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Supplier Credit Notes aka Treat them like an invoice

Hi,

I find supplier credit notes are a the single most awkward area of day to day transactions I’ve come across in Quickfile, and I suspect I’m not alone.

  • Allocating them to a paid or unpaid invoice
  • holding the money on a supplier account

or the latest one I found

  • using the receipt hub or account credit and ending up with a transaction on a bank account!! Really? that’s fun to reconcile.

None of these methods reflect how I suspect alot of businesses handle them. It also makes them really difficult to track where you have a credit account with a supplier and potentially records incorrect finacial activity.

I want to deal with a credit note exaxctly the same way I deal with an invoice from a supplier, without any allocation at first,

  • Record the purchase (credit of a purchase in this case) via the enter new purchase screen or Receipt Hub,
  • hold the -neg transaction on the supplier account as unpaid until such time as a payment is to be made
  • update the credit note ‘as paid’ in the same way and at the same time as an invoice by ticking it, which adjust the running total to pay accordingly.

This would allow the bank account to reconcile when a single payment is made which includes both invoices and credit notes and enable you to see which credit notes have been ‘paid’ (ie taken in to account in respect of actual payments). and which haven’t. You could also see the full transaction history with the supplier this way.

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In all honesty we’re not likely to make any drastic changes to the way credit notes work in Quick File, not least due to the complexities of rebuilding half the system to do so. Also any accounting scenario is covered with the system we have and binding credit notes to invoices provides a clear audit trail on where the credit note originated from.

I know some businesses use credit notes extensively, but for most small cash based businesses they are seldom used.

The way credit notes are handled in Quick File will no doubt improve over time but they’re more likely to be smaller iterative improvements rather than a complete rewrite.

Can you not just allow an invoice from a supplier to be for a negative amount?

It’s the trigger in receipt hub for example that forces the allocation against a bank account thats the issue or the non visabliity of the credit note in outstanding purchases.

I have the senario where I buy from and return goods, when not required, with a supplier, each transaction is accompanied by an invoice or credit note accordingly, periodically when I try to make a payment I can see the invoices but not the credit notes, the total is not correct on the invoice if the credit has been assigned to a particular invoive ie it still shows the original total of the invoice not the amount less credit.

If you made the running total add up corrcetly when you tick invoices to update as paid in outstanding purchases one of the small changes it would help.

NB this is an issue when you deal with a supplier on a credit account basis and the don’t refund you immediatly

I do remember looking at this some time back. The problem is if you enter a negative invoice with the view to just reduce the supplier balance on account, how would you expect that to affect invoices that have already been entered and are unpaid? The system needs to know if these invoices should be considered as due and we use this as a reference point in 100s of places to determine what is outstanding at the supplier level. That’s why credit notes are bound explicitly to invoices, it’s very fundamental to the way the system works.

What we may be able to do if you are predominantly using the Receipt Hub, is rather than always forcing a refund, to allow the credit to be held on account instead, that would then mirror the functionality elsewhere. We only recently added the facility to even process refunds through the Receipt Hub so I’m sure this functionality will follow in time.

Hi Glenn

thanks for your replies

I wouldn’t. The only relationship they need to have is with the total outstanding balance you owe.

I might be missing how QF intends suppliers who you have a credit account with are supposed to be paid, so plaese correct me if I’m simply not using the system correctly but as I understand it you have two routes in.

  • Via the bank account, download your statement and tag the payment as paying a supplier and then tell QF which invoices it refers to.

This relies on knowing how much to pay a supplier in the first place which is a bit back to front. So where do you get the amount to pay the supplier from in the first place?

  • Via ‘Outstanding Purchase’ screen, which can’t add up if you’ve linked credit notes to an invoice * anyway and doesn’t show you credits on account if you’ve entered them via supplier screen or the Receipt Hub as QF has already incorrectly logged them on a bank account. When a credit is provided by a company that you have a credit account with no finacial transaction has occured at that stage. So again where do you get the amount to pay from?

Answer: the statement your supplier sends you. Which is bit rubbish don’t you think?

The lack of a remitance advice is fundamentally connected with this issue as well and means that you can’t provide your supplier with any meaningful information on how you have arrived at the figure that you are paying them. This allows them to apply their own interpretation of what’s been paid and guess what, it’s very likely to be wrong especially if there is a missing invoice or similar senario.

Do you mean having a ‘has this been paid’ option as you do on invoices? If so yes this would address this situation if the ‘unpaid’ credit note then appeared on the Outstanding Purchase screen and if you could then tick them along side invoices and the total in the orange box added them up correctly otherwise how would you know you had a credit to use? This would need to be mirrored in the add a credit through the supplier screen option.

