When you receive a credit note from a supplier, the correct posting does not depend on the credit note itself — but on the reason for it. So always ask this question first:
Should the goods leave inventory, or is it only the value/price that changes?
The answer decides how you handle the credit note. Below we walk through the three typical situations and the recommended approach for each.
This is the situation the digital inbox with auto-import is built for. It automatically creates a credit note on the supplier with the original product lines, and the result is:
The goods are taken out of inventory (the quantity is reduced).
Your debt to the supplier is reduced accordingly.
Here you don't need to do anything extra — the auto-imported credit note is correct. Just check that the quantity and items match what the supplier is actually crediting.
If the goods stay in inventory and the credit note only covers a price reduction (e.g. a faulty delivery you keep, a retroactive volume discount or a later price adjustment), then the inventory quantity must not be changed.
In this case the auto-imported credit note would pull goods out of inventory that are still physically on the shelf. Here is how you correct it:
Open the auto-imported credit note.
Remove the product lines.
Instead, add a single finance line with the credit amount on the relevant account.
Which account should the finance line use?
If the goods are still in inventory: use the inventory account (balance), so the inventory value is reduced and the cost price of the goods you have left becomes correct.
If the goods have in reality already been sold on: use the cost-of-goods account (P&L), so your cost of goods is reduced.
If you are unsure which specific account fits your chart of accounts, ask your accountant.
The result: your debt to the supplier is reduced, and you leave the inventory quantity untouched.
The third situation is when it is the supplier who owes you money — typically a warranty case where you have had a cost that the supplier should cover.
It can be tempting to create a sales order so the supplier is invoiced as if it were a customer. Be aware of one important point here:
When the amount is posted as a receivable in the customer ledger (debtor), it cannot be reconciled against the supplier's balance in the supplier ledger (creditor). The two balances live in separate ledgers and do not offset each other — you end up with both an open customer entry and an open supplier entry that never close each other.
Recommendation: Keep the matter inside the supplier relationship, so it can be reconciled in one place:
If you still have unpaid invoices to the supplier: post the warranty amount as a credit note on the supplier, so it is offset directly against what you owe.
If you don't owe anything right now: post the amount on the supplier anyway, so the supplier's balance goes into debit (the supplier owes you). When the supplier pays or credits you, you reconcile in the same ledger.
This way the whole matter stays together on the supplier and can be reconciled cleanly — without having to be moved back and forth between the customer and supplier side.
Goods returned or scrapped — goods leave inventory: use the auto-imported credit note as it is.
Price reduction, goods kept — leave inventory alone: remove the product lines and add a single finance line.
The supplier owes you (warranty) — leave inventory alone: post on the supplier (creditor), not as a sale to a customer.
Rule of thumb: Do the goods physically leave? Yes → keep the product lines. No → replace the product lines with a finance line, and keep supplier matters in the supplier ledger.
