Preventing Revenue Leakage
Credit memos can significantly impact revenue. Approval workflows ensure credits are justified—whether for returns, disputes, or adjustments—and properly authorized.
Step 1: Define Credit Approval Rules
Credits under $X: manager approval. Above $X: director or CFO. Consider reason codes: returns may have different approval path than disputes or goodwill.
Step 2: Create Workflow on Credit Memo
Trigger on create or submit. Add conditions based on amount, reason code, or customer. Route to appropriate approver.
Step 3: Link to Original Invoice
Enforce that credit memos reference original invoices. Workflow can validate and block submission if link is missing.
Step 4: Post-Approval Actions
On approval: update customer balance, notify AR team, create task for refund if applicable. Track credit memo aging separately if needed.
Best Practices
- Require reason code for all credits
- Cap credit amount as percentage of original invoice
- Audit credit memo trends by reason and approver
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