I could just raise a negative invoice and post the refund to a ‘memorandum’ bank account set up for the purpose. Then, whenever I pay the supplier, I could use this bank account to settle particular invoices (?) Am I correct?
My question is what does the system do when a negative invoice is raised? Will the amount be included in the debit side of the supplier account? Meaning will the balance due to him be correct? If I understand correctly what happens with the negative invoice is that the system treats it as though the supplier made a payment and it is shown with prepayments until it is tagged. Am I correct?
I ask this because in the ‘memorandum’ bank account there will be all the negative invoices (CNs) of all the suppliers mixed in one account. What is not clear to me is how to tag a specific ‘prepayment’ or refund. ie if I am reconciling a supplier account, can I start by viewing the prepayments and work from there towards tagging, or do I have to go through the memorandum bank account and tag from there?
The system doesn’t do anything with the negative invoice, in terms of the supplier themselves. It wouldn’t affect the supplier’s account balance in any way, it would just sit there as a negative invoice. Obviously, it will adjust the relevant nominal codes, but that would be as far as it goes.
Once the payment is showing as a refund in the holding account, you could very well log the same value transaction as money out as credit for the supplier to make sure it sits on their account as credit.
When you create the refund to a holding account, it would just be treated like another bank account. The money would just sit there and show the bank account as in credit. But as I said above, you could zero the balance on this by tagging it back to the supplier as a pre-payment.
Just tied the proposed solution. I think it does not work properly because of the vat element. Adding to a prepayment (btw not a ‘credit’ as shown in the help screen shot ), will not reverse the vat element on the CN. I think therefore that the only way available to account for a credit note on account, is to pick an invoice (assuming the CN is not for a specific invoice) and raise a credit note through the system. The consequence of this is that then the invoice balance is reduced I suppose. ANy thoughts?
I’m assuming these invoices aren’t saved on QuickFile?
You can use the method I mentioned above, and if you want to hold the funds on the suppliers account, you can create a money out transaction to balance it. I’ve following the process and created a negative invoice for £30.00 and applied this to the suppliers account:
What is not clear to me is the VAT element. I suppose on the first negative invoice that was posted, the £5 vat is accounted for as due to the department. Otherwise all the rest of the transactions are just purely memorandum cash transaction (?)
In that case, accrual works by the invoice values, so when you create the negative invoice, it will mark the VAT as a refund. When you raise a new invoice again, it will mark the VAT as paid out to supplier.