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Create, apply, or import credit notes and delayed credits in QuickBooks

by Intuit•185• Updated a day ago

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

In QuickBooks Online, you can:

Create a credit note to reduce a customer’s current balance.
Create a delayed credit for future use.
Import credit notes from another system using a CSV file.

Here’s how each option works and how to use them.

Credit notes vs delayed credits

Credit notes: Reduce a customer’s current balance straight away. They can be applied to invoices now and show on sales reports immediately.
Delayed credits: Save a credit for future use. They only affect balances and reports when you add them to a future invoice.

Tip: If your customer simply wants a refund, here’s how to return their payment.

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.

What you’ll need

An active QuickBooks Online account.
The customer's name and the specific transaction details (date, items, and amount).

Optional: If you want QuickBooks to automatically apply credits to the oldest unpaid invoice, turn on the Automatically apply credits setting.

Step 1: Turn on or off automatically apply credits

This setting only affects new invoices, not existing ones.

Go to Settings ⚙ and select Account and settings.
Select the Advanced tab.
In the Automation section, select Edit.
Turn on or off Automatically apply credits switch.
Select Save, then select Done.

If auto-apply is on: QuickBooks applies credits to the oldest open invoices first. Any remainder is applied to the next oldest invoice. If no open invoices exist, the credit remains unapplied.

If auto-apply is off: Credits won’t be applied automatically. You can select when and where to apply them.

Step 2: Create a credit note

Select + New or + Create.
Select Credit note.
From the Customer ▼ dropdown, select the customer.
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 as a single line item.
Select Save and close.

Step 3: Apply a credit note to an invoice

If auto-apply is turned on, QuickBooks applies credits automatically. If not, apply them manually:

Select + New or + Create.
Select Receive payment.
From the Customer ▼ dropdown, select the customer.
In the Outstanding Transactions section, select the invoice you’re applying the credit note(s) to.
In the Credits section, select the credit note(s) you want to apply.
Note: You won't see the credits section if you have not created the credit note.
In the Payment column of the unpaid invoice, enter how much credit you want to apply.
Leave 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.
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 as a single line item.
Select Save and close.

Step 2: Apply a delayed credit to an invoice

If you are using the new invoice layout:

Select + New or + Create.
Select Invoice.
From the Add 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 Manage, then select Suggestions ▼ dropdown. Select the Automatically show suggested transactions checkbox.
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.
Note: Adding delayed credits to invoices from a prior accounting period will affect that period’s balances.

If you are using the old invoice layout:

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.
Note: Adding delayed credits to invoices from a prior accounting period will affect that period’s balances.

Import credit notes from a CSV file

If you use another system, you can import credit notes into QuickBooks instead of creating them manually.

Before you begin

Import no more than 100 credit notes at a time.
Discounts and negative amounts aren’t supported.
New products are created as “services” by default.
If no customer currency is specified, QuickBooks assumes GBP.
For multi-line credit notes, each line must include the credit note number, customer, and date.
VAT must be turned on to import VAT amounts. If VAT is off, VAT codes aren’t required.
To keep your own numbering, turn on Custom transaction numbers.
To import products or services into a category, use the format: [category name]:[item name] (example: Jewellery: Earrings).

Step 1: Open the Import tool

Go to Settings ⚙ and select Import data.
Select Credit Notes.

Step 2: Upload your CSV file

Download and review the sample file to check required fields.
Select Browse, then upload your CSV file.
If no line item is included, QuickBooks adds a generic item called Sales.
Optionally, select the checkboxes to automatically create new customers or products.
Select Next.

Step 3: Map your fields

Match your column headings to QuickBooks fields. Required fields are marked with (*).
Select your date format (for example, DD/MM/YYYY).
If VAT is enabled, select whether amounts are Exclusive or Inclusive of VAT.
Select Next.
Map your VAT codes to QuickBooks VAT codes.
Select Next.
QuickBooks highlights any mapping issues so you can fix them before importing.

Step 4: Import your credit notes

Review the import summary.
Select Start import.
When finished, review the results. Any failed imports will show the reason.
Select Done.

Next steps

If you want to transfer credit from one customer to another, create a journal entry, then apply the credit.

Remove auto-applied credits from an invoice

If your credits were applied to an invoice automatically by mistake, you can remove them.

Select the invoice that has the credits applied.
Select the blue hyperlink of the credit applied. The payment transaction will open.
Select More, then Delete.
Select Delete to confirm.