Reduce the cost of goods with a vendor credit

When a supplier credits you for goods you are keeping — they overcharged, or they gave you a price allowance after the fact — the credit should do two things: lower what you owe the supplier, and lower what those goods cost you. A vendor credit does both. Each line on the credit states what it does to the goods, and a Reduce the cost of the goods line re-prices the stock you still hold; the share that has already sold posts as a cost-of-goods-sold true-up instead.

You do not edit the original purchase order or bill. The credit stays the document of record, and the cost change goes through the Cost Change Inbox like any other cost correction.

Before you begin

• The goods must have been received on a purchase order — the credit spreads over that order line's receipts.
• Know the supplier's credit memo: how many units it covers and the credit per unit.
• Know your cost-change policy — the Review policy link in the credit's Cost Impact panel opens Cost Change Policies. The Vendor credit price adjustment policy ships as review, so the cost change is held in the Cost Change Inbox until someone approves it. A/P drops as soon as you authorize either way.
• You need permission to work with accounting and purchasing documents.

Steps

Create the credit

1. Go to Orders → Vendor Credits.

   

2. Click Create Vendor Credit, choose Adjust, rebate, or refund, and pick the supplier who issued the credit.

   

3. Click Create. The new credit opens in Draft.

Say what the credit is for

4. Under Reason for credit, choose Overcharged — price correction. The reason sets what each line does to the goods — for a price correction that is Reduce the cost of the goods. You can still change any line yourself.

   

Add the goods from the purchase order

5. Click Add from PO, then Select a Purchase Order, and search for the order the supplier credited. Click Browse Lines.

   

6. Tick the line, enter the number of units the credit covers in Qty, and click Add Selected. Close the browser panel.

   The line is added at the purchase order's unit cost.

7. Click the line's Unit Cost and enter the credit per unit — the supplier's credit amount divided by the units it covers. Press Enter.

   The Cost Impact column now reads Reduce the cost of the goods, and the sentence under it spells out the effect — for example 300 units stay in stock · unit cost $14.00 → $12.75 (−$1.25/unit).

   

Credit for fewer units than were received?

The credit spreads across every unit on the purchase order line, so crediting 100 of 300 units at $4.13 lowers all 300 by $1.38 each. The sentence under the line shows the spread, and the panel's layer table shows what each receipt gets.

Check the Cost Impact preview

8. Read the Cost Impact panel under the lines. Nothing has posted yet — the panel shows what will happen:

   • Quantity — No change. A cost credit moves no stock.
   • Cost basis — the total the goods' recorded cost drops by, across the FIFO layers it touches.
   • Accounts payable — what you owe the supplier drops by the credit total.

   Below the tiles, the panel splits the credit between stock you still hold (which becomes cheaper) and units already sold (which post as a COGS true-up for the period the change is applied to). Expand the product row to see each receipt layer's cost now, cost after, and the change.

   

   Turn on Compare outcomes to see this side by side with keeping the credit Financial only — same A/P change, no change to the goods' cost. Show me an example walks through a worked case with sample numbers.

Authorize

9. Click Authorize. The dialog restates the plan in one sentence per line, with the A/P total and the split between stock value and COGS. Tick the acknowledgement and click Authorize.

   

10. The credit is now authorized: what you owe the supplier has dropped, and the panel's status reads Held for review. The cost of the goods does not change until the cost change is approved.

    

Approve the cost change

11. Click View in Cost Change Inbox. The change names the credit as its trigger and lists the affected FIFO layers.

12. Choose Restate to book the change on each layer's original receipt date (reports for those months change), or Going forward to book it on the day you apply it. Click Apply and confirm.

    

13. Back on the credit, open the Movements tab. FIFO Layers lists each receipt with its unit cost and Adjusted Unit Cost.

    

What each Cost Impact means

Cost Impact	What happens to the goods	Use it when
Return the goods	Stock drops when you record the return shipment; the cost comes off at what those units cost you	The goods are going back to the supplier
Write the goods off	Stock drops as soon as you authorize; the cost is written off	The goods stay with you but can't be sold
Reduce the cost of the goods	Quantity doesn't change; the unit cost of these goods goes down. Units in stock get cheaper; units already sold get a COGS true-up	You keep the goods — the supplier just charged too much
Financial only	Nothing changes on stock quantity or cost	Rebates, co-op advertising, overpayments, services — anything that isn't about the goods' price

A line can only Reduce the cost of the goods when it comes from a purchase order line — a credit with no purchase order has no receipts to adjust, so that option is greyed out with the reason.

Good to know

• The credit can't take the goods below zero cost. If the amount is more than the remaining cost of those goods, Authorize refuses with the remaining amount — reduce the credit, or record part of it as Financial only.
• Unauthorize reverses it exactly. Unauthorizing the credit puts each layer's cost back where it was and records the reversal in the Cost Change Inbox.
• Two credits on the same goods stack. The preview of the second credit starts from the cost after the first, so nothing is counted twice.
• Already edited the purchase order price? If a purchase order or bill edit lowered the same line's cost after the credit's date, the Cost Change Inbox row and the credit's panel both warn you, with a link to the other document and a one-click Record as Financial only — so the same discount isn't applied twice.

Next steps

• Create & allocate vendor credits — the three ways to start a credit, and applying it to what you owe.
• Correcting COGS — how cost changes and restatements show up on orders and reports.
• Return goods to a vendor — when the goods are going back.

Video transcript

When a supplier refunds part of what you paid for goods you keep, those goods should cost you less. Open Orders, then Vendor Credits, where each one is listed with its reason. Click Create Vendor Credit, and a dialog appears. Choose Adjust, rebate, or refund, because the goods stay on your shelf. Then pick the supplier who issued the credit, from the list. Click Create, and the new credit opens in Draft, ready for its lines. Set the reason for the credit. Overcharged, price correction, means you keep the goods and their cost comes down. Now add the goods that were credited. Click Add from PO, then Select a Purchase Order. Search for the credited purchase order by its number, and choose it from the list. Then click Browse Lines to see what was received. Tick the line and enter how many units the credit covers. Then click Add Selected, and close the browse panel once it has been added. Set the unit cost to the amount credited per unit. The line now spells out the effect: the goods stay, and their recorded value goes down. The Cost Impact panel previews the effect before anything is recorded. Stock you still hold drops in value, and the sold share posts as a COGS true-up. Scroll back up and click Authorize, then tick the acknowledgement. The dialog restates the plan: what you owe drops now, and the cost change waits for review. Confirm. The credit is authorized, and its cost change is held in the Cost Change Inbox. Click View in Cost Change Inbox to open the change it created. Choose Restate to book it on each layer's receipt date. Then click Apply, and a confirmation explains which months will change. Confirm, and the layers are restated to the new cost. To see the result, go back to Orders, then Vendor Credits, and open the credit you just authorized from the list. Open its Movements tab, which lists each receipt layer with the adjusted unit cost. That's the whole change: the goods you kept are now cheaper.