What is a "credit memo" used for in QuickBooks?

A credit memo in QuickBooks serves the purpose of adjusting a customer's balance, specifically in instances where goods are returned or when a discount is issued. This tool allows a business to give credit back to the customer, effectively reducing the amount they owe.

For example, if a customer returns a product, the business would issue a credit memo to adjust that customer’s account to reflect the return. Similarly, if a customer is entitled to a discount on their purchase, the credit memo can be used to apply that discount to the customer's balance. This ensures accurate accounting and up-to-date records regarding customer transactions.

The other options outline various functions that do not align with the specific role of a credit memo. For instance, increasing a customer's balance doesn't accurately describe the function of a credit memo, as it is meant to decrease the balance instead. Notifying a customer of a payment method change or reporting on unpaid invoices pertains to different functionalities within QuickBooks, illustrating the diverse ways the software manages customer interactions and financial records.