Managing Credits Without Returning Items to Inventory in D365 Business Central

Introduction

In the realm of retail, the completion of a sale marks not only a transaction but also the onset of potential post-sale scenarios that demand careful handling to maintain customer satisfaction and uphold business integrity. Here, we have sold an item. Do you now have the situation where you need to:

1. Credit a customer without replenishing inventory, such as by issuing a refund without requiring the item’s return.
2. Provide a partial refund, for example, if an item was partially damaged.
3. Adjusting the sales price of a sold item, either higher or lower than the originally invoiced amount.

All these scenarios are possible in Dynamics 365 Business Central by using a Credit Memo with Item Charges.

This method also works for both sale and purchase transactions.

Posted Sales Invoice

Let’s look at an example on the sales side (the purchase side would be the exact same steps) – we have the Posted Sales Invoice below where we sold an Athens Desk for ₹45,090.00 to our one of Customer The Cannon Group PLC (Customer No. 10000).
Now we need to credit The Cannon Group PLC for this invoice without receiving the item back into inventory.

Here is the Posted Sales Shipment that was created when the Athens Desk was sold to The Cannon Group PLC.

And the Item Ledger Entries that were created, we can see the Sales Amount (Actual) field showing the ₹45,090.00 sales amount.

Below are mentioned Value Entries that were created.

Steps to Achieve the Goal

Item Charge

First, create an Item Charge and assign it the same Gen. Prod. Posting Group as the item on the original Posted Sales Invoice (Athens Desk).

The reason for matching the Gen. Prod. Posting Group is to ensure that once we post the credit memo, the general ledger entries are booked to the same accounts as the initial sale.

If we look at the Athens Desk (on the item card), we have the Gen. Prod. Posting Group RETAIL.

To match the sold item Athens Desk, I created an Item Charge for this example named S-CREDIT and set it to the RETAIL Gen. Prod. Posting Group.

Create and Post a Sales Credit Memo

Next, create a new Sales Credit Memo.

In the Customer Name field, select the same customer as the original Posted Sales Invoice – The Cannon Group PLC.

On the Lines FastTab, in the Type field, select Charge (Item), and in the No. field, select the previously created S-CREDIT Item Charge.

In the Unit Price field, enter the credit amount. For this example, I will enter ₹45,090.00 to credit the full original sales price, but you can enter a lower amount for a partial credit.

Next, assign the Item Charge to the Posted Sales Shipment tied to the original Posted Sales Invoice.

To do this, on the Lines FastTab, choose the Item Charge Assignment action.

Select Get Shipment Lines.

Select the Posted Sales Shipment Document No.

Then click on Ok.

In the Qty. to Assign field, enter 1.

Select Close.

Select Post to post the Sales Credit Memo.

Results of Correction

So, what did posting the sales credit memo accomplish?

First, we have the Posted Sales Credit Memo.

Second, it reduced the Sales Amount (Actual) to ₹0.00 in the Item Ledger Entries for the original Posted Sales Shipment without impacting item quantity.

Third, it added a new Value Entry tied to the original Posted Sales Shipment, which reverses the original sales amount by the credit amount.

Fourth, in the Customer Ledger Entries, we now have the original Posted Sales Invoice and the newly created Posted Sales Credit Memo.

The two can be applied to each other here, or the application can be done when the credit memo was initially created.

Lastly, let’s look at what G/L entries were created originally when we posted the sales invoice. We had the four entries below from the posted sales invoice.

And these are the two G/L Entries that the Posted Sales Credit Memo created.

Conclusion

The Credit Memo debited Revenue and credited Accounts Receivable, reversing the original sale amount without impacting the inventory or COGS accounts.

So, in essence, the Credit Memo with the Item Charge properly accounted for the return/credit from an accounting standpoint without receiving the physical item back into inventory.

To sum up, implementing credit management in D365 Business Central also offers a solution to handle returns without affecting inventory levels. Remember to leverage credit memos and customer ledger entries effectively to maintain accurate records.

Thank You.