What is a credit note?

Every business aims to deliver the best service as often as possible but, no matter how hard you try, mistakes can be made. Yet, the way you react to a mistake is vitally important. This is your chance to show you are professional and fair – every customer will forgive an honest mistake if the right effort is made to ‘put it right’.

Credit notes are a way of you doing just that and putting right a mistake.

Credit notes: What you need to know

A credit note is, essentially, a negative invoice. It’s a way of you reducing all or part of the money owed to you by a customer – or of offering them money off a future purchase with your business. The format of a credit note should, in most respects, be identical to that of the invoices you issue to customers.

When should you issue a credit note?

It might be appropriate to issue a credit note if:

• You didn’t supply a full order to your customer
• All or part of the product or service you supplied was below the appropriate standard
• You overcharged your customer by sending an invoice for too much
• You issued an invoice by mistake

Offering to do this should help to win over a customer – and should help you to sort any unpaid invoices that are being disputed.

Your credit notes must include the same information as a VAT invoice, including:

• Why it was issued
• The total being credited, excluding VAT
• The date and number on the original VAT invoice you issued

Creating a credit note

With KashFlow, credit notes are simple to create. Just create an invoice or receipt for a negative amount.

Then, when you print an invoice containing a negative amount, the heading will automatically change from ‘Invoice’ to ‘Credit Note’.