User wants to know how credit memos can be applied to invoices in order to reduce the A/R balance.
In Core, you can use credit memos only to issue project credits or refund retainers from the Credit Memos screen. Both are liabilities that credit Accounts Payable and these can be paid off in the Bill Payments screen. Check the Core Help for details. Credit memos cannot be directly used on invoices to affect Accounts Receivable. However, you can use the credit payment method in the Payments screen to do that. Check the Core Help for details.
Note: The credit payment method is not linked to credit memos and you should use them independently of one another: credit memos to pay back the credit liabilities of a client (Accounts Payable) and credit payment to reduce the outstanding amount on invoices (Accounts Receivable).