Return orders in sales and purchasing

Returned goods affect inventory, accounts and customer relationships. Business Central has several ways to handle them: a credit memo directly, or a return order with more control. Here you see when to choose which, how return reasons are recorded, and why the item must go back into stock at the original cost. You also get a checklist for the settings that should be in place before the first returns arrive.

Credit memo or return order

If a customer is to get money back for items you have sold and been paid for, you post a sales credit memo. You can create it from the posted invoice or copy the invoice into a new credit memo. If the invoice is unpaid, you can use Correct or Cancel, but they do not support partial returns.

A return order gives more control, for example if you need to use warehouse documents, or a return covers several posted documents. The return order issues the credit memo itself and can create related documents.

Create a sales return order

On the Sales Return Orders page you choose New, fill in the customer and then choose Get Posted Document Lines to Reverse. Here you can show only the lines that can still be returned, so you do not return the same thing twice. The function copies the item lines and fills in Appl.-from Item Entry, so the item is valued at the original price. The Copy Document function can also give exact reversal, if Exact Cost Reversing Mandatory is turned on in Sales & Receivables Setup.

Return reason

On each line you choose a Return Reason Code. You create the codes yourself, for example damaged, wrong item or changed mind. They give you a basis for seeing where errors arise, for example at a particular vendor. Which codes make sense depends on your business, so make a short list that everyone can use.

Inventory and cost

When the item is posted as received, it is put back into stock. For inventory value to be correct, the returned item must go back at the cost it was sold at, and not today's cost. This is called exact cost reversal. If you do it manually, you choose the original sales entry in the Appl.-from Item Entry field on the return line. The same applies to returns to a vendor.

Replacement, fee and purchasing

From the return order you can create a replacement order, a purchase return order or a purchase order, if the item is to go back to the vendor or be ordered again. If you want to charge a restocking fee, or give a discount for a damaged item, you post it as an item charge line and assign it to the posted shipment, so inventory value is kept correct. Several return receipts can be gathered on one credit memo with the Combine Return Receipts function.

Checklist

Have you created return reason codes?
Is exact cost reversing turned on in sales and purchasing setup?
Does the warehouse know where returned items should stay until they have been inspected?
Who approves credit memos?

Purchasing: the same principle

If you return items to a vendor, the purchase return order works the same way. You can copy or retrieve lines from the posted documents and get exact cost reversal. You post the return shipment and the credit memo from the order, depending on what you choose.

Agree with the vendor whether you will get a credit memo, a replacement or a new invoice, and match it against your return order when the amount arrives.

Also think about what should physically happen to the item. If it is unusable, it can be posted back and then written off. If it is in order, it must go to a location where it can be sold again. Use a separate location or bin for returned items that are waiting for inspection, so they are not sold on by mistake.

Next steps

Addverk builds its own apps for Business Central, but they are not on Microsoft AppSource yet. On the apps page you can see what we are working on. If you want help with the setup in standard BC, you will find the services and the open prices on the prices page.