--- title: "Vendor credits, short pays and duplicate payments" description: "Credit memos against a posted bill, a $17,500 short pay, and a $6,000 duplicate payment, with the journals that unwind each without editing the record." canonical: "https://lopifi.com/learn/vendor-credits-and-duplicate-payments" --- # Vendor credits, short pays and duplicate payments > Credit memos against a posted bill, a $17,500 short pay, and a $6,000 duplicate payment, with the journals that unwind each without editing the record. Source: https://lopifi.com/learn/vendor-credits-and-duplicate-payments Part of: Lopifi — Planned: US GAAP books on autopilot, checked by a CPA (https://lopifi.com) --- **How do you fix a vendor overbilling, apply a credit memo or recover a duplicate payment?** Credit memos against a posted bill, a $17,500 short pay, and a $6,000 duplicate payment, with the journals that unwind each without editing the record. A bill does not only go down when it is paid. A vendor's [credit memo](https://lopifi.com/md/glossary/vendor-credit) can reduce it, and a payment can overshoot it. A buyer's debit memo is the other side of the same paper: it tells the vendor that the buyer is reducing the account, for goods returned or a shipment that came up short. The vendor answers with its own credit memo. In Northwind's books the entry is the same either way, and the original bill is never edited. It stays on the record, and the credit sits beside it. Take the short, over-priced bill from the [three-way match](https://lopifi.com/md/learn/purchase-orders-and-three-way-match) lesson: 360 drills billed at $51, when 350 arrived and the order said $50. The vendor billed $18,360; $17,500 is owed. Many teams post the bill at what the vendor billed, so the books agree with the vendor's invoice number, and let a credit memo bring it down to what is owed. The vendor's account now shows $18,360 billed, $860 credited, and $17,500 to pay. If Northwind does not want to wait for the memo, it can pay the $17,500 owed, tell the vendor in writing why, and leave the $860 open and marked disputed. That is a short pay, and it works only when the dispute is documented before the payment goes out. ## Four accounts, four positions | Vendor account | Billed | Credits | Paid | Balance | | --- | --- | --- | --- | --- | | The drill bill at September 30 (JE-4, JE-9) | 18,000 | 0 | 12,000 | 6,000 | | The short, over-priced bill, after the credit memo and a payment of what is owed | 18,360 | 860 | 17,500 | 0 | | The drill bill, paid in full and then paid again from the reminder | 18,000 | 0 | 24,000 | (6,000) | | The short bill, paid in full before the shortage was found; the credit memo comes later | 18,360 | 860 | 18,360 | (860) | A vendor's position is billed, less credit memos, less payments. A negative balance means the vendor owes Northwind. The last two rows are the interesting ones. Both are overpaid: the vendor holds Northwind's money. A [debit balance](https://lopifi.com/md/glossary/vendor-debit-balance) with a vendor is not a payable. It is a refund to chase or a credit to use, and it should never sit inside the total of what Northwind owes as if it were a smaller liability. ## A payment made twice The commonest way to make a [duplicate payment](https://lopifi.com/md/glossary/duplicate-payment) is a reminder. The drill vendor emails a copy of the invoice, someone enters it again under a slightly different number, and the next run pays $6,000 that was already paid. The [bill](https://lopifi.com/md/glossary/bill) screen should have caught it before it posted, by checking the vendor with the vendor's invoice number and then flagging the same vendor and amount a few days apart. When that fails, the payment is made, and the books have to say so. — [ASC 210](https://asc.fasb.org/210/tableOfContent), Balance Sheet **Wrong:** Dr 1000 Cash 6,000 Cr Other income 6,000 The vendor's debit balance never clears. **Right:** Dr 1000 Cash 6,000 Cr 2000 Accounts payable 6,000 A refund of money Northwind paid by mistake is not income, and it is not a reduction of an expense. The payment settled a payable that was already settled, so the refund puts the vendor's account back to zero. **Scenario — A reminder paid as a new bill.