What Is a Credit Memo? The AP Document That Reduces Your Balance

A credit memo is a document issued by a vendor acknowledging that the customer is owed money — an overcharge, a returned product, a damaged shipment, a negotiated adjustment. Credit memos are free money for AP teams that apply them correctly, and they're consistently underutilized because they arrive separately from invoices and don't always get captured. Here is what a credit memo is, how to handle one, and why they matter more than their dollar amount.