Why it matters
Mistakes and changes happen: a customer is charged twice, part of an order is returned, or you agree a discount after the work is done. The tempting fix is to edit or delete the original invoice. That breaks the record of what was billed and can cause problems with tax and with your accountant.
A credit note fixes the amount while keeping the history intact. The original invoice stays as issued, and the credit note shows exactly what changed and why.
When to issue one
- Overcharges or pricing errors.
- Returns or cancelled parts of an order.
- Discounts or goodwill credits agreed after invoicing.
- Cancelling an invoice that should never have been issued, where your rules do not allow voiding.
What a credit note includes
| Detail | Why |
|---|---|
| Credit note number | Its own reference, like an invoice number |
| Reference to the original invoice | Links the correction to the sale |
| Customer details | Who the credit applies to |
| Lines and amounts | What is being credited, including tax |
| Date and reason | When and why it was issued |
How it affects the books
A credit note is recorded as the opposite of a sale. Revenue goes down, the amount the customer owes goes down, and any tax charged on the credited amount is reversed. The customer can then pay the reduced balance, or the credit can be used against a future invoice, depending on what you agree.
Credit note or void?
Voiding usually means the invoice is cancelled outright as if it never applied, often for an invoice sent in error before any payment. A credit note is the better choice when the invoice was valid but the amount owed has changed, or when it has already been paid in part.
Common mistakes
- Editing issued invoices instead of crediting them.
- Forgetting tax on the credited amount.
- Not linking the credit to the original invoice, which makes the customer’s balance confusing.
A worked example
You invoiced a customer for ten hours of work at 100 an hour, plus tax, and later agree that two hours should not have been charged. Rather than editing the invoice, you issue a credit note for two hours at 100, plus the tax on that amount, referencing the original invoice. The customer’s balance falls by the credited amount, your revenue for the period goes down by the same, and the history shows both the original charge and the correction. If the customer had already paid in full, the credit can be refunded or used against their next invoice.
How GuardenerAI handles it
- GuardenerAI Invoices and accounting supports credit notes as their own invoice type, with product, tax and discount lines.
- Invoices move through Draft, In review and Issued, and can be voided, so mistakes are corrected without rewriting history.
- Each invoice shows whether it is Unpaid, Partially paid or Paid, worked out from the payments applied to it.
- With the Accounting module switched on, credit notes and invoices post to the double-entry ledger and appear in AR aging.
- Credit notes are raised to the same companies and persons as your invoices in the CRM.