What a credit note is
A credit note reduces what a customer owes you. You'd issue one to correct an invoice, handle a return, or give a goodwill discount — any time you need to take money off a customer's balance in a clean, traceable way.
Credit note or void?
If an invoice was issued by mistake, has had no payment, and is in an open period, it's simplest to void it. Reach for a credit note when:
- The invoice has been partly or fully paid.
- Goods have been returned after payment.
- The invoice is in a closed accounting period (where voids aren't allowed).
Issuing a credit note
- Open Sales → Credit notes and create a new credit note.
- Choose the customer, and link the invoice you're correcting if there is one — its lines are pulled in for you to edit.
- Pick a reason (returned goods, pricing error, goodwill, and so on).
- Adjust the lines to the amount you're crediting.
- Issue it. The credit reduces the customer's outstanding balance and is recorded in your accounts.
A credit note can't be for more than the invoice it corrects.
Applying or refunding
Once issued, a credit note can be:
- Applied to one or more open invoices, reducing what's still due on them.
- Refunded to the customer through a payment provider, if they're getting their money back.
You can split it — apply part and refund part — until the whole credit is used up.
Tip
Always pick the right reason and link the original invoice where you can. It keeps your records clear and makes the credit easy to explain to the customer (and your accountant) later.
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