In most cases the bank tagging feature is being used to retrospectively create invoices, rather than creating the invoice first, leaving it as unpaid then tagging it to a record on the bank. So in effect the invoices are getting created on-the-fly from the bank. This suits a lot of small cash based businesses who just want to get their bookkeeping up to date in one session. The advantage of this method also means you don’t need to do any bank reconciliation, you’re effectively importing your bank statement and completing your whole accounts from the bank screen. The disadvantage of this method is you don’t have a great deal of management information in your accounts.

The other approach is to enter all invoices manually or generate them from the Receipt Hub, this approach is more geared towards those who prefer to use QF as a daily ledger to track their client and supplier balances. It allows you to document detailed information about all your invoices and accurately track what you’re owed and what you owe at any given time. This method is more time consuming to manage but perfectly valid.

Going back to credit notes, the way the software has been designed relies fundamentally on credit notes being linked to invoices, to show their origin. The method of just having a bunch of invoice and a bunch of credit notes and netting the difference can never be implemented in QF without rewriting half the software.

We can allow credits to be saved on account from the Receipt Hub but it will be contingent on selecting a previous invoice to attribute it to. That functionality is already there elsewhere in the sense that you can find a previously issued invoice and raise a credit note against it. So any credit note raised in the Receipt Hub would work along the same lines.

Morming Glenn

Thanks for the confirmation, that’s as I understood it in respect of entry. Manual / Reciept hub is the way most organisations would handle a Purchase Invoice from a credit account as you have the invoice long before any payment is made.

That still leaves the visablity of Credit Notes Issue QF has. If you look at All Purchases for a supplier you see Paid, Unpaid and Credit when one has been linked to an invoice, the little running total tick box can add these up correctly & when a credit is selected it is subtracted, yeah!

What you don’t see is if the credit has been included in a previous payment as it is always red. If the credit note is fundamentaly linked to an invoice and an invoice knows if it is paid or not you must be able to tell a cedit note if it’s parent invoice is paid and therefore if it is paid (or, more correctly, taken into account when a payment is made)

Would it be possible to give credit notes a status based on whether the invoice they’re attached to has been paid or not and display this in some way,

eg a red ‘Credit’ = parent invoice unpaid, green = paid?

If it is possible, these credits where their parent invoice has not been paid should appear on the Outstanding Purchases, currently, as it stands, this screen is a complete waste of time.

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I can make a recommendation but given our current workload it’s probably not going to happen any time soon. It may be a waste of time to you but people use the software in a multitude of different ways. This is the first time this problem has been specifically raised. We tend to provision work based on consensus from our users so if others come in and support the idea we can explore it further.

Hi Glenn

Thanks, one question is the outstanding balance held in a field on QF or is it calculated each time an invoice is looked at in detail ?

It’s actually calculated dynamically every time by referencing all payments, credit notes and bad debt write-offs.

HI Glenn

that’s a shame because with how credit notes are handled it’s this figure that you need to see and it’s this figure that the running total should calculate in outstanding purchases because that is what is actually outstanding. It would be useful in the purchase management summary screen as well.

Next question(s), is it possible to dsiplay this figure? can a field be added to the database that holds and updates this dynamic figure? can the running total in Outstanding Purchases use this instead of the original amount?

Reading back up the post I realaised I didn’t explain why this is a issue, just to clarify, it becomes a problem when trying to work out how much to pay a supplier you hold a credit account with and there are multiple invoices and credit notes to include. Current method is to go into the detail of each one and write down the outstanding balance on a piece of paper.

Maybe this is what you’re after?

You can then see in the supplier screen the totals of outstanding invoices and also account credits.

I don’t see why you’d need to manually total the credit notes. If you go into any supplier detail screen the account balance for that supplier already factors in the credit notes and will show exactly what’s owed. You can also look at the creditor ageing report and this will give you a more detailed breakdown of aged debt.

Having a column that stores the credit note total at the invoice level is a bad idea from a programming perspective as it introduces huge margin for errors. You’re basically storing the same information in two places and there’s a good chance these will occasionally go out of sync. Also you need to update this extra reference frequently which puts more load on the database.

Every time I get a credit note from a supplier, my heart sinks as I always have to process it in an unsatisfactory manner. If the credit note is linked and has the same total as an invoice I have not paid, this is fine but any other scenario is frankly the worst thing about quickfile. We are often issued credit notes for invoices that have already been paid so where is the facility for this? Also sometimes we get credit notes for part of an invoice and I can’t find a way to process this either. I have read the various instructions posted by the accounting department at quickfile but frankly I find it all very confusing. If I do actually manage to post a credit note and include it in the running total of a group of invoices to be paid, the system alerts me that there is a credit note in the total and then takes it off, which makes the total more than it should be. I then have to go into the current account section and manually take the credit off the payment which I then post to adjustments - with an explanation for my accountant.

