What is a credit memo in QuickBooks?

A credit memo in QuickBooks is specifically designed to reduce the amount a customer owes. When a business issues a credit memo, it typically does so to acknowledge a return, an overpayment, or to provide a discount after a sale. This document is vital for accurate financial records and helps maintain customer satisfaction by rectifying billing issues effectively.

By creating a credit memo, the amount that the customer should pay decreases, which is reflected in their outstanding balance. This mechanism allows businesses to manage their accounts receivable more accurately, ensuring that customer accounts are updated correctly to reflect the true amount owed after any adjustments.