Credit note
Reverse value clearly.
Issue a credit note that points back to the original invoice and keeps the paper trail clean.
Issue a credit note that references the original invoice and shows the value being credited back.
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A credit note reverses value from an invoice you already issued. When you overcharge, a client returns goods, or you agree a discount after billing, you do not delete the original invoice — you issue a credit note that references it and records the amount credited back. This keeps both sets of books matching and preserves a clean audit trail. This generator builds a credit note PDF that points back to the original invoice.
Why you never just delete an invoice
Once an invoice is sent and recorded, deleting it breaks the numbered sequence and hides the correction from anyone reviewing the accounts. A credit note is the accepted way to undo value: the original stays on file, and the credit note documents exactly what was reversed and why.
The credit note should reference the original invoice number, show the amount credited, and state the reason — a return, an overcharge, or an agreed discount. That reference is what ties the two documents together for accounting.
How a credit note is applied
A credit note can be refunded to the client or held as a credit against their next invoice. Which you choose depends on the relationship and your cash position, but either way the paperwork is the same: a clearly numbered credit note linked to the original bill.
If tax was charged on the original invoice, the credit note reverses the tax portion too, so your tax reporting stays accurate.
How to use it
- 1Reference the original invoice number being corrected.
- 2List the items or amount being credited back.
- 3State the reason: return, overcharge, or agreed discount.
- 4Reverse the tax portion if tax was on the original invoice.
- 5Give the credit note its own unique number.
- 6Download the PDF and send it to the client.
What to include for the US, Canada, the UK, and Australia
- In the US, credit notes (credit memos) adjust receivables and any sales tax already reported on the original sale.
- In Canada, a credit note adjusts the GST/HST previously charged and must reference the original invoice.
- In the UK, a VAT credit note must show the original invoice reference and reverse the VAT so returns are reported correctly.
- In Australia, an adjustment note reverses GST from a tax invoice and should identify the original sale.
This is general information, not legal or tax advice. Tax registration numbers, mandatory wording, and retention periods differ by country and by state or province — confirm the rules that apply to you before sending a document to a client.
Worked example
A client was invoiced $1,200 plus $96 tax on invoice 2026-040, then returned one item worth $200. The seller issues credit note CN-2026-005 referencing 2026-040, crediting $200 plus $16 tax, a total of $216.
The original invoice stays on file untouched; the credit note documents the reversal. The client's balance drops by $216 and both sets of books still reconcile.
FAQ
What is a credit note?
A document that reverses part or all of the value of an invoice you already issued, referencing the original so the correction is traceable.
Why not just edit the original invoice?
Because the original may already be recorded by both parties. Editing it hides the change and breaks the audit trail; a credit note documents the correction openly.
Does a credit note reverse tax too?
Yes. If the original invoice charged sales tax or VAT, the credit note reverses the proportional tax so your reporting stays accurate.
Can a credit note be used instead of a refund?
Yes. You can refund the money or hold the credit against the client's next invoice. The document is the same either way.
What number should a credit note have?
Its own unique number, separate from your invoice sequence, that references the original invoice it corrects.
When would I issue one?
For returns, overcharges, post-invoice discounts, or cancelled portions of an order — any time value needs to come off an invoice already sent.
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