Functions in Sales Return

Zoho ERP provides a set of functions to help you manage sales returns efficiently, from identifying eligible items to completing the financial and inventory adjustments. These functions allow you to qualify items for return, record customer return requests, receive returned goods into inventory, and issue refunds or credits as needed.

Qualify Items for Return

Before creating a sales return, ensure that the inventory items are marked as returnable. A sales return can be initiated only for items that are qualified as returnable in Zoho Inventory.

Insight: Service items and items that contain only purchase information cannot be returned.

To qualify an item for return:

Navigate to Items in the left sidebar.
Click + New to create a new item.
Enter the required item details.
Under Cancellation and Returns, select Yes for Returnable Item.
Click Save.

Insight: If the returnable option is not enabled, the item will be treated as non-returnable, and you will not be able to create a sales return for it.

You can also mark multiple existing items as returnable at once using the bulk action option.

To do this:

Navigate to Items on the left sidebar.
Select the items you want to mark as returnable.
Click Mark as Returnable.

The selected items will be updated and can now be used while creating sales returns.

Processing a Sales Return

Insight: Sales returns cannot be created for orders that are drop-shipped or manually fulfilled.

Scenario: Consider a common business scenario where a sale is completed, the products are shipped, and payment is received. After delivery, the customer returns one or more items due to unforeseen reasons such as damage or incorrect delivery. You can record this return in Zoho ERP by creating a sales return.

To record such a sales return, you can follow these steps:

Create Sales Return

To create a sales return:

Navigate to Sales on the left sidebar.
Select Sales Orders from the top module bar.
Open the partially or completely fulfilled sales order for which you want to create a sales return.
Click Create and select Sales Return.
Enter the sales return details.
- RMA#: The delivery challan number will be auto-generated. However, you can change the auto-generation series or enter a unique number by clicking the Gear icon.
- Date: The date on which the sales return is created.
- Reason: The purpose of creating this sales return.
Specify the quantity of returned items.
Enable This sales return contains credit-only goods if the return includes damaged or expired items.
- The return details will be split into Return Quantity and Credit-Only sections.
- Enter the receivable quantity under Return Quantity.
- Enter the damaged or non-resalable quantity under Credit-Only.

Insight: Quantities entered under the Credit-Only section will not be added back to inventory.

Click Save.

Receive Items in the Sales Return

A sales return records the return request, but the stock is updated only when items are physically received in the warehouse.

To receive items:

Navigate to Sales on the left sidebar.
Select Sales Return under Invoices from the top module bar.
Open the required sales return.
Click Receive.
Enter the items and quantities to be received.
If Advanced Inventory Tracking is enabled, you can enter serial/batch numbers:
- Click Add Serial Numbers or Add Batch Numbers below the quantity field.
- Enter the serial or batch details and click Save.

Insight: You can enable tracking in packages, purchase receives, and sales return receipts, if you have enabled either serial or batch number. To enable tracking go to Settings, select Items under General, and under Advanced Inventory Tracking, select Track in packages, purchase receives, and return receipts. Click Save.

Click Receive.
In the sales return, again click Receive to receive the rest of the returned items.

Insight: Items marked as Credit-Only in the sales return cannot be received into stock.

Create Credit Note

A credit note is issued to provide a refund or credit for returned items if you have created an invoice for the sales order associated with this return. Creating a credit note also updates the stock details of the underlying items.

To create a credit note:

Navigate to Sales on the left sidebar.
Select Sales Returns under Invoices from the top module bar.
Open the sales return for which you have received items.
Click Create Credit Note.
Fill in the required details.
Click Save.

Insight: Learn how you can handle the return of batch-tracked or serial number–tracked items here.

Record a Refund or Apply Credits to Invoice

Once a credit note is created, you can either issue a refund or apply it to the existing outstanding invoices of the same customer.

To record a refund:

Navigate to Sales on the left sidebar.
Select Credit Note under Invoices from the top module bar.
Click Refund.
Enter the refund amount.
Select the expense account.
Fill in other details and click Save.

To apply credits to invoices:

Navigate to Sales on the left sidebar.
Select Credit Note under Invoices from the top module bar.
Click Apply to Invoice.
Enter the credit balance to distribute against each invoice.
Click Save. The credit will be deducted from the total invoice amount.

Insight: A credit note can only be applied to invoices created for the same customer.