What is a credit note? How businesses correct or cancel an invoice
By SendPay Business · · 2 min read
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A credit note is a document a business sends to reduce, or cancel, what a customer owes on an invoice it has already issued. Instead of editing or deleting the old invoice, you add a credit note that cancels out part or all of it.
When to issue one
- The customer returns goods or cancels part of an order.
- The invoice had a mistake, such as a wrong price or quantity.
- You agree a discount after the invoice was sent.
Why not just delete the invoice?
Invoices should run in an unbroken number sequence, and your records need to show what was billed and what was taken back. A credit note keeps that trail clean for your accounts and, if you are VAT-registered, for HMRC. It should reference the original invoice number and show the amount and reason.
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What the customer does with it
The customer can take the credit off what they owe, use it against a future invoice, or, if they have already paid, you refund the money. Say clearly on the credit note which of these applies.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.