How to Process a Remittance with Credit Notes

Learn how to reconcile a batch payment when an amount has been withheld as a credit adjustment.

This situation occurs when you have invoiced in error and received payment for an invoice you should not have. The payer will recoup those funds by withholding an amount from a future batch payment. To reconcile this correctly, you need a credit note already raised in Xero before you begin.

What You'll Learn

• How to handle a credit adjustment amount shown on a remittance advice
• How to upload and process the remittance advice in Remittance Go
• How to delete the credit adjustment line from the batch payment in Remittance Go
• How to use Xero's bank feed to match the batch payment and the credit note against the received amount

Steps

1. Confirm the credit note exists in Xero — Before processing, check that the credit note is already raised in Xero. In this example, that's credit note ORC1043.
2. Upload the remittance advice in Remittance Go — Drag and drop the remittance advice file to begin matching.
3. Review matched invoices — Check the list of matched invoices. You'll see the credit adjustment amount listed at the bottom (in this example, $193.99 withheld).
4. Delete the credit adjustment line — Remove that line from the batch payment in Remittance Go, then confirm the correct bank account is selected and create the batch payment.
5. Reconcile in Xero — In Xero's bank feed, locate the received transaction and use Find & Match to select the batch payment you just created.
6. Apply the credit note — Click Show spent items, search for the credit note (e.g. ORC1043), select it, and confirm. Xero will reconcile both the batch payment and the credit note against the transaction in one step.