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Customer Returns

Former Member
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I have searched and couldn't find any cases similar to my scenario and so decided to post here hoping some gurus can shed some light.

My user has created a Sales Order, delivered the goods, billed customer and even cleared the invoice.

Due to some quality issues, customer has decided to return the goods to us.

The normal process would be to create a Returns Order, do returns delivery and issue credit memo to customer.

However, customer has incurred some handling charges and other miscellaneous costs with regards to the return that customer would want to bill us.

That means the total amount customer wants to bill us is more than what we had invoiced them - sum of goods ordered + extra handling costs (and other miscellaneous costs as a result of returning)

My user has informed that customer will invoice us all the costs incurred and so we will not issue credit memo to customer.

User's question to me was, what is the correct procedure to do this.

Well, my question is, is this the correct way of handling such scenario? Is it even possible in the first place?

What is the best practice for this kind of scenario?

Accepted Solutions (1)

Accepted Solutions (1)

Lakshmipathi
Active Contributor
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What is the best practice for this kind of scenario?


It is upto the clients' Financial team to decide this as to how their balance sheet should show.  Of course, the end customer should also accept to your clients' proposal.  But in general, for any customer returns, seller has to raise a credit note to the extent of value claimed by the buyer; or will be given free of charge in the next immediate subsequent shipment.

Most importantly, if the client has not returned the  material, then there is no need to create a return order as stated by you.  Directly, Credit Memo Request followed by Credit Memo will suffice.

G. Lakshmipathi

Answers (5)

Answers (5)

Former Member
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Thank you all for your valuable comments.

Initially, I thought this was more of a process question and so could be solved out-of-the box without having to go into configuration and create new condition type like what Srinu has suggested (thank you nevertheless).

The goods will definitely be returned so returns goods receipt will be done. My proposal is similar to what Jelena has suggested; to create 2 separate credit memos.

(1) Create a returns order in VA01 for the original invoice which will then allow user to do returns GR when the goods get ships back. Then create credit memo in VF01 for this returns invoice which will be same amount as what we originally billed customer.

(2) Because the credit for returns in (1) pulls data from the original invoice and does not allow me to edit the items (correct me if I am wrong), hence the amount is fixed to original invoice; have to create another credit memo in FB75 just for the additional charges (not only freight but also other miscellaneous charges like handling costs, etc.).

Would this be a viable solution?

I am more concern about the effects in Finance as I am not familiar in that area.

joao_sousa2
Active Contributor
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Unless there is a custom development, you should be able to change the quantity/amount in the credit request. But you do need to validate how the customer invoice will be handled.

Jelena
Active Contributor
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As Joao pointed out, you should be able to create a CR and change the amount/quantity. This could be easily tested in the QA system. Even if for some reason this is not feasible, you still should be able to create a CR (even without reference) for any amount. Don't do an FI credit memo since this number then would not reflect in your sales reports.

Former Member
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Yes, I got it now.

I have another question. Instead of creating a Returns Order for the original order and a Credit Memo Request for the extra costs, can I just create a Returns Order and add a service material to account for the freight charge so I just have one single Returns Order?

Another basic question comes to mind when working on this issue.

Other than being able to show it in document flow, what is the difference when creating a Returns Order or Credit Memo Request with reference and without reference?

joao_sousa2
Active Contributor
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Tell your user that he should tell the customer to wait for the credit memo instead of invoicing, since he is not going to open him as a supplier just because of that invoice.....

in some countries you can just ignore the invoice and issue a credit memo with reference to the invoice number,, but it depends on the legal framework.

Jelena
Active Contributor
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Best practice would be to attach 10 page terms and conditions of sale that would prevent such situation from happening in the first place (AKA "lawyer up" ).

But overall I agree with Lakshmipathi - this is more of a financial question and depends on how Accounting wants this to be posted. E.g. this may need to be captured under some special warranty cost, taxes may also need to be considered, etc. I would've voted for two credit memos - one for the original invoice (with return delivery if necessary) and a separate one for any additional cost. For the analysis purposes it'd be difficult to connect an incoming invoice with a sales document. Also you might save on payment processing. Just IMHO of course.

Former Member
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Hi All,

In real scenario, end customer can send the goods back to the client in "TO-PAY" basis.,Client will pay the the freight charges incurred for returning the goods and the customer can be given the credit memo only for the goods.

Kindly correct me if i am wrong!

Brgds|DS Rajan

srinu_s1
Active Contributor
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My user has informed that customer will invoice us all the costs incurred and so we will not issue credit memo to customer.

Please let me know how your customer will invoice your company how you will link this to return process?

As per my understanding the following process can be implemented.

1.Define new condition type as ZMIS(surcharge cond type) and assign this to your pricing procedure and mark this condition type as manual in V/08.

2.So when you are creating return invoice(credit for returns) for the customer enter this ZMIS condition manual for adjusting the transportation cost incurred by the customer so that customer will be credited for the total amount (net value of the goods+Transportation charges).

thanks,

Srinu.

venu_ch8
Active Contributor
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Dear Srinu Sorry For interptiong

Your Answer is correct But as per my knowledge One draw back is there so consider this also

ex: once we added Surcharge condition type manuvally in v/08 and made it Manuvel condition check box

so he is able to adjust the price in returns Right but after while creating sales order also User able to make changes in VA01 Right so it is affecting The price . may be unwantedly if we will do it Will be problem right

Regards

venu Gopal

srinu_s1
Active Contributor
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Thanks Venu for your reply.

What am trying to say is since the transportation cost is not fixed it varies between the order to order hence i suggested to mark it as manual and this has to be entered only in return invoice.

VA01-VL01n-VF01->VA01(return order)-Vl01n(return delivery)-VF01(credit for returns) here user needs to enter the transportation condition type .

Yes definitely there could be more better process than mine.

thanks,

Srinu.