How-ToFinance & Operations

How to Process Sales and Purchase Returns in Business Central

Learn how to create sales return orders and purchase return orders in Business Central, reverse posted documents using Copy Document, post return receipts and shipments, and generate credit memos.

Stein Sæstad
7 min read

Returns in Business Central are handled through dedicated return order documents, Sales Return Orders for goods coming back from customers and Purchase Return Orders for goods sent back to vendors. These documents give you control over the receiving or shipping process before a credit memo is posted.

If you only need to issue a credit quickly without tracking a physical return, a direct credit memo is an option. This guide covers the full return order process and mentions credit memos where relevant.

When to Use a Return Order vs. a Credit Memo

Use a return order when:

  • You need to receive items back into inventory before crediting the customer.
  • You want to inspect returned goods before issuing a credit.
  • You are returning goods to a vendor and need a posted return shipment.

Use a direct credit memo when:

  • No physical goods are moving (for example, a pricing correction).
  • You want to issue the credit immediately without a separate receipt or shipment step.

Creating a Sales Return Order

  1. Search for Sales Return Orders using Alt + Q.
  2. Select New.
  3. In the Customer No. field, select the customer making the return.
  4. Set the Posting Date and, if applicable, the External Document No. for the customer’s reference.
  5. In the Return Reason Code field, enter or select a reason for the return (for example, damaged goods, wrong item, or customer error). Return reason codes are configured under Return Reason Codes.

Using Copy Document to Reverse a Posted Invoice

Rather than manually re-entering lines, use Copy Document to pull in the original posted lines:

  1. From the sales return order, select Process > Copy Document from the ribbon (or search for the action in the ribbon).
  2. In the Document Type field, select Posted Invoice.
  3. In the Document No. field, enter or look up the posted invoice number you are reversing.
  4. Enable Include Header if you want to copy the customer and document header fields.
  5. Enable Recalculate Lines if you want prices recalculated from current price lists. Leave it off if you want to reverse at the exact original price.
  6. Select OK.

Business Central copies the lines from the original invoice into the return order with negative quantities.

Posting the Return Receipt

Once the lines are in place and the returned goods have arrived:

  1. Review the lines. Adjust Return Qty. to Receive if you are receiving only part of the return.
  2. Select Post from the ribbon.
  3. Choose Receive to post only the return receipt (no credit memo yet), or Receive and Invoice to post both at once.

Posting the receipt returns the items to inventory and creates a Posted Return Receipt.

Creating a Credit Memo from the Return Order

If you posted the receipt separately and want to invoice it now:

  1. Open the sales return order.
  2. Select Post and choose Invoice.
  3. Business Central posts the credit memo and creates a Posted Sales Credit Memo.

The credit memo reverses the G/L entries from the original invoice, debiting the sales account and crediting accounts receivable.

Creating a Purchase Return Order

  1. Search for Purchase Return Orders using Alt + Q.
  2. Select New.
  3. Enter the Buy-from Vendor No..
  4. Set the Posting Date and Vendor Authorization No. if the vendor has issued a return authorization number.
  5. Set a Return Reason Code if applicable.
  6. Use Process > Copy Document, select Posted Invoice or Posted Receipt, and enter the original document number to populate the lines.

Posting the Return Shipment

  1. Verify the quantities in Return Qty. to Ship.
  2. Select Post and choose Ship to post the return shipment, or Ship and Invoice to post both at once.

Posting creates a Posted Return Shipment and, when invoiced, a Posted Purchase Credit Memo. The G/L entries from the original purchase invoice are reversed.

Tracking Returns

You can review posted return documents from several places:

  • Posted Sales Return Receipts, under Sales & Receivables
  • Posted Purchase Return Shipments, under Purchases & Payables
  • Posted Sales Credit Memos and Posted Purchase Credit Memos, for the financial side

The Return Reason Code on each document makes it possible to filter and report on return volumes by reason.

Return Reason Codes

Return reason codes are short identifiers you define to categorize why returns occur. To configure them:

  1. Search for Return Reason Codes using Alt + Q.
  2. Select New to add a code.
  3. Enter a Code and Description.

These codes appear on both sales and purchase return orders and carry through to the posted documents.

For guidance on issuing credits without a return order, see How to Handle Credit Memos in Business Central.