** The drill vendor emails a reminder for the same invoice, and the clerk enters it as a new bill under the reminder's number. The duplicate check misses it, because the vendor's invoice number differs. The next run pays $6,000 a second time, and nobody notices until the vendor's statement arrives showing the account overpaid. The clue was the vendor, the amount and the dates: the same vendor and the same amount, a few days apart. 1. **Ask the bank first.** Call the bank the day you find it and ask what recall options exist for that payment method. They are time-limited. 2. **Tell the vendor, in writing.** Email the vendor with the invoice number, both payment dates and the [remittance advice](https://lopifi.com/md/glossary/remittance-advice). Ask whether they want to refund it or hold it as a credit. 3. **Check where it landed.** Check the vendor's own statement. The vendor may already have applied the second payment to another open invoice, and then it is not a refund at all. 4. **Choose refund or credit.** Take the refund, or apply the credit to the next bill. Put the credit memo number and the invoice it applies to in the memo. 5. **Fix the cause.** Find out why the duplicate got through: a copied invoice number, a second vendor record, or a payment made outside the tool. Close that gap, not just this one. Recovering a duplicate payment. > **Tip.** **Ask for a credit, not a refund,** when you will keep buying from the vendor. It is faster than a check coming back, and it is already on their statement. **Write the invoice number each credit applies to,** so the credit memo can be tied back to the bill it reduces. **Keep both payment confirmations** in the vendor's folder until the account is clean. > **Mistake.** Deleting or voiding the duplicate payment record so the books look right. The money left the bank, and a record that says otherwise breaks the bank reconciliation. Posted payments are reversed or offset, never erased. The same goes for the original bill: the credit memo sits beside it, and the bill stays as it was. **Exercise — Settle four vendor accounts.** Four vendor accounts. For each, work out the balance: billed, less credit memos, less payments. Write a balance the vendor owes Northwind as a negative number, then say whose money it is. Type it in the workbook at https://lopifi.com/playground. > **A vendor account has three numbers: billed, credited and paid. When paid is the biggest, the vendor owes you, and it belongs on the books as a refund to chase.** ## Where this lesson's rules come from - [ASC 405](https://asc.fasb.org/405/tableOfContent) — Liabilities (codification) - [ASC 210](https://asc.fasb.org/210/tableOfContent) — Balance Sheet (codification) - [Wikipedia, “Accounts payable”](https://en.wikipedia.org/wiki/Accounts_payable) — Accounts payable (reference) ## Read further - https://lopifi.com/md/journal-entries/accounts-payable - https://lopifi.com/md/journal-entries/inventory-purchase - https://lopifi.com/md/startups/accounts-payable-process-for-startups - https://lopifi.com/md/accounting/accounts-payable - https://lopifi.com/md/accounting/reversal - https://lopifi.com/md/tools/duplicates - https://lopifi.com/md/docs/domain/procure-to-pay - https://lopifi.com/md/docs/domain/controls-and-audit - **Track:** [Accounts payable](https://lopifi.com/md/learn/ap) - **Lesson:** Lesson 10 of 21 — 11 min - **Terms taught:** [Accounts payable](https://lopifi.com/md/glossary/accounts-payable), [Bill](https://lopifi.com/md/glossary/bill), [Subledger](https://lopifi.com/md/glossary/subledger), [Control account](https://lopifi.com/md/glossary/control-account), [Reversal](https://lopifi.com/md/glossary/reversal), [Remittance advice](https://lopifi.com/md/glossary/remittance-advice), [Exception](https://lopifi.com/md/glossary/exception), [Vendor credit](https://lopifi.com/md/glossary/vendor-credit), [Vendor debit balance](https://lopifi.com/md/glossary/vendor-debit-balance), [Duplicate payment](https://lopifi.com/md/glossary/duplicate-payment) - **Previous:** [Coding and approving a bill, AP · Lesson 9](https://lopifi.com/md/learn/coding-and-approving-bills) - **Next:** [Vendor statements and the payables tie-out, AP · Lesson 11](https://lopifi.com/md/learn/vendor-statements-and-ap-tie-out) - **The course:** https://lopifi.com/md/learn