In this article
Talk to our experts- Debit memo
- In B2B billing, a debit memo is a document a seller issues to increase the amount a customer owes, for example when an invoice charged a price that was too low. The customer pays it like an invoice, and it keeps the original invoice unchanged. It is the opposite of a credit memo, which lowers the amount owed.
How it works
A debit memo adds a charge to a customer's account after a sale, instead of editing an invoice that has already gone out.
Sage Intacct's documentation describes it as an accounts receivable adjustment. It recommends making an adjustment if a balance is due after an invoice is paid, rather than editing an invoice, so there's an audit trail of the history. Debit memos increase the amount that a customer owes you. After you post a debit memo, the debit shows on the customer's statement, and the customer's debit memo can be selected as a transaction to be paid.
SAP's documentation for sales shows where one usually starts: a debit memo request, a sales document used in complaints processing to request a debit for a customer.
How a debit memo is raised in SAP sales
You can create a debit memo request if the prices calculated for the customer were too low, for example if the wrong scale prices were calculated.
The debit memo request can be automatically blocked for checking.
Once the request has been approved, you can remove the block.
The system uses the debit memo request to create a debit memo.
Debit memo vs. credit memo
- Debit memo: increases the amount a customer owes you.
- Credit memo: decreases it, for example after a return or an overcharge. See credit memo.
Trading partners that exchange EDI can send either adjustment as an EDI 812. X12 says the 812 Credit/Debit Adjustment can be used to notify a trading partner of an adjustment or billback.
The same name shows up in bank transaction histories with a different meaning. Scotiabank's help center, for example, says that when a debit memo entry appears in the transaction details of your transaction history, the amount next to it has been debited from that account. This page covers the B2B billing meaning.
This is general information, not accounting advice.
Example
A janitorial supply distributor invoices a facilities company for 200 cases of hand towels at $30 a case: 200 x $30 = $6,000, on net 30 terms. The buyer's contract price is $32 a case, and the invoice used an old price.
The distributor issues a debit memo for the difference: 200 x ($32 - $30) = $400, referencing the original invoice. The buyer now owes $6,000 + $400 = $6,400 across the invoice and the debit memo.
On Shopify
On Shopify, one way to raise what a buyer owes on an existing order is to edit the order:
- Edit the order: when you edit an order, you can add or remove products, adjust item quantities, and update shipping fees.
- Collect the difference: after you save your changes, if additional payment is required, then you can send the customer an updated invoice.
How Uncap helps
Uncap Portal gives trade accounts a self-serve home on Shopify, catalogs, pricing, reorders, invoices, and users, with NET terms, invoices, and payments in the portal.
Sources
Frequently asked questions
What is a debit memo charge?
A debit memo charge is an amount a seller adds to what a B2B customer owes after the original invoice, for example when the invoice used a price that was too low. In Sage Intacct's words, debit memos increase the amount that a customer owes you.
Are debit memo and credit memo the same?
No. A debit memo increases the amount a customer owes, while a credit memo decreases it. Both adjust an account after a sale without editing the original invoice.
Is a debit memo like an invoice?
A debit memo works much like an extra invoice: it adds an amount the customer owes. In Sage Intacct, a posted debit memo shows on the customer's statement and can be selected as a transaction to be paid.
What is a debit memo in SAP?
In SAP sales, a debit memo is created from a debit memo request, a sales document used in complaints processing when the prices calculated for the customer were too low. The request can be blocked for checking, and once approved, the system uses it to create the debit memo.
