Credit notes are financial documents that reduce the amount a customer owes you. They provide a formal record of refunds, returns, or adjustments to customer accounts.
Use this form to issue credits to customers when you need to reduce their outstanding balance or process refunds.
Issue credit notes in the following situations:
• Customer returns goods or cancels services
• You made pricing errors on the original invoice that need correction
• Customer received damaged, defective, or incorrect items
• You want to grant post-invoice discounts, rebates, or goodwill allowances
• Customer overpaid and you need to record the credit balance
When creating a credit note, follow these steps:
• Select the customer from the dropdown list
• Reference the original sales invoice number if this credit relates to a specific invoice
• Enter the items and quantities being credited - use positive quantities
• Include a clear description explaining the reason for the credit
• Add any relevant notes or reference numbers
The system automatically handles the following when you save a credit note:
• Updates the customer's account balance to reduce what they owe
• Returns credited inventory items back to stock (if applicable)
• Creates the necessary accounting entries to maintain accurate financial records
• Makes the credit available to apply against future invoices or process as a refund
Complete the credit note details using the fields below. Required fields are marked with an asterisk ().
Enter the date when this credit note is issued to the customer.
This date determines when the credit reduces the customer's account balance and appears in financial reports.
Enter a reference number for this credit note. This helps track and identify the credit note in communications.
You can use automatic numbering by leaving this field blank, or enter your own reference number for better organization.
Select the customer who will receive this credit note. Their billing address will automatically populate.
The credit note will reduce what this customer owes you and can be applied against their outstanding invoices.
Optionally, link this credit note to a specific sales invoice. This helps track which invoice is being credited and can automatically apply the credit.
If linked to an invoice, the credit will be automatically allocated against that specific invoice's balance.
Enter the customer's billing address. This is automatically filled from the customer record but can be modified.
The address appears on the printed credit note and should match where you send correspondence to this customer.
If the customer uses a foreign currency, enter the exchange rate for converting to your base currency.
The exchange rate determines how the foreign currency amount converts to your base currency for accounting purposes.
Optionally, add a description or reason for this credit note, such as 'Product return' or 'Price adjustment'.
This description helps document why the credit was issued and appears on reports but not on the credit note itself.
Enter the line items being credited. Each line represents a product or service with the amount to be credited.
Line items should match what was originally sold, including the same accounts, tax codes, and tracking categories.
Check this box to display line numbers on the credit note. This helps reference specific items.
Line numbers make it easier to discuss specific items with customers and match them to the original invoice.
Check this box to show a description column for each line item, allowing detailed explanations for each credit.
Descriptions help explain why each item is being credited, which is especially useful for partial credits or adjustments.
Check this box if the amounts you enter already include tax. Leave unchecked if tax should be calculated on top.
This setting should match how the original invoice was created to ensure accurate tax calculations.
Check this box if withholding tax applies to this credit note. This adjusts the withholding tax previously recorded.
Withholding tax credits reverse the withholding tax that was recorded on the original invoice.
Check this box if this credit note also represents a return of physical goods, updating inventory levels.
When checked, the credit note will also function as a goods receipt, adding the returned items back into inventory.
Select the inventory location where returned goods will be received back into stock.
This determines which warehouse or location receives the returned inventory items for future sale.