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How to Process Purchase Invoices with Credit Memos in Microsoft Dynamics 365 Business Central

Jun Wang Profile Picture Jun Wang 4,791 Super User


How to Process Purchase Invoices with Credit Memos in Microsoft Dynamics 365 Business Central

Processing purchase invoices efficiently while managing credit memos is a vital part of maintaining accurate accounting records in any ERP system. In Microsoft Dynamics 365 Business Central, handling these transactions correctly ensures that your payables are up-to-date and reflect true amounts owed to vendors. This blog post will guide you through the steps to properly apply credit memos to purchase invoices and explain how to avoid common processing errors, specifically within the context of payment journals.

Understanding Credit Memos

A credit memo is issued by a vendor to correct or modify the amounts invoiced in previous transactions, typically due to returns, rebates, or errors in billing. In Business Central, a credit memo can be applied directly to an associated purchase invoice, effectively reducing the amount payable to the vendor.

Step-by-Step Guide to Process Purchase Invoices with Credit Memos

Step 1: Create a Credit Memo

Step 2: Apply the Credit Memo to a Purchase Invoice

Step 3: Handling Payments in the Payment Journal

  • When processing payments in the Payment Journal, it's important to ensure that the payment amount for a vendor does not turn negative due to the application of a credit memo.
  • Enter the total amount you are paying after the credit memo application. If the credit memo covers or exceeds the invoice amount, ensure you are not entering a negative amount in the payment line.
  • Business Central processes each line in the payment journal individually and will show an error if it tries to process a line with a negative amount. To avoid this, adjust the payment amount accordingly.


Effectively managing purchase invoices and credit memos in Microsoft Dynamics 365 Business Central requires careful attention to detail and a thorough understanding of how transactions interact. By following the steps outlined above, you can ensure that your accounts payable are accurate and that your financial reporting reflects the true state of your business finances.


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