Credit Management: #1 Credit You Owe vs Credits Owed to the Business

Credit Management: #1 Credit You Owe vs Credits Owed to the Business

Think about the last time you ordered food online. You might have paid in advance through your card, but you received a $20 refund because your order got delayed or cancelled. In most apps, refunds don't go into the bank account directly; instead, they're stored as a credit in your food delivery account, ready for your next order.

Imagine a mom-and-pop store at the corner of your street, where you buy things "on tab." You take home items today and promise to settle the bill at the end of the month.

Now, flip that perspective. The same store probably receives goods from its supplier every week, but doesn't pay for them immediately. The supplier allows a few days or even weeks before payment.


InfoThey are more than just promises, more than trust. They are credits.

Credits like these are everywhere in our daily lives. Sometimes we owe them, sometimes they owe us. Moreover, in business, this constant give-and-take of credit plays a critical role in keeping transactions flowing smoothly.

Understanding the Two Sides of Credit 
In every business, credit flows both ways. You extend credit to your customers when you allow them to pay later, and sometimes you owe credit back, as adjustments or refunds. These two sides of credit determine how efficiently your business manages cash flow, customer relationships and revenue recognition.

Let's break them down.

Credits Owed to the Business 
You're extending credit when your business provides goods or services before receiving payments. It's a standard business practice that builds trust and encourages repeat sales, but it also means a portion of your revenue is pending to be collected. This pending amount is your credit owed or accounts receivable.

Some of the common forms of Credit Owed to the business are:

Sales on Credit:

The most common form of credit is sales credit. You deliver the product or service and give the customer a set number of days to pay, say, Net 15 or Net 30.

For example, a freelance designer might deliver a logo package to a client and issue an invoice payable within 10 days. Until payment is made, that amount remains as credit owed to the business.

Recurring or Subscription Billing:

For services that run month after month, invoices are generated periodically, and the payment cycle follows agreed-upon terms. It may be either the start or the end of the month.

Take a SaaS company offering a monthly plan. Each invoice raised at the start of the month gives the customer a set time to complete the payment, making it a recurring credit relationship.

Instalment or Milestone Billing:

Large or ongoing projects may be billed in parts; each payment represents a credit instalment.

For example, a software development firm might bill 40% upfront, 30% after a beta release and 30% after project completion. Each stage involves extending short-term credit until the payment arrives.

Overdue Receivables:

When payments extend beyond the due date, those invoices become overdue and need close follow-up.

For instance, a wholesaler who has multiple clients on credit terms may notice one customer's invoice consistently crosses the 45-day mark, prompting reminders or credit hold decisions.

Credits You Owe 

Now let's flip the perspective.

Sometimes, your business owes customers a credit. This could be because they paid in advance, overpaid, or a transaction needed adjustment. These credits act as a promise, a value the customer can use against future invoices or purchases.

Some of the common forms of Credit You Owe are:

Credit Notes:

This is issued when you need to reverse or adjust part of a billing amount, such as when a customer returns goods or a post-sale discount occurs.

Imagine a retailer who invoices a customer for 100 items but later finds 10 were defective. Instead of issuing a refund, they create a credit note for the value of those 10 items, which the customer can apply to their next purchase.

Overpayment:

When a customer pays more than what's due, the excess is treated as a credit balance for future invoices.

For instance, if a customer's invoice total is $1900 but they transferred $2000, the extra $100 becomes a credit balance that can automatically be adjusted against their next invoice.

Advance Payment:

When a customer prepays, the amount remains a credit until applied against an upcoming service or product delivery.

A good example is a training provider who receives $600 upfront for a workshop scheduled next month. That amount is held as customer credit until the session occurs and the invoice is adjusted.

Balancing the Equation 

Both sides of the credits are equally important.

  1. If the "credit owed to you" side grows too much, your cash flow is weakening.

  2. If the "credit you owe" side isn't correctly managed, you risk misreporting revenue or confusing customers.

A healthy credit management process means,

  • Payment terms are clearly defined.

  • Overdue invoices are tracked and followed up on.

  • Credits and refunds are issued promptly.

  • Use automation to handle reminders, adjustments and reporting.

 When these pieces are in sync, your business operates with confidence, as every transaction is accounted for and every balance is clear.


