Contractors: Are You Getting Credit for the Materials You Return?
Returning unused materials can feel like the last loose end on a job. You drop off the extra fittings or tile, take the receipt, and head to your next appointment.
When the supplier gives your business an account credit, someone still needs to check how that credit is used. The receipt might reach the office after the next bill has been paid, or never make it there at all.
For contractors who purchase materials on account, checking supplier credits can help prevent unnecessary payments and keep material costs accurate in the books.
A return receipt doesn’t tell you the whole story
A supplier may refund your original payment method or issue a credit on your supplier account. An account credit is an amount you can use toward eligible bills with that supplier. The supplier’s credit memo is the document showing the amount credited to your business.
Your return receipt may show that amount, but you still need to confirm whether the credit was applied to a bill, remains available, or was refunded. A credit sitting on a supplier account won’t appear as a separate deposit in your bank feed.
Restocking charges can reduce the value of a return; Ferguson’s return policy, for example, allows for these fees. Compare the credit with the amount approved for the returned items, including any agreed deductions.
How to check for unused supplier credits
Start with the suppliers you buy from most often. Gather your return receipts and credit memos, along with the original purchase invoices and the supplier’s latest statement or account history.
You may be able to get these documents online. Ferguson’s bill payment portal, for example, provides access to invoices, credit memos, and statements. If you can’t find a credit, ask the supplier’s accounting department to trace the return.
For each return, check:
Whether the supplier issued a credit for the accepted return.
The amount credited and the supplier account it was posted to.
Whether it has been applied to a bill or refunded, and how much remains available.
If you track supplier bills in QuickBooks Online, open All apps > Expenses & Bills > Vendors, select the supplier, and review the Transaction List. You can also filter the supplier’s transactions by type.
Compare the credits and payments in QuickBooks with the supplier’s activity for the same period. Include older activity if an unresolved return falls outside those dates.
A credit missing from QuickBooks may already have reduced a supplier payment. Likewise, an open credit in QuickBooks may have been used or refunded without the corresponding transaction being recorded correctly. Confirming the supplier’s records helps you identify what still needs attention.
What a $900 credit changes
Suppose your supplier confirms that you have an unused $900 credit from a material return, after any fees. You also have $3,000 in unpaid bills with that supplier before the credit is applied.
Applying the $900 credit reduces the payment to $2,100. That leaves $900 available in your bank account for other expenses. If you paid the full $3,000, the unused credit could remain with the supplier for a later purchase.
Check whether the amount shown on your supplier statement already includes the credit. If the statement shows $2,100 due after deducting it, that is the remaining balance. Subtracting another $900 would leave the account underpaid.
When the supplier’s records and your books disagree
If the amounts don’t match, trace the credit and any related payment or refund before changing your books. Ask the supplier which invoice a credit was applied to, or when and how a refund was issued.
What you find | What to do |
|---|---|
The supplier issued a credit, but it is missing from QuickBooks. | Obtain the credit memo and check whether the return was recorded elsewhere. Record any missing transaction using the appropriate credit or refund method. |
Both records show an unused credit. | Confirm which bills the credit can offset and use it when paying them. If you no longer buy from that supplier, ask whether a refund is available. |
QuickBooks shows an open credit that the supplier already used or refunded. | Locate the related payment or refund in your books. Correct or link the existing transactions as needed, with help from your bookkeeper if you’re unsure. |
QuickBooks can automatically apply available vendor credits when you use Pay bills. Check the Credit Applied field and the final payment amount before saving. Intuit’s credit and refund instructions explain the appropriate recording method based on how you entered the original purchase and received the refund.
When you track material costs by job, keep the return connected to the original project. Otherwise, that job’s recorded costs may stay too high. Applying the credit against a bill for a different job does not change which project the returned materials came from.
Keep return paperwork with the purchase
Make return receipts part of the same routine you use for purchase receipts. Whoever returns the materials can send a photo or forward the receipt while the details are fresh, noting the supplier, original purchase, and job name.
Give one person responsibility for following up on unresolved returns. A simple list can record the return date, supplier, expected credit, and whether it is waiting to be issued, applied, or refunded.
Before paying supplier bills, check for available credits and verify the amount being paid. During your monthly bookkeeping, compare supplier statements with your records and follow up on any return that still hasn’t been resolved.
Keep the paperwork showing where each credit went. That makes it easier to answer a supplier’s question or confirm a job’s material costs without trying to remember a return made weeks earlier.
If your supplier statements and QuickBooks balances aren’t lining up, I’m happy to help you work through the differences. You’re welcome to schedule a free evaluation of your books so we can discuss the support your business needs.
