To create a credit memo for a customer, Financial (the $ icon at the top of your page) then choose 'Create Credit Memo' - this will let you choose the customer and the amount.
Once you've saved it, you or the customer can use it by going to their dashboard and choosing an order to apply it to by simply putting in the amount you want to apply to the order (the same way you would if you were going to process a normal payment) and then when the payment options come up you should have the option shown below to choose from, which will allow you to use that credit to pay the invoice!
Keep in mind, the credit applies IN FULL to the invoice you're applying it to. You can't split credit payments across multiple orders.