Meet Zoho Billing 
Credit management becomes much easier when your billing system does the heavy lifting.


Idea
With Zoho Billing, businesses can:

  • Define flexible payment terms at the customer level or invoice level.

  • Track receivables in real time with clear visibility into what's due, overdue or funds collected.

  • Issue credit notes instantly for returns, discounts or adjustments.

  • Apply customer credits automatically against future invoices or renewals.

  • Automate reminders and the dunning process to keep cash flow consistent.

  • Clear reports on what's paid and unpaid, how long a customer takes to pay, and how often it fails.

In this series, we will examine each of these functionalities deeply and explain how they offer visibility and clarity, letting your team focus on growth rather than following up on credits.

 

Notes
Up Next: Setting the Right Payment Terms 


    • Sticky Posts

    • Community Learning Series | Digest #5 — September 2020

      Dear customers, We're happy to bring you the September edition of our #CommunityDigest! Keep track of your subscription KPIs right from your smartphone: Last month, we enhanced our Android mobile app to help our customers get daily updates on their business health. We got to know from a lot of customers that this has made their job much more easier because they no longer have to keep a reminder to manually check on the previous day's revenue or activations. If you have not downloaded it yet, here's

    • Community Learning Series | Digest #4 - August 2020

      Dear customers, We hope you're staying safe and healthy. I'm happy to bring you the fourth edition of our #CommunityDigest with some brand-new updates from us. 1. Daily Business Updates (for Android users) The Zoho Subscriptions Android app has got a cool new update: You can now get a push notification to your smartphone that lets you know how many activations and cancellations have taken place, and what's the net revenue for the previous day. The best part is, you can tell the app when exactly you

    • Community Learning Series | Digest #3 - July 2020

      Dear customers, We hope you're staying safe and healthy. We're glad to bring you the July edition of our #CommunityDigest. New community members can view our previous newsletters here. This time, we have two major updates and three interesting topics for you: 1. Zoho Subscriptions Developer Community Since the inception of Zoho Subscriptions, our team believed that the recurring billing platform we provide should be able to offer an extensive API library that empowers businesses to automate most

    • Introducing: Community Learning Series | Digest #1 - May 2020

      Dear customers, We hope you are staying safe and healthy. Helping businesses manage their customer subscriptions more efficiently has always been, and always will be, our goal at Zoho Subscriptions. We strongly believe this is possible if we grow together as a community and share what we know with each other. To nurture this shared learning experience, here is our brand-new Community Learning Series! ​ Welcome to the first edition of our digest! Each edition of our community digest includes guides

    Nederlandse Hulpbronnen


      • Recent Topics

      • Change Last Name to not required in Leads

        I would like to upload 500 target companies as leads but I don't yet have contact people for them. Can you enable the option for me to turn this requirement off to need a Second Name? Moderation update (10-Jun-23): As we explore potential solutions for

      • Having Trouble Opening The Candidate Portal

        Recently am having trouble opening the Candidate Portal. It keeps loading but cannot display any widgets. Tried Safari, Chrome and Edge. Non of them work. Please solve the problem ASAP.

      • Tip of the Week - Spot Risky Sales with Conditional Formatting

        In Zoho Analytics, small tweaks can lead to big insights. One such feature is Conditional formatting based on other columns, your key to instantly spotting where sales success is overshadowed by product returns. Our tip this week shows you how to apply

      • How do I duplicate / copy a campaign

        I am evaluation Zoho Campaigns and sent an email to one of my personal email accounts from Zoho Campaigns.  It went into my junk file in Hotmail. I want to duplicate that same (1-page) campaign and send it to another of my personal accounts to try to

      • For a Bill, can "Pay via Check" - Can we also "Pay via Check" when documenting refund for payment?

