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.
Can I apply a customer deposit to an already existing invoice?
Thank you and best regards,
Dan Bernal
Sr. Accountant
Mattco Forge Inc
Paramount, CA
562-634-8635
Hi Dan,
If the invoice has not been paid and the customer deposit is of the same currency, you can apply it. Yet, the customer deposit may be connected to an originating Sales Order which may be preventing it to connect to unrelated Invoices. Is that your experience?
Marty
Write Dan responded offline and agreed we could continue the post:
“Thank you for your valuable time and rapid response.
The open invoice and deposit are of the same currency but it is not tied to a Sales Order. The previous accountant made the deposit as a debit to “cash” and a credit to “undeposited funds” which is another current asset account. My customer is concerned because they do not see their $68K plus payment taking off the invoices they paid off their statement and I have a huge credit sitting on the balance sheet in a current asset account which is not a “contra” account.
I tried using the help in NetSuite and was not much help then I took to the web and stumbled on to your site.
I see where you suggested to create a “credit memo” using a non-inventory account but my boss is hesitant about setting up a new account unless I can prove the validity of doing so.
Please please advise.
Again thank you Marty for your valuable time and assistance.
Best regards,
Dan”
The beauty (or not so beautiful…) of NetSuite is that you can delete the transaction. Can you do this and book it properly? Be very careful booking anything to the Undeposited funds account besides the normal Accept Payments and Customer Deposits functionality; especially credits in a journal entry manner. The application tools do not recognize “negatives” in that account.
I have a client going through it now.
Marty
Marty,
I have a process at my company where our customers buy product and at the end of the year they get a “rebate” from our Vendors. Instead of the Vendors sending them the check directly the Vendor sends us the check and asks that I apply it to their account. Out of courtesy in our old system we created a credit memo and put it on their account. Our last system was not an all in one ERP system. With that in mind we didnt take into account all the other affects doing it this way had. Now with Netsuite if we apply a credit memo to a customer it will affect sales reports for that customer of which shouldnt happen b/c this is a rebate from our Vendor to our customer. And just other reports are affected as well. We then thought why not just put it as a deposit on their account. and that doesnt show up correct on the statement for the customer b/c it shows up as a payment and not as a credit memo. Our customers would get confused if they saw it this way and not the credit memo way.
With that in mind the solution above seems to be the correct way to handle this. I wanted to know if you had other customers where they got rebates from their vendors for their customers and had to issues credit memos. Are they handling it this way?
Thanks in advance
Hi Greg,
That’s a great problem. Here is how I would handle this:
I love these kinds of relative quick fixes as you exploit the power of the NetSuite platform. If you get these frequently enough, it may well be worth the effort. Good luck!
Marty
Thanks Marty! I’ll give it a try
Hello Marty,
I misapplied a payment in one customers account which now has a credit balance, can I apply that cash to the proper account?
Thank you for your valuable time and assistance.
Kind and best regards,
Dan Bernal
Sr. Accountant
Mattco Forge Inc.
Paramount, CA
Hi Dan,
Can you delete the payment and do another? Or is the period closed?
You may need to create a dummy invoice to eat the credit and then do the proper credit memo to offset the dummy invoice. Play with the line pointers so you control the GL impact.
Marty
Thank you Marty for your valuable time and response. Yes sir it is in a closed period. I will take a look at the dummy invoice thing…
Thank again.
Dan Bernal
Hi, Marty, I have to be overthinking this…we have some customer deposits that were made by individuals to us. The corresponding sales orders are with dealerships (different customer record). I don’t see a way to apply Mr. Smith’s $500 to XYZ, Inc.’s sales order and the receipt of the deposit is in a closed period. If I do a dummy invoice for Mr. Smith, I use a non-inventory item coded to that Utility: Zero balance account? If I do a CM from that invoice, won’t I have the same problem – not able to apply the CM to the dealer’s sales order?
Hi LC,
I am a little confused. Are you trying to apply a customer deposit on one customer to another customer by crossing a boundary via credit memos and fake invoices?
Marty
This is really strange, for one simple work of deposits, now i have to go and create couple of extra steps? I am not able to understand why deposit cannot be a part of aging. This is universal everywhere
I understand. It does seem peculiar. Yet, I understand that NetSuite’s approach to the aging is that it is simply a summary of the AR GL Account. Deposits are controlled by a different GL account. I plan to write an article on how to get this information collected in a aging formate in a Saved Search.
Marty
Hi Marty,
Is there a way to have NetSuite automatically apply credits (either overpayments or credit memos) to new invoices. This seems like a really good feature for lots of businesses, I’m surprised I can’t find more information about it.
Thanks,
Gabe
Hi Gabriel,
Yes, via SuiteScript, you can apply these to invoice according to your rules you invent. We have done it for a number of our clients.
Marty
Hi Marty,
I googled a lot but couldn’t find it – how do you apply credit memo to invoice with SuiteScript?
Thanks
Alon,
To make a credit memo from an invoice via the API, use the record.transform (v 2.0) method.
Marty
I want to create a customer deposit(creditcard payment) from sales order using suitescript. I created but it says not deposited status.please help me?
Hello Rajitha,
The status on the customer deposit is controlled by the cash account defined in the payment method. It appears you are creating a deposit and it is landing in the Undeposited Funds. Reference a payment method that references a bank account and the record will move to Deposited.
Marty
Thank you for your valuable time and response. Earlier i have created a customer payment(creditcard) from invoice using the suitescript.That time i was able to select an account “1415 Receivable for Pending CC Receipts”. But in sales order customer deposit , that “1415 Receivable for Pending CC Receipts” is missing in account list. For moving my deposit from “not deposited” to “deposited” status,i want add the deposit to the “1415 Receivable for Pending CC Receipts” account.How can add this into the list?
Depending on how you are attacking the code, as it sounds like you are starting from a Sales Order, you may need a beforesubmit script on the customer deposit record to set the value. Generally, I do not recommend setting the account; instead, the business can define a payment method with a reference to that 1415 account. Then, you select that payment method in script.