When it comes to issuing invoices, mistakes happen from time to time.
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 ever make an error on an invoice? Or what if you need to change an invoice for some other reason?
This is where credit notes come in.
Here’s how credit notes work, when you might need to issue one and how to do it.
First let’s cover a quick credit note definition.
A credit note, sometimes called a credit note or credit memorandum, is a document that allows you to change 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.
That’s important because in many countries you need to keep all invoices for potential auditing purposes, even if they’re incorrect.
Credit notes can be used to cancel part or all of an invoice for products or services.
For example, let’s say you accidentally issued an invoice for $100 instead of $75. You would then need to issue a credit note for $25 to correct the outstanding balance.
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 of the invoice.
There are a few common scenarios in which you might need to issue a credit note, such as:
Basically if anything happens that reduces the amount of an issued invoice, you can use a credit note.
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.
A credit note has a similar layout to an invoice. It’s a good idea to include the following details in a credit note:
If the original invoice included tax, you’ll need to include it on the credit note as well.
Also clearly state that the document is a credit note, not an invoice, to avoid any potential confusion.
Much like invoices, you can issue a credit note using your own template or with invoicing software.
No matter why you 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 features of QuickBooks designed to make life easier. Find out more about how QuickBooks’ invoicing software can help you stay on top of your business finances.
