Quick answer
A credit note is a document that cancels all or part of an invoice you have already sent. You use it when you overcharged, the customer returned goods, or the invoice was wrong. It refers to the original invoice number and shows the amount being credited, so both sides’ records stay accurate.
When to issue a credit note
- The invoice had a mistake, such as the wrong price, quantity or customer.
- The customer returned goods or cancelled part of the order.
- You agreed a discount after the invoice was sent.
- The invoice was sent twice.
If the invoice hasn’t reached the customer yet, you can usually just correct it. Once it has been sent, use a credit note rather than editing or deleting the original.
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What a credit note includes
- the title “Credit note” and its own unique number (for example CN-0001)
- the date, and the number of the original invoice
- your details and the customer’s
- what is being credited and why, with amounts and any tax
- the total credit
After issuing a credit note, send a corrected invoice with a new number if the customer still owes something. To make a credit note in our editor, change the document title to “Credit note”, put the original invoice number in the reference, and enter the amounts being credited.
Credit note vs refund
A credit note reduces what the customer owes. If they had already paid, you then either refund the money or let them use the credit against a future invoice. The credit note is the paperwork; the refund is the payment.
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Invoice templateFrequently asked questions
Can I just delete a wrong invoice?
It is better not to. Deleting breaks your numbering and your records. Issue a credit note that cancels it, then a new invoice.
Does a credit note need tax on it?
If the original invoice charged VAT or GST, the credit note should show the tax being reversed, so both sides can adjust their tax returns.
Is a credit note the same as a debit note?
No. A credit note reduces what the customer owes. A debit note increases it, for example when you undercharged.
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