Best Invoice Types For You If You're Self-Employed |
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In the simplest words, a debit memo is nothing but an opposite of a credit memo. Also known as a debit invoice, a debit memo is issued by a seller to a buyer, and also shows an increase in the monetary value of the debit that the buyer owes their seller. It is generally a document given to an account holder, mentioning that their account balance has been reduced due to certain factors other than a cash withdrawal or a written cheque being cashed in. A debit memorandum can arise as a result of a bank charging extra services or if there are cheque bouncing fees due by an account holder. A debit memo is also typically sent out to customers of the concerned bank along with their monthly bank statements. Moreover, there is an adjustment procedure that follows a business’s valid complaint against their competing businesses. For instance, if there is a company A sending defective merchandise to a Company B, a debt memo will be issued for adjusting the accounting statements in terms of debits and credits. Generally, it is preferred to avoid debit memos either from an individual or from a business perspective. Individuals typically tend to incur undesirable fees for extra bank service charges or for the purpose of having a cheque bounced. On the other hand, there are several implicit costs for a business when it comes to debit memorandum, like possible loss of reputation and human labour for making the necessary adjustments. Banks also often use a debit memo for charging fees to the customer accounts. Sometimes, the banks also use a debit memo to charge fees to the customer accounts, and companies often use a debit memorandum to clear a small amount of money owed to a customer as a credit balance. Majority of the businesses hardly use debit memorandums, but they can be useful in case you need an incremental adjustment for billing. For example, if you underestimate the amount of hours you put in for billing a project, you may issue a debit memorandum for adjusting the amount owed. Alternatively, several businesses also choose to reissue the original standard invoice along with the adjusted amount.
Many times when firms purchase inventory from the vendors, the inventory is damaged for shipping or the wrong inventory is shipped. In all the cases, the buyer has the right to return the damaged or incorrect inventory for the entire refund. At times, returning the full shipment is not always feasible. So, a debit memorandum is nothing but a notification from a buyer to a seller that tells the seller that debit was made n the seller’s account on the buyer’s books. This may sound confusing, but putting it simply, debit memorandum is a way for a buyer in order to inform the seller that it wants refund or a discount on its purchase.
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