        We really like when we have a Bill in Zoho Books that we can record payment by selecting "Pay via Check" and that will cut the check for us from Zoho Books. However, when we have to write checks as a result of invoice overpayment, we can not select "Pay

      • Creator Change History: Ways to improve

        Hi Everyone, Recently been working in developing this change history(an idea from Zoho Forms) - unlike forms that you can this with a click but using Creator, we can use "old" keyword. The concept I come up with is to put the result in a table however,

      • Currency selector (based on variable) usage in comparsion

        Hi, I've developed a currency selector based on the following topic, and it's working well in pivot tables and charts: https://help.zoho.com/portal/en/community/topic/how-can-i-allow-my-users-to-choose-a-currency-for-the-dashboard I also have a comparison

      • Suitability of Zoho One (Single User License) for Multi-State GST Compliance & Cost Analysis

        Hello Zoho Team, I am an e-commerce business owner selling on platforms like Amazon, Flipkart, and Meesho, and I'm currently using their fulfillment warehouses. I have two GSTIN registrations and am planning to register for an additional 2-3 to expand

      • add employees and customiz

        I want a Zoho software to track employees record. I logged in a demo so now I tried adding employee, first thing when I click on add employee it takes me to a page where it says add user maximum 10 users, my first doubt why users I don't want employees

      • Inactive User Auto Response

        We use Zoho One, and we have a couple employees that are no longer with us, but people are still attempting to email them. I'd like an autoresponder to let them no the person is no longer here, and how they can reach us going forward. I saw a similar

      • Zoho People Attendance Module - Split Shifts

        Hello, Our business employs a number of college students who often split their workdays between work hours and class schedules, resulting in split shifts. For example: Employee 1 works 9am to 11:30am and then leaves for class, returning to work at 3pm

      • Zoho One subscription

        we have got Zoho CRM for 3 users and we paid for the app , and we have still 9 months to go , but if we join Zoho one , does it mean the payment for that subscription would be a waste? Please help. Thanks.

      • How Zoho CRM Can Enhance Your Faucets Accessories Business Operations?

        In today's competitive market, having a reliable CRM system is crucial for managing customer relationships and streamlining business operations. For businesses in the faucets accessories niche, Zoho CRM offers powerful tools to help manage everything

      • Dashboard

        I’m currently working on a project using the Zoho IoT Cloud with an ESP32 and MQTT. I’ve successfully connected the ESP32 to Wi-Fi and MQTT, and the data from the ESP32 is displayed in the telemetry section of the cloud. However, when I try to create

      • Can i connect 2 instagram accounts to 1 brand?

        Can i connect 2 instagram accounts to 1 brand? Or Do i need to create 2 brands for that? also under what subscription package will this apply?

      • Zoho Forms - Improved Sub-Forms

        Hi Forms team, I'm helping a client move from JotForms to Zoho Forms and I've found another opportunity for improvement. In the below screenshot, JotForm left and Zoho Forms right. The Zoho Forms Sub-Form is quite a poor visually. There is no way to make

      • What's New in Zoho Billing | Q3 2025

        Hello everyone, We are excited to share the latest set of updates and enhancements made to Zoho Billing in Q3 2025. From the latest GST updates to multi-level discounting, Zia-powered report summaries, and customizable web forms, these updates are designed

      • How to Delete Personal Account Linked with My Mobile Number in past or by someone else

        How to Delete Account Created with My Mobile Number in past or by someone else This is creating issues in making or sync with my credentials mobile and email address..

      • WhatsApp Business Calling API

        Dear Zoho SalesIQ Team, I would like to request a feature that allows users to call WhatsApp numbers directly via Zoho SalesIQ. This integration would enable sending and receiving calls to and from WhatsApp numbers over the internet, without the need

      • Does Zoho Learn integrate with Zoho Connect,People,Workdrive,Project,Desk?

        Can we propose Zoho LEarn as a centralised Knowledge Portal tool that can get synched with the other Zoho products and serve as a central Knowledge repository?

      • Marketer's Space - Going beyond basics: Smarter ecommerce marketing with Zoho Campaigns

        Hello Marketers, Welcome back to this week's Marketer's Space. In the last post, we discussed the basics of email marketing and how to get started with email marketing in ecommerce. In this part, we'll dive much deeper into some other advanced features

      • Connecting two modules - phone number

        Hi, I’d like some guidance on setting up an automation in Zoho CRM that links records between the Leads module and a custom module called Customer_Records whenever the phone numbers match. Here’s what I’m trying to achieve: When a new Lead is created

      • Zoho Marketing Automation 2.0 - Landing Page function not working

        Dear Zoho Team, I am working on implementing Zoho Marketing Automation 2.0, and am now looking into the section "Lead Generation". If I open the "Landing Pages" section, I immediately get an Error code: Error: internal error occurred. Can you help me

