Welcome to the third installment of our new Branded Program blog series. This edition will explore one of the more complicated topic of credit memos.
By Veronica Wade, Branded Program Coordinator, Food Export – Midwest
The Branded Program can be a great support to your export business by providing 50% reimbursement on international marketing expenses. To be reimbursed, we require documentation to meet the program regulations. In this blog series, we’ll take a deep dive into some of the more in-depth types of claims and documentation, which will help you take full advantage of the program. You’ll also find examples and links to further information.
In this installment we explore the topic of Credit Memos.
A credit memorandum (more commonly referred to as a credit memo) is a document issued by an exporting company to an international distributor/buyer. The credit memo acts as the source document that informs the distributor/buyer that the exporting company will decrease or “credit” the amount owed, for services and product rendered by the distributor/buyer.
Now that you have a basic understanding of the definition of a credit memo, let’s talk about the components needed when using a credit memo as proof of payment for Branded Program reimbursement:
No matter your level of exporting experience credit memos are confusing. Below we give a simple sample scenario of when and how a credit memo is likely to be utilized.
Company A is a small business headquartered in the U.S.
Company B is a distributor/buyer headquartered in Canada.
Company A provides goods to Company B and asks Company B to perform services/activities in Canada.
Company A issues a credit to Company B; decreasing the price or giving a “credit” to Company B for services rendered as well as products.
Company A will also issue a new invoice showing the lower amount based on the credit given to Company B. To prove that there is a working capital relationship between Company A and Company B a bank statement is provided to show the invoice is paid in full. A Freight Bill or Bill of Lading will also be provided to show the goods were sent and received by Company B.
There are a variety of reasons as to why a company might choose to use a credit memo over other methods of payment.
Below are a few examples:
A credit memo can sometimes make the business transaction between your company and a distributor/buyer smoother. It also makes the backtracking of products shipped or services performed for your company easier.
Want to learn more? Check out this previous blog post where we go into detail about the Proof of Payment documentation required for Branded Program reimbursement.
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