What action does a credit memo perform in relation to the funds expected from a customer?

A credit memo is a document issued by a seller to a buyer, reducing the amount that the buyer owes to the seller. When a credit memo is created, it signifies that a transaction has resulted in a credit, often due to returns, discounts, or an overstatement of charges. As a result, this action decreases the funds expected from a customer.

When a credit memo is applied, it effectively lowers the customer's outstanding balance, which in turn reduces the total amount that the company anticipates receiving from that customer. This adjustment is critical for maintaining accurate financial records, as it reflects the actual expected cash flow resulting from customer transactions.