Apply credit note in DEAR without 'refunding' customer
The only way to apply a credit note in DEAR is to click '+credit note' which creates a refund for the value of the credit note. Using this refund, we can apply a payment against an invoice. The problem with this is both the refund and payment lines go through to Xero from DEAR and appears on a customer's Activity Statement. The payment line is fine to appear, but the refund line should not and would be confusing to customers. Ideally there would be a way to apply a credit note to an invoice without having to first turn the credit note into a refund.
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This is quite a big problem. Xero is the one source of truth for AR (it has to be), so statements must come from Xero.
If a credit note is created but not converted to a Customer Credit, everything in Xero is fine.
I advise my clients to delay converting a credit note into a Customer Credit until they are ready to immediately use it as a payment.
But this has a problem: Dear does not tell the user that the customer has a credit potentially available to pay the invoice. Dear is blind to credit notes which are not converted to customer credits, they also don't appear in the list of customer credits (which is odd).
The ideal functionality would be to consider credit notes as "customer credits" when they are created, without the step of creating a customer credit. The Customer Credit step doesn't do anything useful, and it breaks Xero.
1. A Dear credit note creates a credit note in Xero’s AR.
The accounting is
DR <Revenue acct in credit note>
2. The credit note is converted to a Customer Credit in Dear when you do this step
A Xero ‘refund’ is created.
CR The account set up in settings as the Customer Credit Account
Note: this appears to Xero that the credit note is ‘refunded’. The credit disappears from the customer’s statement, which is misleading. Actually, the refund has gone to a liability account, which is also used in reverse when step 3 is done. However, the customer statement is now wrong.
My advice: Steps (2) and (3) should happen together. Create the credit note, but don’t action it as a “convert to customer credit” until you are actually ready to pay with it.
The disadvantage is that such a credit is not shown in Customer Credits, although it is on the customer statement in Xero.
3. Apply the credit as payment in Dear.
3 people like this