Credit note
A credit note reduces the amount a customer owes, for example after a return, discount or billing error. It should reference the original invoice and explain the reason.
What a credit note should include
- A unique credit note number and the date
- The customer's name and address
- A reference to the original invoice number and date
- The reason for the credit
- The amount being credited, including VAT where applicable
- Your business details and VAT number if VAT registered
Credit note vs refund
A credit note adjusts the accounting record; a refund returns money. You may issue a credit note and then refund the customer, or offset the credit against future invoices. Keep both records clear.
Related tools and guides
Frequently asked questions
Do I need to issue a credit note for a refund?
It is good practice to issue a credit note when you refund or reduce a charge, especially for VAT records. It links the adjustment to the original invoice.
Can a credit note have a negative amount?
Many systems show credits as positive amounts labelled as a credit. The important thing is that the document clearly identifies the adjustment and the original invoice.