When it comes to issuing invoices, it's not uncommon for the occasional mistake to happen.
After all, as a business owner you’ve got a lot to stay on top of, and invoicing is just one piece of the puzzle. But what should you do if you happen to make an error or if changes need to be made to an invoice?
This is where credit notes come in. In this article you'll learn about how credit notes work, when you might need to issue one and how.
A credit note, sometimes called a credit note or credit memorandum, is a document that allows you to make changes to an invoice after it has been issued or paid.
When you issue a credit note, you are essentially deleting an amount from an invoice, and your financial records, without deleting the invoice itself.
This is important for record keeping purposes, especially because in many countries you need to keep all invoices for auditing purposes, even if they're incorrect.
Credit notes can also be used to cancel part or all of an invoice for products or services.
For example, if you were to accidentally issue an invoice for $100 instead of $75, you'll then need to issue a credit note for $25 to correct the outstanding balance.
Additionally, if a customer were to cancel their order after you had issued an invoice, you could also use a credit note to cancel the full amount.
There are a few scenarios in which you may need to issue a credit note, such as:
In the event something happens that reduces the amount on an issued invoice, you can use a credit note to remedy that error.
The credit note can then be used to reduce a customer's current balance or apply a discount on future purchases.
If the order amount needs to increase rather than decrease, you can re-issue a new invoice instead of issuing a credit note.
A credit note follows a similar layout to an invoice, and includes the following details:
If the original invoice included tax, you’ll need to include it on the credit note as well. And, to avoid any confusion, it's important to state that the document is a credit note and not an invoice.
Much like invoices, you can issue a credit note using either your own template or invoicing software.
No matter the reason why you may need to change an invoice, QuickBooks’ invoicing software makes issuing and sending credit notes quick and easy. You can also create a branded credit note template to save even more time in the future.
Credit notes are just one of the many features of QuickBooks that is designed to make life easier. Find out more about how QuickBooks’ invoicing software can help you stay on top of your business finances.
