When to issue a credit note to a client

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.

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.

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