What is a Chargeback?

A chargeback is an invoice that reduces the amount owed to a vendor. If an invoice amount is greater than the receipt amount, the application lets you process this difference in two ways:

• Pay the invoice in full and post the difference to a tolerance account to be written off.

• Create a chargeback invoice to the vendor for the difference.

A chargeback reduces the amount owed to the vendor and states the reason for the reduction. The chargeback lets you pay the expected invoice amount without waiting for a credit memo from the vendor.

For example, you have an agreement with a vendor to purchase 10 units of an item with a unit cost of $10. The expected invoice total is $100. You receive an invoice with an item cost of $10.25 and total cost of $102.50. A chargeback invoice is created for $2.50; the difference between the ordered cost and the invoice cost.

Chargebacks are useful if you want to chargeback an invoice overage so that responsibility shifts to the vendor (chargebacks can be created automatically). However, if you want to create a credit memo toward the original invoice, you may not use chargebacks often.