Scenario 2: The credit amount is greater than the invoiced amount
If the credit amount exceeds the invoiced amount for which it was credited, the maximum possible amount is credited from the corresponding invoice. The remaining amount is credited from all the invoices in the billing schedule, starting from the first invoice.
For example, your customer purchased a product 'CloudStream' with a base price $100 for 3 months. Therefore each Billing Schedule would carry an amount of $100 spread across 3 months. You've invoiced the customer for $300 in advance.
Now, let’s assume that for the billing schedule BS1, a direct credit memo of $65 was created and for the billing schedule BS2, a direct credit memo of $80 was created. After credit memos are generated and approved, the amount remaining in BS1 is $35 and in BS2 is $20.
|
Billing Schedule |
Start Date |
End Date |
Fee Amount |
Status |
Is Superseded? |
Debit Schedule |
Available Credit |
|---|---|---|---|---|---|---|---|
|
BS1 |
3/1/2017 |
3/31/2017 |
100.00 |
Invoiced |
35.00 |
||
|
BS2 |
4/1/2017 |
4/30/2017 |
100.00 |
Invoiced |
20.00 |
||
|
BS3 |
5/1/2017 |
5/31/2017 |
100.00 |
Invoiced |
100.00 |
Now if you amend the contract and reduce the rate of the asset to $70 per month, you will have to provide your customer with a $30 credit for each billing schedules. After the contract is amended and the renewed quote/proposal is accepted, a new order is created. Once the order is activated, new billing schedules are generated as mentioned in the following table:
|
Billing Schedule |
Start Date |
End Date |
Fee Amount |
Status |
Is Superseded? |
Debit Schedule |
Available Credit |
|---|---|---|---|---|---|---|---|
|
BS1 |
3/1/2017 |
3/31/2017 |
100.00 |
Invoiced |
Yes |
0.00 |
|
|
BS4 |
3/1/2017 |
3/31/2017 |
-30.00 |
Pending Billing |
BS1 |
||
|
BS2 |
4/1/2017 |
4/30/2017 |
100.00 |
Invoiced |
Yes |
0.00 |
|
|
BS5 |
4/1/2017 |
4/30/2017 |
-20.00 |
Pending Billing |
BS2 |
||
|
BS6 |
4/1/2017 |
4/30/2017 |
-5.00 |
Pending Billing |
BS1 |
||
|
BS7 |
4/1/2017 |
4/30/2017 |
-5.00 |
Pending Billing |
BS3 |
||
|
BS3 |
5/1/2017 |
5/31/2017 |
100.00 |
Invoiced |
Yes |
65.00 |
|
|
BS8 |
5/1/2017 |
5/31/2017 |
-30.00 |
Pending Billing |
BS3 |
For BS4, $30 credit is calculated from BS1 which had $35 amount. For BS5, only $20 credit is calculated from BS2 as only $20 is available in this billing schedule. For the remaining $10, the system starts calculating from the first billing schedule, which is BS1. As BS1 has only $5 left, a billing schedule BS6 is created with an amount of $5 with BS1 as the debit schedule. The remaining $5 credit is calculated from BS3. For BS8, $30 credit is calculated from BS3.
Check out how you can generate Credit Memo documents from the section Generating Credit Memos.
