Crediting Invoices for a Customer That Are Associated with a Purchase Order Drop Shipment

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If you've ever received the following message when trying to Correct, Cancel, or Create Corrective Credit on a posted sales invoice, then this post is for you.

You cannot use the cancel or correct functionality because the invoice line is associated with purchase order XXXX via a Drop Shipment.

This error occurs because the system locks invoices tied to purchase order drop shipments, preventing you from using the standard correction tools. But don't worry, there are alternative approaches. Below are my recommendations based on different scenarios.


Scenario 1: Customer was charged the wrong price

If you accidentally billed the customer incorrectly (wrong item price or freight amount) you have two main options:
  1. Create a Sales Credit Memo for the difference. 
  2. Reverse the full invoice and issue a new invoice with the correct pricing.
After posting the credit memo, make sure to apply it against the original invoice so everything balances out.

👉 Don’t forget about sales tax: 
  • If you create a credit memo for the difference, include any related tax adjustment.
  • If the invoice is fully reversed, the entire tax amount will be credited, and the new invoice will calculate tax correctly.

Scenario 2: Customer returned the item

If the customer returned the item that was shipped directly from the vendor, you'll need to handle both sides of the transaction: 
  • Sales side: create a Sales Return Order to credit the customer back. 
  • Purchase side: create a Purchase Return Order to send the item back to the vendor.

Pro Tip

You can create the Purchase Return Order right from the Sales Return Order.
  1. Home > Create Return-Related Documents
  2. Select Vendor No.
  3. Select Create Purch. Ret. Order
  4. Unselect all other options. 
Once the Purchase Return Order is created you will post it as Ship and Invoice to create the vendor credit memo. Apply the credit memo to the original invoice so everything balances out.


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Kristen Hosman is a Microsoft MVP in Denver. She works with Dynamics 365 Business Central and related technologies. You can also connect with her through this link: Kristen Hosman | Linktree

 

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