Overview
The AR Credit feature allows you to reduce or eliminate an Accounts Receivable balance by issuing a credit against one or more AR invoices.
This feature is commonly used when your business decides to forgive all or part of a customer's balance, such as waiving finance charges or writing off amounts that are no longer expected to be collected.
Note: If your organization uses the General Ledger (GL) module, you will be prompted to select the appropriate GL account for the credit. Organizations without the GL module will not see this option.
When to Use an AR Credit
Use the AR Credit feature when you need to reduce a customer's Accounts Receivable balance without receiving payment.
Common examples include:
Waiving finance or interest charges
Writing off uncollectible balances
Correcting billing adjustments
Issuing customer goodwill credits
Removing charges resulting from company error
Example
A customer has accumulated several finance charge invoices. After reviewing the account, management decides to waive the interest and collect only the original invoice balance.
Rather than receiving payment for the interest charges, you can apply an AR Credit to remove those invoices from the customer's balance.
Access the Customer's Account
Navigate to Accounts Receivable.
Open AR Aging.
Locate and select the customer whose balance you want to adjust.
Review the customer's outstanding invoices before proceeding.
Open the AR Credit Window
Select the AR Credit button (gift icon).
The AR Credit window opens and displays the customer's eligible invoices.
Select the General Ledger Account (GL Users Only)
If the General Ledger module is enabled:
Select the appropriate expense account for the write-off.
For example:
Bad Debt Expense
Customer Adjustments
Write-Off Expense
Choose the account that aligns with your organization's accounting policies.
Why is this required?
When finance charges or interest invoices are created, they are typically posted to an Interest Income account.
If those charges are later forgiven, the credit should be posted to an appropriate expense account (such as Bad Debt Expense) to properly record the adjustment.
Note: Organizations without the General Ledger module will not see this step.
Select the Invoice to Credit
Choose the invoice you want to credit.
The system processes credits on an individual invoice basis.
If multiple invoices require adjustment, each invoice must be credited separately.
Enter the Credit Amount
Specify the amount to credit.
In many cases, this will be the full invoice amount, but partial credits can also be applied when appropriate.
Enter the Reason for the Credit
A reason is required for every AR Credit.
Examples include:
Customer goodwill adjustment
Finance charges waived
Company billing error
Collection settlement
Bad debt write-off
Providing meaningful explanations creates a clear audit trail and helps future users understand why the adjustment was made.
Tip: If you are applying the same credit reason to multiple invoices, consider copying and pasting the explanation to save time while maintaining consistency.
Process the Credit
After reviewing the information:
Select Process Payment (or Post, depending on your configuration).
The system will:
Reduce the customer's AR balance.
Credit the selected invoice.
Record the transaction using the selected General Ledger account (if applicable).
Repeat for Additional Invoices
If additional invoices need to be credited:
Repeat the process for each invoice individually.
The system intentionally requires invoice-by-invoice processing to ensure each adjustment is reviewed and documented.
This design helps prevent accidental write-offs of customer balances.
Best Practices
Use AR Credits only after management has approved the adjustment.
Select the correct General Ledger account for write-offs and customer adjustments.
Provide detailed reasons for every credit.
Review invoices carefully before processing.
Apply credits promptly to keep customer balances accurate.
Avoid allowing finance charges to accumulate over long periods without collection activity, as this can result in numerous individual credits being required.
Summary
The AR Credit feature allows you to reduce a customer's Accounts Receivable balance by applying credits to individual invoices.
Using this feature, you can:
Waive finance or interest charges.
Write off approved customer balances.
Record customer adjustments.
Select the appropriate General Ledger expense account.
Maintain a complete audit trail by documenting the reason for each credit.
Because credits are processed one invoice at a time, the system helps ensure that every write-off is intentional, properly documented, and accurately reflected in your accounting records.