Handle the returns of damaged goods from your customers

If your customer reports that the item they have received from you is damaged the following procedures will review how to process the transactions. The manner in which you handle this situation depends on how you do business. There are two ways to handle damaged goods depending on whether or not your company returns the product to stock, so that it can be returned to the vendor or the customer can be given credit and the item can be discarded.

If you have the Business Activities Module (an add-on), you can enter a Return Merchandise Authorization (RMA) to efficiently manage returns. This will allow you to keep track of the returned product and related information by referencing the RMA number generated by the system. Refer to: Complete a Return Merchandise Authorization (RMA)

Not returning damaged goods to stock:

In the case that you do not require your customer to return a damaged product or if you discard it after it’s returned, you will need to enter a credit memo for the customer as a non-standard product type. This allows the option to apply a credit to their account for the damaged goods and not return the goods to inventory.

  1. Select Sales > Credit Memo to open the Credit Memo window.
  2. Click the New button.
  3. Click the Lookup button next to the Cust Name field to open the Find Customer Lookup window.
  4. From the data grid select the customer that received the damaged goods. Default information will appear in the Header tab and top portion of the window.
    In the top portion, if needed reference the customer PO number in the PO field; and your invoice and sales order number in the provided reference fields: Ref and Ref 2.
  5. Review all the information in the Header tab and update if necessary.

Entering credit memo details:

  1. Click the Detail tab.
  2. From the Type field drop-down menu choose the line type N – Non-standard product.
  3. Click in the Product ID field and a Lookup button will appear.
  4. Click the Lookup button and from the Find Product Lookup window select the product that is damaged.
  5. In the Quantity field, enter the quantity of that product that is damaged as a negative amount.
  6. In the Price field enter the amount that you need to credit to the customer’s account.
  7. Click the Instructions tab to enter any specific instruction that you would like to print on the credit memo.
  8. Click the Save button. A Credit Memo number will be assigned in the Memo Number field.
  9. Click the Create Credit button.

Returning damaged goods to stock:

An option for handling damaged goods that need to be returned to stock is to do a credit memo that returns the damaged products to a “special returns” or “RMA” warehouse until a decision is made on whether the items will be resold or sent back to the vendor.

If it is then decided to return the damaged items to the vendor, the most common method is to enter a negative purchase order, negative receipt (out of the “returns” warehouse) and then a negative purchase invoice when you receive the credit memo from the vendor (Refer to: the Returning the damaged product to the vendor section of this document).

(Optional) Setting up a “returns” warehouse to return damaged goods into:

  1. If you need to setup a “returns” warehouse select File > Configuration Management > Inventory > Warehouse.
  2. Click the New button in the Configuration Manager toolbar.
  3. Enter all the necessary information to setup the warehouse.
  4. Click the Save button.

Adding the “returns” warehouse to the product (If you set up a “returns” warehouse):

If you set up a “returns” warehouse to temporarily hold the damaged product, you must add the warehouse to the product in the Product Information window. This will allow you to select the “returns” warehouse throughout the returns process.

  1. Select Inventory > Product Information to open the Product Information window.
  2. Click the Lookup button next to the Product ID field.
  3. From the Find Product Lookup window select the product that will be returned to the “returns” warehouse.
  4. Click the Edit button.
  5. To add a warehouse, click the Add Warehouse button in the Inventory tab. The ‘Add Product to Warehouse’ prompt will open; select the “returns” warehouse (you created previously) from the drop-down and click the Add button.
  6. Click the Save button.
    Now, you can return the product to the “returns” warehouse in the following steps.

Entering a credit memo to return damaged goods to inventory:

  1. Select Sales > Credit Memo to open the Credit Memo window.
  2. Click the New button.
  3. Click the Lookup button next to the Cust Name field to open the Find Customer Lookup window.
  4. From the Data Grid select the customer that received the damaged goods. Default information will appear in the Headertab and the top portion of the window.If needed reference the customer PO number, your invoice and sales order number (in the provided reference fields: Ref and Ref 2).
  5. Review all the information in the Header tab and update if necessary.

