What is a credit note?
A credit note (also called a credit memo) is a document a seller issues to reduce or cancel an amount on an invoice that has already been sent. It is the correct way to handle refunds, returned goods, pricing errors or discounts agreed after invoicing.
Instead of deleting or editing the original invoice, you issue a credit note that references it. This keeps your records accurate and gives both you and your customer a clear paper trail, which accountants and tax authorities expect.
When to issue a credit note
- A customer returns goods or cancels part of an order
- You charged the wrong price or quantity on an invoice
- You agree to a discount or goodwill reduction after invoicing
- A service was not delivered as agreed
- An invoice needs to be cancelled in full
What to include in a credit note
- A unique credit note number and the date of issue
- The number and date of the original invoice
- Your details and your customer’s details
- The items or amounts being credited, and the reason
- Any tax adjustment and the total amount credited
Credit note vs. refund
A credit note records that money is owed back to the customer. The customer can receive that amount as a refund, or you can deduct it from their next invoice. Either way, the credit note documents why the original invoice total changed.
Frequently asked questions
Is the credit note generator free?
Yes. You can create and download credit notes for free, with no account and no watermark.
Should a credit note reference the original invoice?
Yes. Always mention the original invoice number and date, for example in the notes field, so the credit can be matched to the right invoice.
Can I edit an invoice instead of issuing a credit note?
Once an invoice has been sent, it is best practice not to change it. Issue a credit note instead, so your records show exactly what happened and when.
Does a credit note include tax?
If the original invoice included tax, the credit note should reverse the tax on the credited amount too. BillOak calculates the tax for you.