I see that quickfile don’t intend to rectify this any time soon and as it is a scenario that I have do deal with almost every month, I am thinking about looking for accounting software that is more efficient in this respect.

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Hi @chrissiemof

I’m sorry to hear you’re having troubles with credit notes for suppliers. I will however try to help you the best I can.

If the invoice has been paid, simply go to the invoice that you’ve entered, and go to More Options >> Credit Note:

You can then adjust the credit note as you wish, and you’ll be prompted how you would like to save it, for example, whether to hold the money on the supplier’s account, or whether to create a new bank transaction:

Using this method, you can adjust the credit note to be for just a certain part of an invoice.

If you’re having any issues, please don’t hesitate to contact us (like you have here). We’re here to help, as is the rest of the community (including other users). If there’s a part we don’t support, we’re always open to listening to our community and we are happy to investigate reasonable suggestions too.

I hope this helps, but please don’t hesitate to ask further questions :slight_smile:

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The OP is correct in high lighting again that Quickfile is decficent in handling credit notes.
The problem lies in Quickfiles instance to have a bank transaction occur at the same time as you enter the credit note on to Quickfile, on a credit account this is inapropriate but allocating it against an outstanding invoice as per your suggestion above, looses any obvious trace of it as there is no visual entry for the credit note.
.
Neither of the methods suggested within Quickfile credit note options are helpful, so…

Here’s a reasonable suggestion; allow Quickfile to hold a negative value invoice (or credit note) against a supplier so you see on any statement view this sort of senerio

inv A £10
inv B £10
inv C -£10 (Credit Note)
inv D £10
Total owed = £30

and allow it to behave like any normal invoice. Or put another way copy any standard accounting package.:slight_smile:

Hi @aos

In your example of invoices A, B, C & D, what’s the purpose of the £10 credit? For example, why would the £10 credit be issued?

If there are already 2 invoices of £10 on the system, couldn’t you credit one of those which eliminates the need for a bank transaction?

If instant bank transaction is not required just hold the funds on credit and next time make reduced payment from bank for outstanding invoice by using credit on a/c figure

At first sight I am with FaradayKeynes on this.

I am guessing that there is an issue with the way that the particular supplier operates. Are the credit notes issued against specific invoices or is a generic credit issued for a return without referencing which of multiple purchases it applies to?

Hi Mathew,

It’s a question of reconciliation with a suppliers statement.

A credit is issued in my case when I return goods that are either excess to requirement or faulty.

In answer to your second point yes it can but there in lies the problem with how Quickfile handles credits you see sometimes that is ok, but for myself and the OP and I suspect many others it’s only appropriate occasionally. I only used £10 in my example for ease of addition and in hindsight that may have distracted you from the issue. Imagine all the transactions are for different amounts and that the credit does not match any of them.

Scenario: I go into my supplier, who I have a 30 day credit account with, and pick up ten items on the 1st of the month, that is then invoiced on the day and sent to me by email, I log that invoice on Quickfile via the dashboard. I return one of the items a few days later as it’s not required, they raise a credit note which I receive in due course. I could post it against the invoice however this is unsatisfactory as at the end of the month (30 days later) when I receive the statement from my supplier and try to reconcile it the two lists don’t match as;

the supplier statement shows

inv A £132
inv B £50
Credit note#1 - £20
inv C £60

Total outstanding £222

(this layout is, I’d say, an accounting package industry standard layout, all my suppliers show both invoices and credits in a simple list as above on their statements)

but Quickfile shows on the outstanding purchases screen

inv A £132
inv B £50
inv C £60

Total Outstanding £242, not stated as such but visible if you select those invoices with the tick box, this is the total regardless of whether you have or have not posted the credit note against one of those invoices.
Only when I select the invoices to pay them and select ‘allocate one lump payment’ option do I see a corresponding value of £222, that is if I’ve post the credit note against one of those invoices.

Simply put the credit note should be able to be held on the suppliers account without being allocated to a purchase so it is visible just like any invoice is and not ‘hidden’, then when I want to pay my supplier I pick the invoices and credit notes I want and get a running total that makes sense and pay that.

Quickfile should allow me to see a list identical to my suppliers statement, because that is how the transactions are managed between companies. A credit note has the exact same worth and effect as an invoice representing the transfer of goods or services between legal entities and should not be relegated to being lost within an invoice.

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