Credit note
A credit note is a document that reduces or cancels an amount already invoiced, used to correct an error, refund a customer or settle a dispute without deleting the original invoice.
Also called credit memo.
Issued invoices are accounting records and generally cannot be edited or removed. The credit note is the mechanism for changing what is owed while leaving the audit trail intact.
A credit note can be refunded as cash or held as a balance against future invoices, and the two are treated differently in the accounts.
Common questions
- What is the difference between a credit note and a refund?
A credit note is an accounting document that reduces the amount a customer owes. A refund is the movement of money back to the customer. A credit note may be settled by a refund, or held as a balance against future invoices.
- Why issue a credit note instead of editing the invoice?
An issued invoice is an accounting record and generally cannot be altered or deleted. A credit note changes what is owed while leaving the original document and the audit trail intact.
- When should a credit note be issued?
When an invoice was wrong, when goods or services were not delivered as billed, when a discount was agreed after invoicing, or when a dispute is settled in the customer's favour.