When to use credit memo application

Use this workflow when a payment includes credit memos that you must apply to invoices.

• Apply credit memos directly to the listed invoices when the remittance advice identifies them

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• Manually select available credit memos when the remittance advice does not identify them. Follow your internal policy, such as first in, first out (FIFO), to clear invoices accurately and reduce manual adjustments in the enterprise resource planning (ERP) system.

Access and review credit memo application

From the Payment Application page:

1. Click + Credit Memo next to the invoice.

2. Review the remittance details, available credit memos, and invoice allocations in the Apply Credit Memo dialog.

Credit memo application example

Invoice TIPC0045 has $1,000 due. Credit memo CRED090 applies $700, leaving $300 outstanding. The ERP system is updated after you post the payment application.

Apply a credit memo identified in remittance advice

Case 1:

When the Credit Memo is Mentioned in the Remittance. If the Remittance Advice clearly lists a credit memo number, you can directly apply it to the related invoice:

1. Locate the invoice in the Invoice(s) section.

2. Click + Credit next to that invoice.

3. Select the matching Credit Memo as mentioned in the remittance.

4. The applied credit amount will appear in the Credits (B) column, reducing the outstanding balance automatically.

Case 2:

When Credit Memo is not mentioned in the Remittance. If the remittance does not specify any credit memo, you can still allocate available credits for that customer:

1. Review the Credit Memo(s) list on the left side of the screen — this shows all open credit memos for the customer.

2. Based on your internal policy, you can apply these credits following the First In, First Out (FIFO) method — i.e., older credit memos get used first.

3. Select the appropriate credit memo(s) and click "+ Credit" beside the invoice where you want to apply them.

4. Confirm the allocations in the Credit Summary section before proceeding.

Final Step

After completing all allocations, click Apply to save the changes, then click POST on the Payment Application screen to sync the updates with the ERP.

Credit memo application capabilities

• View Remittance, Invoices, and Credit Memos side-by-side.

• Apply multiple credit memos to one or more invoices.

• Real-time update of allocations before ERP posting.

• Track applied and unapplied credit amounts.

Prerequisites and scope

Review the following configuration requirements and scope limitations before you use credit memo application.

1. Use the V2 UI. Credit memo application is available only in the V2 UI.

2. Do not use split payments. Split payment handling is not supported in this version and is planned as a Scope 2 enhancement.

3. Do not expect automatic credit memo identification from remittance advice. This capability is not supported and is planned as a scope 3 enhancement.

4. SDo not expect AI-driven credit memo suggestions. Smart AI suggestions for credit memo identification or mapping are not supported and are planned as a scope 3 enhancement.

5. Use a supported ERP system:

   • NetSuite

   • Zuora

Workflow limitations

1. ERP Posting Dependency:Credit memos applied during payment allocation will only reflect in the ERP after the payment is successfully posted. Until then, the allocation remains local to Zuora.

2. Update after posting to ERP:Credit Memo - once applied successfully from the payment application page, cannot be edited or updated from the same page. From the Credit Memo list page, the edits can be done and posted to the ERP.

3. Parent–Child Restrictions:There are two settings for Credit Memo

   1. Setting1: Strictly enforce Parent-Child Heirarchy. A parent credit memo can be applied to its child account, but not vice versa. Child credit memos cannot be applied to a parent or sibling account.

   2. Setting2: Do not enforce the Parent-Child heirarchy. Allow the the Credit Memo to be applied across any customers within a family.

4. Credit Balance Validation:You cannot apply a credit memo beyond its remaining balance, or apply credits exceeding the open invoice amount.

5. Duplicate Application Prevention:Once a credit memo is applied (even partially), it cannot be re-applied to another invoice until ERP sync refreshes the updated balance.

6. Manual vs Auto-Apply:Manual apply is the default. Auto-allocation is based on First in First Out (FIFO). i.e the Credit Memo is applied on the oldest unapplied invoice first.

7. Remittance Absence:If the remittance does not list a credit memo, users must manually select and apply available credit memos.

8. Partial Posting Cases:When credit memo posting succeeds but payment posting fails (or vice versa), Zuora displays a partial-success alert. The user must reattempt posting after corrections.