Understanding Vendor Credits

This document provides a high-level overview of how vendor credits work in Zoho ERP. It explains the purpose of vendor credits, their lifecycle, different ways they are used, and how they impact accounts payable.

What is a vendor credit?

A vendor credit (or debit note) is a record of money that a vendor owes your organization. Vendor credits are typically created when goods are returned, services are cancelled, or when a vendor issues a credit note for an overcharge or adjustment.

How Vendor Credits Impact Payables

Vendor credits directly affect your organization’s accounts payable.

When a vendor credit is created:

• Vendor liability decreases
• Payables reports reflect the reduced outstanding amount

When a vendor credit is applied or refunded:

• The payable balance is adjusted accordingly
• Cash or bank balances are updated if a refund is received

This ensures financial statements accurately represent what the organization owes and is owed by vendors.

Lifecycle of a Vendor Credit

The lifecycle of a vendor credit shows the stages it goes through from creation until it is fully utilized or cancelled. A vendor credit is typically created as a draft, converted to open, and then applied partially or fully to bills or refunded. In some cases, a vendor credit may also be voided instead of being used.

Configure Preferences

You can configure the preferences of the Vendor Credits module based on business requirements. Read our help document on Vendor Credits Preferences to learn more.