How to issue a credit note
- Reference the original invoice. Enter the invoice number in Original invoice so both records connect.
- List what is credited. Add the returned items or the overcharged amount as positive lines.
- Include the same tax. Apply the same tax rate as the original invoice so the tax is reversed too.
- Give the reason. Returned goods, a pricing error, or a goodwill discount.
- Refund or offset. Pay the customer back or deduct the credit from their next invoice.
Credit note basics
- Never edit a sent invoice
- Accountants and tax offices expect corrections to be made with a credit note.
- Use its own number series
- CN-0001, CN-0002 and so on, separate from invoices.
- Show the reason
- It makes audits and customer queries much faster.
Frequently asked questions
What is the difference between a credit note and a refund?
A credit note is the document. A refund is one way to settle it. The credit can also be offset against future invoices.
Is a credit memo the same as a credit note?
Yes. Credit memo is the usual term in the US; credit note is common in the UK, EU, Australia and India.
Should amounts on a credit note be negative?
Enter them as positive numbers. The document title already makes clear that the amount is owed to the customer.