Total Credit Memo Outstanding (AR)

In Account Receivable context, the KPI Total Credit Memo/Note Outstanding is reported along with actual expected receivables. This KPI indicates the extent of liability in the organization(s) books from cash flow perspective.

An Accounts Receivable Credit Memo is issued to a customer when a company has accepted payment and the customer has cancelled due to some reason after which the organization is liable to pay back to the customer.

This essentially means that liability is created equivalent to the amount received from customer.

Main reason for reporting AR Credit Memos is because it affects the actual cash flow by directly impacting actual receivables. A credit memo is usually adjusted against a new order from the customer, which basically offsets the liability without impacting the receivables.

Whenever, future receivables are taken into account for analysis (e.g. like ageing analysis) both inflow and outflow of cash gives a better picture. Here, the receivables along with credit memo data will help in providing a complete picture.

This KPI looks at all “Open” Credit Memos (i.e. Credit Memos that are not adjusted fully) and shown as a single value measure. Time context is not applicable because a credit memo can be utilized any time from the date of issue.

Total Receivable as of Feb ’17 $23,456
Total AR Credit Memo Outstanding $456
Net Realizable Cash $23,000

In the above illustration, the Total AR Credit Memo Outstanding is used to calculate realizable cash flow, which will in turn help in planning and forecasting activities.