what is a debit memo

A debit memo, also known as a debit note or debit memorandum, is a commercial document issued by a buyer to a seller as a means of formally requesting a credit note. It is a notification to a customer that a debit adjustment has been made to their account, reducing the money available. Debit memos are generally used in business-to-business transactions, often involving an extension of credit, meaning that a vendor would send a shipment of goods to a company before the goods have been paid for. Debit memos can be used to correct undercharging on an invoice or to levy ad hoc charges outside the context of a subscription. They can also be used to correct billing mistakes, such as overcharging, undercharging, and other billing mistakes. Debit memos have specific purposes and are used only for adjustments beyond normal debits. The seller might also issue a debit note instead of an invoice in order to adjust upwards the amount of an invoice already issued (as if the invoice is recorded in wrong value). Debit memos can be generated to offset a small credit balance remaining in a customer account, which allows the accounting staff to clear out the balance in the account. Debit memos are usually issued in the same format used for an invoice and appear on the monthly statements of outstanding accounts receivable that are sent to customers.