What is a debit memo?

A debit memo is a document that increases the amount a customer owes after an invoice has been issued. Sellers use it to add a charge they missed. The same term also describes a bank notice that it has deducted money from your account.

How it works

Once you send an invoice, both you and your customer have a record of it. If you need to add to it, you should not quietly change the original. Instead you issue a debit memo that references the invoice and states the extra amount and the reason.

A debit memo should include:

• A unique number and the date.
• The original invoice number.
• The reason, such as “freight not billed” or “additional hours”.
• The extra amount, with any tax.
• The new total now due.

It raises your accounts receivable because the customer owes more than before. Its opposite is the credit memo, which lowers the balance.

Customers can send debit memos too. A buyer who returns goods or finds a shortage may issue one to tell the seller it is deducting an amount from what it owes. In that case, check it against your records before you agree.

Example

An electrician sends invoice INV-3310 for $1,800.00. Later, the electrician realizes a $65.00 permit fee was not billed.

You can check the tax portion with the sales tax calculator.

When to use one

1. You forgot a charge, such as shipping, permits or extra hours.
2. A price or quantity was entered too low.
3. The customer asked for additional work that you agreed to bill against the original job.

If the extra amount is large or unrelated, a fresh invoice from the invoice generator may be clearer. Always tell the customer why the amount changed, and be ready to show the evidence.

Related terms

• Credit memo: reduces what a customer owes.
• Accounts receivable: the balance a debit memo increases.
• Line item: one charge on an invoice.
• Statement of account: a summary showing invoices and adjustments.