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Create and apply credit notes or delayed credits in QuickBooks Online

by Intuit•6• Updated 1 week ago

Instead of a refund, some customers prefer getting a credit note they can use to reduce the balance on their next invoice.

There are a few ways to handle credit notes in QuickBooks. You can:

Create a credit note to immediately reduce a customer's current balance.
Or, enter a delayed credit so they can use it in the future.

Here's more about the differences and how to apply them to customer transactions.

Note: If your customer simply wants a refund, here's how to return your customer's payment.

Learn the differences between credit notes and delayed credits

In QuickBooks, you can give credit using a credit note or delayed credit. Here are the key differences:

Credit note

If your customer wants to immediately reduce their current open balance, use a credit note.
Your customer can use their credit note as payment for an invoice, either partially or in full.
You can apply a credit note when recording payment for a customer’s invoice.
Credit notes impact sales reports, even if you don't apply them to invoices.

Delayed credit

If you want to track a customer's credit for future use, without it immediately affecting their current open balance, use a delayed credit.
Your customer can use their delayed credit to reduce the balance of an invoice.
You can add delayed credits to future invoices as a line item.
Unlike credit notes, delayed credits don't impact sales reports until they’re applied to invoices.

Create and apply a credit note

You can easily issue credit to your customers in QuickBooks Online. You might want to do this because you need to reduce a customer's invoice for some reason. Or you might want to give a customer credit because they are a good customer. Note that the difference between credit and a refund is a refund happens when you need to send money back to a customer. A credit is when you want to reduce what they owe you - either now or in the future. To give customers credit, you’ll create a credit note. Let’s go over how to create a credit note, send it to a customer, and then apply that credit to an invoice. To start, select New and Credit note (beat) or Give credit depending on your view. Select the customer you want to give credit to. Then select the products and services you want to give them credit for. Then the amount of the credit you want to give them. You can also select + Add new and create a credit item that doesn't have a specific price. Any time you add it to a credit note, you can fill in the amount you want to credit your customer's account. If you want to send a copy of the credit to your customer select save and send. Otherwise, you can select another save option so QuickBooks records the credit. We’ll select save and send for this option. You see the PDF version of the credit note that your customer will receive here. If everything looks good select save and close and your credit note is on its way. Now let’s go over how to apply a credit note to an invoice. If your customer already has an open invoice with you then this happens automatically. To see this go to your customer list. Find your customer and the open invoice. Select it and you can see QuickBooks has applied the credit note to the open invoice. What happened is QuickBooks automatically created this Payment transaction here to apply the credit note to the oldest open invoice. However, if your customer has multiple open invoices and you want to apply this credit to a different one, just select the payment. Then select the invoice you want to apply it to and enter the amount. Make sure this matches the amount of the credit note. Once everything looks good. Save...and then confirm. If your customer doesn’t have an open invoice then the credit will automatically be applied to their next invoice. Let’s take a look. Just create a credit note for your customer. Then when you create a new invoice for your customer (beat) you will see that QuickBooks has applied the credit to your new invoice. That’s it. Now you can create credit notes for your own customers.

Step 1: Create a credit note

Select + New or + Create.
Select Credit note.
From the Customer dropdown, select the customer's name.
Enter the credit note details, such as the date and the amount.
Tip: You can create a custom credit service item so you can quickly add it to credit notes as a single line item.
When you're done, select Save and close.

Note: If your customer has returned inventory and you wish to update your quantity on hand, input the product as a line item within the credit note.

Step 2: Apply the credit note to an invoice

Select + New or + Create.
Select Receive payment.
From the Customer dropdown, select the customer.
In the Outstanding Transactions section, select the open invoice you want to apply the credit note to.
In the Credits section, select the credit notes you want to apply.
Note: You won't see the credits section if you have not created the credit note.
For the open invoice in the Payment column, enter how much of the credit you want to apply.
Leave the Payment method, Reference no, Deposit to, and Amount received fields blank.
Fill out the rest of the form, including the Payment date.
Make sure the total is correct after applying the credit note.
When you're done, select Save and close.

Create and apply a delayed credit

Step 1: Create a delayed credit

Select + New or + Create.
Select Delayed credit.
From the Customer dropdown, select the customer's name.
Enter the details, such as the date and the amount.
Tip: You can create a custom credit service item so you can quickly add it to delayed credits as a single line item.
When you're done, select Save and close.

This saves the delayed credit. You can choose to apply it the next time you invoice the customer.

Step 2: Apply the delayed credit to an invoice

Keep in mind that adding a delayed credit to an invoice from a prior accounting period will affect that period's balances.

Select + New or + Create.
Select Invoice.
From the Customer dropdown, select the customer. This opens a window with all open transactions for the customer, including invoices and delayed credits.
Note: If you don't see this, select the small arrow next to the invoice Balance Due.
Find the delayed credit and select Add. This adds the credit as a line item to the invoice.
Fill out the rest of the invoice as needed.
When you're done, select Save and close.

Credit note customisation

To customise a credit note, edit the Standard template according to your needs. Any changes made to the Standard template will be picked up by the credit note.

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