Entering credit memo details:

  1. Click on the Detail tab.
  2. Click in the Product ID field and a Lookup button will appear.
  3. Click the Lookup button and from the Find Product Lookup window select the damaged product.
  4. In the W/H field make sure you select the correct warehouse that you want to return the products to.Note:If you setup a “returns” warehouse, select that warehouse.
  5. In the Quantityfield, enter the quantity as a negative amount.Note:The negative quantity is very important because it returns the stock to inventory for an inventoried item.
  6. Click the Instructions tab to enter any specific instruction that you would like to print on the credit memo.
  7. Click the Save button. A credit memo number will be assigned in the Memo Number field.
  8. Click the Create creditbutton.The product has now been returned to stock.

Returning the damaged product to the vendor:

To return the damaged items to your vendor, the most common method is to perform the following steps:

  • Enter a negative purchase order
  • Enter a negative receipt (out of the “returns” warehouse)
  • Enter a negative purchase invoice when you receive the credit memo from the vendor

Entering a negative purchase order:

  1. Select Purchasing > Purchase Order to open the Purchase Order window.
  2. Click the New button to create a new PO. A PO number will automatically be assigned and the remaining fields become editable.
  3. Click the Lookup button next to the Supplier field to select the vendor that the damaged product originated from.
    The Supplier Address fields will automatically populate with the default information; to override this address check the Override Supplier Address checkbox.
  4. In the Ship to Address section of the Header tab, from the Warehouse field select the warehouse that you previously returned the damaged product to.
  5. Click on the Detail tab.
  6. Within the Detail tab, click in the Product ID field to display a Lookup button.
  7. Select the Lookup button to open the Find Product lookup window and from this list select the product you are returning to your vendor.
  8. In the Ordered field enter the quantity as a negative amount.
  9. Review all of the order information. When you are finished, click the Save button.

Entering a negative receipt:

*Do this when ready to ship item to vendor

  1. Select Inventory > Inventory Receipts to open the Inventory Receipts window.
  2. Click the New button. A new transaction will automatically be created in the session.
  3. Use the Lookup button next to the Purchase Order field to select the negative Purchase Order you entered previously.
  4. The Warehouse field will automatically populate based on the warehouse selected in the PO, which should be the warehouse the damaged product was returned to.
  5. Click the Save button. You must save the current transaction before you can continue.
  6. Depending on your purchasing configuration settings (‘receive POs in full’ option), the damaged product may or may not automatically populate the data grid. If not, click inside the Product ID field and enter the product ID manually or click the Lookup button select the product from the Find Product on Purchase Order window.
  7. The negative quantity of the product will automatically populate the Received field based on the quantity entered on the PO previously.
    Verify that the unit cost is the same as the original receipt. This line will remove the original transaction from inventory.
  8. When you are done, review the products and their details. Your inventory in the database has not been posted yet.
  9. To post your inventory transaction, click the Post button.
  10. A pop-up window will appear asking if you want to post your inventory transaction. Click Yes to post (update) the inventory. Click No to stop the posting process.
    When posting is successful, corrections will be made to the inventory value, Accrued Purchase Receipts account and purchase invoice.
  11. The Inventory Receipts-Transactions Report window will open when you have successfully posted your inventory transaction, which will display the changes to the inventory receipt cost.
  12. Select the appropriate buttons, to print or preview the report.

Entering a negative purchase invoice:

After you have received the credit memo from your vendor you can enter the negative purchase invoice to complete the process of accepting credit for returning the damaged goods to your vendor.

  1. Select Purchasing > Purchase Invoice to open the Purchase Invoice window.
  2. Click on the Lookup button next to the PO Number field to select the negative PO previously entered for the damaged goods.
  3. The details of that negative PO will appear in the Purchase Invoice window.
    Most of the fields will be automatically populated, such as Supplier, Supplier Address, Ship to Address, and the products you are returning to your vendor (in the Detail tab).
  4. Click the Edit button.
  5. Enter the vendor’s credit memo number into the Invoice Number field (near the bottom-left).
  6. Enter the date into the Invoice Date field.
  7. Click the Detail tab to check the details of the damaged products.
  8. Click the Save button.
  9. Click the Create Invoice button to complete the purchase invoice and the returns process.
  10. A prompt will appear asking if you want to mark the purchase invoice as completed.
    Click Yes or No.
Posted in Inventory
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