This article is relevant if you are wish to change your NetSuite customer’s deposits to credit memos.
Customer Deposits Not on Accounts Receivable Aging Report
NetSuite’s customer deposit records do not show up on an Accounts Receivable Aging report. ¬†However, credit memos do. ¬†And because of this, NetSuite customers may wish to convert their customer deposit records to credit memos. ¬†But how?
Customer Deposits Represent Credits
A NetSuite customer deposit typically comes into existence by receiving monies before producing an invoice. ¬†We have clients that have third party eCommerce systems with separate credit card processing systems with policies to ship the same day they get the order. ¬†For convenience, when the eCommerce orders are electronically entered into NetSuite, we constitute sales orders and we create ¬†associated customer deposit records. ¬†The deposits represent liabilities and is meant to be “funds on account” to be applied to invoices after you deliver on your customers’ order.
A customer deposit, in essence, is a liability. ¬†As such, it should contain a balance sheet credit. ¬†If you never deliver on the order, the idea is that you resolve your customer obligation by issuing a cash refund. ¬†However, the more typical case is to generate an invoice and then apply the customer deposit to effectively close the invoice as paid.
This is great functionality. ¬†However, NetSuite’s default Accounts Receivable (AR) Aging doesn’t bring customer deposits into view. ¬†A separate report is required to see deposits. ¬†This may frustrate AR accountants who want the AR aging to represent the total customer balance due on account. ¬†I believe the reason NetSuite does not bring the customer deposits into the AR aging is because deposits are tracked on a different GL Account. ¬† And the AR aging needs to tie out to the AR account balance.
How to Change a Customer Deposit into a Credit Memo
To change a customer deposit into a credit memo, we need to work through an invoice document. ¬†The trick is to create a special purpose item for this purpose. ¬†Here is an approach you can use:
- Create a non-inventory item type, perhaps, “Utility: Convert Deposit to Credit Memo” and point it to a balance sheet account called, “Utility: Zero Balance”. ¬†The idea is that this account should always equal Zero and if it doesn’t, something is wrong.
- In the ¬†amount of the deposit, create a customer invoice using this new item. ¬†This will effectively debit AR and credit “Utility: Zero Balance”.
- Apply the customer deposit to the invoice to effectively close the invoice. ¬†This will debit Customer Deposits and credit AR. ¬†Now the customer deposit is consumed.
- From the new invoice, create a credit memo for the entire amount. ¬†This will debit “Utility: Zero Balance” and credit AR.