      • Unable to use Sign "You have entereed some invalid characters"

        Unable to use Sign "You have entered some invalid characters" I do not see any invalid characters. The text in "Leave a Note" is plain text which I entered directly into the field. See attached screenshot

      • Elevate your CX delivery using CommandCenter 2.0: Simplified builder; seamless orchestration

        Most businesses want to create memorable customer experiences—but they often find it hard to keep them smooth, especially as they grow. To achieve a state of flow across their processes, teams often stitch together a series of automations using Workflow

      • Messages not displayed from personal LinkedIn profile

        Hello. I connected both our company profile and my personal profile to Zoho social. I do see all messages from our company page but none from my private page. not even the profile is being added on top to to switch between company or private profile,

      • "Performed changes in the query is not allowed due to following reason" when adding columns or reordering data

        I'm trying to make changes to a query but every time i try to save it i get this error message. I'm not touching the data it's flagging. All I've tried to do is reorder a couple of fields and add a new one. Why won't it let me do this? It's a core query

      • Onboard new users easily with native screen recording in Zoho Projects Plus

        Communication involving both visual and audio elements tends to capture more interest among the audience. Whenever we onboard new employees to the organization, the task of engaging them in the induction sessions, and keeping the spark going in their

      • Request to Add Support for PDF Templates and More Flexibility in Email Editor

        Hi Zoho Campaigns Team, I hope you're doing well. I wanted to share some feedback and request a few improvements in the Email Template feature of Zoho Campaigns. Right now, we can create email templates using the HTML editor, which is helpful. But we’re

      • Can you stop Custom View Cadences from un-enrolling leads?

        I'm testing Cadences for lead nurture. I have set un-enroll properties to trigger on email bounce/unsubscribe, and do NOT have a view criteria un-enroll trigger. However, help documents say that emails are automatically un-enrolled from a Cadence when

      • Zoho Desk Android and iOS app update: Agent detail overview

        Hello everyone! We’ve introduced agent detail overview on the Zoho Desk Android and iOS app update. With this feature, you can get a complete view of agent’s tickets, response times, logged hours (for both tickets and activities), customer happiness ratings

      • Blog Widget: Show recent blog posts on my homepage

        Hey there I am using the Zoho Sites Blog feature. On my homepage, on the bottom I'd like to have a featured content section where I show some of my blog posts (selected, most recent, filtered by category and so on...). It would be nice to have a blog

      • YouTube Live #2: Agreement Intelligence with Zoho Sign's eSign AI assistant

        Hi there, We're back again with our YouTube live series and this time, we'll take you through our holistic agreement intelligence powered signature workflows. Struggling to draft an agreement? Need help double-checking clauses and going through complicated

      • How to iterate through excel data using zoho rpa

        I wanted to iterate or loop through excel data ( datatable). How can i do that

      • Zoho Commerce

        Hi, I have zoho one and use Zoho Books. I am very interested in Zoho Commerce , especially with how all is integrated but have a question. I do not want my store to show prices for customers that are not log in. Is there a way to hide the prices if not

      • Mass (Pull back) (Close WOs) (Close APs)

        Hi develop team. Just idea because Zoho FSM is great but its too manual. we have a lot of task to do every day and the system needs to have more features to automatic our tasks. I need to close several WOs, APs and Pull Back per day. Please we need mass

      • Customising Zohidesk portal default widgets

        Hello, I'm wondering how could I customise the default widgets such as "popular topics", "popular articles" using CSS or to make the tiles at the bottom match the ones that I made in the picture attached. I have made some custom widgets and edited them

      • If there’s a batch at the end, the ‘mark as inactive’ function doesn’t work.

        when my batch has a date to batch end and I "mark as inactive" he batch does not obey the status and reactivates the batch.

      • Seamless multilingual messaging and tone control in Zia IM Composer

        Hello everyone! Managing customer conversations across multiple languages can be time-consuming. Using Zia in the Instant Messaging (IM) Composer helps you overcome this by providing tools to translate content, adjust your tone, and refine your messages

      • Advanced Deluge help needed with custom function and COQL limits

        I have a scheduled function that takes a snapshot of specific metrics and saves them to a custom module. However I'm struggling with the limits of COQL. I attach my full code, but an example of the issues I'm having is that it's erroring with a 'Limit

      • Next Page