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Documentation Index

Fetch the complete documentation index at: https://docs.arcuserp.com/llms.txt

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Vendor returns allow you to send items back to suppliers for credit or replacement. Unlike customer returns, vendor returns reduce the amount you owe the vendor and impact the Accounts Payable subledger.

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When to Create a Vendor Return

Create a vendor return when:
  • Inventory received is damaged or defective
  • You ordered excess inventory and want to return it
  • You received the wrong SKU and the vendor should take it back
  • A customer returns an item and you want to pass it back to your supplier (drop-ship scenario)

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Two Paths to a Vendor Return

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Path 1: From a Customer Return (Common)

When a customer returns an item and you decide to return it to your vendor:
  1. Go to Returns > Customer Returns.
  2. Find the customer return with items you want to send back to the vendor.
  3. In the return detail, look for the line items.
  4. For each item, select the disposition “Return to Vendor”.
  5. Click Authorize Vendor Return.
  6. Arcus creates a linked vendor return and prefills the quantity and item.
Customer return line item with Return to Vendor disposition

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Path 2: Standalone Vendor Return

To create a vendor return without a linked customer return:
  1. Go to Accounting > Vendor Returns.
  2. Click Create Return.
  3. Search for and select the vendor.
  4. Add items you are returning by SKU or product name.
  5. Enter the quantity being returned.
  6. Enter or confirm the unit cost (used to calculate the credit amount).
  7. Click Create Return.
Create vendor return form with vendor search and line item entry

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Vendor Return Statuses

  • Draft - You have created the return but not yet authorized it.
  • Authorized - The return is ready to send to the vendor.
  • Shipped - You have sent the items back (optional tracking step).
  • Received by Vendor - The vendor has confirmed receipt (optional).
  • Credited - The vendor issued a credit memo that Arcus has recorded.
  • Closed - The return is complete and the credit has been applied.

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Record Shipment Back to Vendor

After authorizing a vendor return:
  1. Click the return to view its detail.
  2. Click Mark as Shipped if you want to record that you sent the items.
  3. Optionally, attach a carrier tracking number.
  4. Click Confirm Shipment.
This step is optional but recommended for audit and carrier proof of delivery.

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Receive the Vendor Credit

When the vendor receives the returned items, they issue a credit memo or deduct from the next invoice. If the vendor sends a separate credit memo:
  1. Go to Accounting > AP Bills.
  2. Click Create Bill.
  3. Select “Credit Memo” as the document type.
  4. Link it to the vendor return.
  5. Arcus auto-fills the credit amount based on the return line items.
  6. Click Create Credit Memo.
If the vendor deducts from the next bill:
  1. When entering the next vendor bill, link it to the PO as usual.
  2. Arcus checks for open vendor returns from that vendor.
  3. If found, it suggests applying the credit to reduce the bill amount.
  4. Confirm the offset and approve.

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Accounting Impact

A vendor return reduces Accounts Payable:
  • Debit: Accounts Payable (to the vendor)
  • Credit: Inventory (for the returned items at cost)
Example: You return 10 units at $50 cost each.
  • AP decreases by $500 (you owe the vendor less)
  • Inventory decreases by $500 (items are gone)
Journal entry showing vendor return AP and inventory impact

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Using the Vendor Credits Tab

Go to Accounting > Vendor Credits to see all outstanding credits from vendors:
  1. Filter by vendor or status.
  2. Click a credit row to view details and the linked return.
  3. Apply the credit to a bill by clicking Apply to Bill.
  4. The next time you enter a bill from that vendor, the available credit is shown as a line item you can apply.
Credits expire per terms If your agreement with the vendor specifies that credits expire after 90 days, document this in the vendor account. Set a reminder to apply or follow up if credits get close to expiration.

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Handling Disagreements

If the vendor disputes the credit amount:
  1. Review the linked return detail to confirm the quantity and unit cost.
  2. If the vendor claims they received fewer items, request a receipt confirmation.
  3. If the vendor claims a different cost, review the original PO to confirm your unit cost was correct.
  4. Document the dispute in the activity timeline of the return.
  5. Escalate to your manager if the credit cannot be reconciled.

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Troubleshooting

“Cannot create return: vendor not found” - Search for the vendor by exact name or account number in the vendor dropdown. If the vendor does not exist, create the vendor account first. See Accounts. “Credit was issued but Arcus shows no credit memo” - The vendor may have applied the credit as a deduction on the next bill without sending a separate credit memo. Review recent bills from the vendor to find the deduction. “Return is stuck in Shipped status” - If the vendor will not confirm receipt, you can manually close the return after a reasonable time (e.g., 30 days) by clicking Mark as Closed in the return detail.

Create and Manage Purchase Orders

How to set up and manage purchase orders from vendors.

AP Bills

How to record vendor invoices and link them to returns.

Customer Returns

How to process returns from your customers, which may lead to vendor returns.