A credit note is a type of document that businesses typically provide a customer when the amount on an invoice is disputed or incorrect. This might be due to an admin error, or because the customer requires a full or partial refund.

In many cases an updated invoice might suffice, but those using time-saving online accounting software will be more familiar with credit notes as a means of cancelling out debt owed. Issuing a credit note means both parties have a clear record of the discount.

When and how to use a credit note to correct your invoices

Here are a couple of scenarios of when you might want to issue a credit note to a client.

An unpaid invoice you’ve issued has an incorrect amount

Let’s say that before your payment has come in, you realise you’ve mistakenly added an extra zero and issued a sales invoice for £1,000 instead of £100.

This is where it’s practical to use a credit note instead of a refund, because you technically can’t issue a refund of money that you never received in the first place.

Instead, you can raise and issue a credit note for £900, and your client will receive the credit note documenting the error.

Your accounts and that of the client should now correctly reflect a debt of £100 after posting the original invoice for £1000 and the £900 credit note.

A customer has paid a proportion of the invoice but wants to pay less than the total

Imagine that you’ve performed a service for a total of £1,000, but the client is unhappy and believes that they should pay you no more than £800.

If you agree and wish to lower the total of the invoice to £800, you should issue a credit note for the difference of £200.

If you are a Crunch client there are further instructions on how to issue credit notes within the Crunch app in our Help Centre article.

Crunch invoice templates

We have our very own invoice templates available for you to download and use whenever you need them. The best part is that they’re completely free! You'll even find specialist designs, including VAT registered limited company invoice templates,contractor invoice templates, and commercial invoice templates.

Invoice through the Crunch software

Our innovative online accountancy software allows you to send invoices to your clients whenever and wherever you are. Find out how we can help sole traders, limited companies, and contractors manage their accounts and streamline the invoicing process.