Auto-Application of Credit Memo on Prepayment Invoice

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Posted on by peter fun

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Is there any solution to ensure that whenever we create a credit memo against a prepayment invoice on a sales order, it gets automatically applied to the invoice? Currently, it does not happen automatically and has to be done manually.

Thanks

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Dynamics 365 Business Central

Microsoft Dynamics NAV

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Sumit Singh 10,078 on at

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Automation Possibilities:

While Business Central doesn't auto-apply credit memos to invoices out of the box, you can explore:

Power Automate (Flow): Create a custom workflow to detect when a credit memo is posted and trigger an application process.

Custom Extensions: A developer can create an AL extension that hooks into the posting of credit memos and applies them automatically based on matching criteria.

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Sagar Dangar, MCP 799 Super User 2025 Season 2 on at

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Hi Peter,

Please don't create sales credit memo manually, instead create it from posted Sales Invoice(Prepayment Invoice) by using below action button:

Note: It will automatically apply to invoice

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peter fun 617 on at

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after clicking on create corrective credit memo i am getting this message

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Mansi Soni 8,907 Super User 2025 Season 2 on at

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Hello,

The error message indicates that a posted sales prepayment invoice cannot be corrected or canceled directly. To reverse it, you must open the related sales order and use the Post Prepayment Credit Memo action instead. This is the only supported way in Business Central to reverse a prepayment invoice.

Hope this answer will help you to resolve the error!

Regards,
Mansi Soni

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peter fun 617 on at

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@Mansi Soni
We have a scenario where a prepayment invoice of 1000 has been created, and the customer has paid 200 against it. Later, the customer places a new order worth 800. In this case, we add a new line on the sales order and remove the prepayment percentage from the original line (for which the previous prepayment invoice was created and partially paid).

To modify the original line, we generate a credit memo. At this point, I want the credit memo to be automatically applied to the original invoice. After the application, the invoice balance should become 0.00, and the credit memo should retain a balance of 200.

Currently, I am applying the credit memo manually to the invoice. I would like to know if there is a setting or toggle in Business Central that can automate this process.

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Mansi Soni 8,907 Super User 2025 Season 2 on at

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Hello @peter fun,

In Business Central, there is no out-of-the-box setting to automatically apply a prepayment credit memo to the original prepayment invoice. This process must be done manually through the Apply Entries action. Although you can automate some posting processes using custom codeunits or Power Automate, Business Central does not natively support auto-application of credit memos to specific invoices, especially in complex scenarios like partial payments and prepayment adjustments. For automation, a customization or extension would be required.

In short, Manual Application is required as per out-of-the-box functionality in BC or else if you want it as a functionality you can definitely go for customization.

Hope this answer will help you!

Regards,
Mansi Soni

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Jeffrey Bulanadi 8,760 on at

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Hi Peter,

BC doesn't natively auto-apply credit memos to prepayment invoices, even when tied to the same sales order, because the ledger link isn't enforced at that level. That leaves manual application as the default workflow.

If you're looking to customize this, here are a few implementation paths:

Custom AL Extension

Build a handler on OnAfterPostSalesCreditMemo to scan customer ledger entries for a matching prepayment invoice, then invoke application via Codeunit 12 (Gen. Jnl.-Post Line). Use ApplyCustLedgEntry or a custom routine that respects application rules. Be sure to validate currency, amount, and open status before auto-applying.

Workflow Enhancement via Events

Even without full automation, subscribing to the posting event allows you to prompt the user post-credit memo with a link to the application page, or pre-fill the application grid.

UI-Level Assistive Behavior

Modify the Credit Memo page or posting routine to trigger a notification or drill-down that navigates directly to the application window filtered by the customer and open entries.

Microsoft hasn’t introduced this into core yet, but you can echo the need via the Ideas portal:
Ideas

Helpful References:

Credit memos and cancellation – Microsoft Learn
Setting up and invoicing sales prepayments – D365 Training
Apply credit memos to invoices – iSolutions
Prepayment of Sales Orders – UseDynamics
Applying posted credit memos – Kristen Hosman

If you find this helpful, feel free to mark this as the suggested or verified answer.

Cheers
Jeffrey

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Sohail Ahmed 11,136 Super User 2025 Season 2 on at

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In standard Business Central, credit memos—whether for regular or prepayment invoices—are not auto-applied upon posting. You need to manually apply them in the Customer Ledger Entries page.

To automate this, you would need a small customization, such as subscribing to the OnAfterPostSalesCreditMemo event and using AL code to auto-apply the credit memo to the matching invoice.

✅ Mark this answer as verified if it helps you.

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