Credit notes. The right way to fix an invoice.
Mistakes happen. Services get cancelled. Prices change. A credit note is how you correct the record without deleting history.
What is a credit note and when do you need one?
A credit note is a document that partially or fully reverses a previously issued invoice. You cannot just delete an invoice once it has been sent. Tax authorities expect a paper trail. Credit notes provide that trail. You need one when a client was overcharged due to a pricing error, when a service was partially delivered and the remaining amount needs to be refunded, or when a project is cancelled after an invoice was already sent. The credit note references the original invoice and shows the adjusted amounts as negative values.
How to issue a credit note
Identify the original invoice
Find the invoice you need to correct. Note its number, date, and the line items that require adjustment. You will reference this invoice in the credit note.
Create a credit note referencing the invoice number
In Billstride, select the original invoice and create a credit note. The invoice number is linked automatically so both documents stay connected.
Include negative amounts
The credit note mirrors the original line items but with negative values. If you are only partially crediting, include only the affected items or adjusted quantities.
Send to client and adjust your records
Send the credit note to your client just like a regular invoice. Your accounting records now reflect the correction. Both the original invoice and the credit note remain in the system.
What must be on a credit note
- The words "Credit Note" clearly visible
- Reference to the original invoice number
- Reason for the credit (pricing error, cancellation, partial refund)
- Negative amounts matching the original line items
- Date of issue
- A sequential credit note number
- Your business details and the client's details
- Tax amounts adjusted accordingly
Questions
What is the difference between a credit note and a refund?
A credit note is a document that adjusts the amount owed. A refund is the actual transfer of money back to the client. The credit note comes first. It corrects the invoice. The refund is the payment that follows.
Can I just delete an invoice instead?
No. Once an invoice has been sent or booked, deleting it breaks the audit trail. Tax authorities require sequential numbering and a clear record of all issued documents. A credit note is the legally correct way to reverse an invoice.
Does Billstride handle credit notes?
Yes. You can create a credit note directly from an existing invoice. Billstride links the two documents, generates the negative amounts, and assigns a sequential credit note number. It costs $0.30, same as a regular invoice.
What are the tax implications of a credit note?
A credit note reduces your reported revenue and the associated tax liability for the period. The VAT or sales tax on the credited amount is reversed. Keep both the original invoice and the credit note for your records.
Can I issue a partial credit note?
Yes. You do not have to credit the full invoice amount. Include only the line items or quantities that need adjustment. The remaining balance on the original invoice stays valid.
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