Here are instructions on how to use customer credit against invoices.
The first thing you will need is an invoice you want to pay. Typically, invoices are created when a sales order has been marked shipped, but you can also create an invoice manually (See: How do I create an invoice manually?).
Next, you will navigate to the Receive Payment tab (under Accounts Receivable). 
Click on Add.
Enter in the customer number and click Load All. All open invoices for that customer will appear.
Select the one(s) you want to process payment on. You will notice that, as you select them, the amount in the New Balance column automatically shifts over to the Payment column.
You are able to manually adjust the Payment amount, which will then automatically adjust the New Balance amount accordingly.
You will also notice that the Amount Received and Total Payment values have updated.
Next, go to the Credits tab. Here you will see all available credits for this customer. They are sorted by default according to Type, but you can click the column header to sort by that column if you choose (e.g., Date). 
Select the credit(s) you wish to apply to this payment. 
The Credit Amount and Unapplied values will update, but the Total Credit will remain at $0 for now.
Click the blue checkmark to apply the selected credit amount to payment.
Now the Unapplied value will adjust to $0 and the Total Credit amount will update accordingly.
Once you're done, click Save.
Click Yes.
For more on Credit Memos, see How do I create a Credit Memo?, How do I refund a Credit Memo?, and How do I partially apply a Credit Memo?
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