How to use this credit note
- Give the credit note its own number (for example CN-0001) in a separate sequence.
- Enter the original invoice number in “PO / reference” and repeat it in Notes.
- List the items or amounts being credited as positive amounts. The title makes clear they are a credit.
- Use the same tax rate as the original invoice so the VAT or sales tax is reversed correctly.
- Say in Notes whether you will refund the money or offset it against the next invoice, then download the PDF.
When to issue a credit note
Once an invoice has been sent and recorded, it should not be changed or deleted. If something is wrong, you issue a credit note instead. Common reasons:
- The customer returned goods or cancelled part of an order
- You charged the wrong price, quantity or tax rate
- You agreed a discount or goodwill gesture after invoicing
- The whole invoice was raised in error
To fix an error, credit the full original invoice and issue a new, correct one. That keeps your invoice numbering clean and gives your accountant a clear trail.
What a credit note must show
In the UK and EU, a VAT credit note normally needs the same core details as an invoice: your name and VAT number, the customer, a unique number and date, a description of what is credited, the amount and the VAT, and a reference to the original invoice (its number and date). HMRC and EU rules allow some flexibility in format, but the reference to the original invoice is what makes it a valid correction. In the US there is no federal format; a credit memo simply needs to be clear enough for both sides’ books and any state sales tax return.
Positive amounts on this credit note
The editor does not allow negative lines, so you list what is credited with positive amounts under the heading “Credit note”. That is how most credit notes are printed. Both your books and the customer’s treat the total as a reduction of the original invoice. Do not enter anything under “Amount paid” on a credit note.