When you need a credit note
A credit note (or credit memo) corrects an invoice that has already gone out. It is the clean, traceable alternative to editing the original. Typical reasons:
- The client returned some or all of the goods.
- You agreed a discount or price reduction after invoicing.
- You billed too many hours, the wrong rate or the wrong tax.
- The job was cancelled after the invoice was issued.
- The invoice went to the wrong legal entity.
If nothing has been sent yet, just fix the draft. Once the client has the invoice, keep it untouched and issue a credit note.
How to create a credit note
The editor above is set to the credit note document type.
- Basics. Use the same country, client type and tax status as the original invoice.
- You and Client. Enter the same details as on the original. Select the saved client to avoid typos.
- Items. Enter the lines you are crediting as negative amounts, using the original tax rates. Only include what changes.
- Details. The credit note gets a number from its own series. Link it to the original invoice: its number and date then appear on the credit note. Add the reason in the notes, for example “Return of 2 units, see RMA 3381”.
- Design, Review & download. Download the PDF and send it with a short explanation.
The fastest route: open the invoice in My documents and choose credit note linked to this invoice. The client and items are copied over, and you only adjust what is credited.
What must be on a credit note
| Field | Example |
|---|---|
| Title | Credit note (or Credit memo) |
| Own number | CN-2026-004 |
| Date | November 12, 2026 |
| Reference to the original invoice | Credits INV-2026-118 of October 30, 2026 |
| Seller and buyer | Same as the original invoice |
| Credited items and amounts | Negative quantities or amounts |
| Tax per rate | Negative tax amounts, same rates |
| Reason | Returned goods, price adjustment, error |
| Settlement | Refund by bank transfer, or credit toward the next invoice |
In VAT countries, a credit note is how the tax on the original invoice is corrected, so it should reference the original clearly. Ireland’s and the UK’s rules are summarized on our Ireland and UK pages.
Example: partial return
Original invoice INV-2026-118: 10 desk lamps at $40.00 = $400.00, plus 8% sales tax $32.00, total $432.00. The client returns 2 lamps.
| Description | Qty | Unit price | Amount |
|---|---|---|---|
| Desk lamp, returned | −2 | $40.00 | −$80.00 |
| Sales tax 8% | −$6.40 | ||
| Credit total | −$86.40 |
The client now owes $432.00 − $86.40 = $345.60. If they had already paid $432.00, you refund $86.40 or carry it forward.
Credit note or a new invoice?
Use a credit note when you reduce or cancel what was billed. Use a new invoice when you need to bill more, for example extra hours the client approved later. When almost everything on the invoice was wrong, such as the wrong client, the common practice is to credit the whole invoice and then issue a fresh one. That keeps both your numbering and your client’s books consistent. See invoice numbering for how to keep the series clean.
A credit note is not a receipt and not a quote: it only ever refers back to an invoice. If you prefer a fixed file, the blank invoice templates can be retitled, but you then have to enter the negative amounts and the reference by hand.