Purchasing org &1: No customer exists - cannot mark as returns supplier

What causes this issue?

The checkmark Returns Supplier (LFM1-KZRET) is set in purchasing org
&V1& (in transaction BP: on tab Purchasing Data in section Additional
Purchasing Data - not to be confused with the tab with the same name).
However, supplier &V2& is not directly linked to any customer (via
LFA1-KUNNR).

System Response

The system issues an error message and will not allow you to continue with this transaction until the error is resolved.

How to fix this error?

Remove the flag. In transaction BP you can then set the flag again and
will get a prompt to specify the ID of the customer.

Procedure for System Administrators

Error message extract from SAP system. Copyright SAP SE.