A credit note (or credit memo) is a document that reduces or cancels an amount a customer owes on a previous invoice — for a return, an overcharge, a discount or a correction. It’s the proper way to fix an invoice without deleting it.
When to issue a credit note
- A customer returns goods or cancels part of an order.
- You overcharged, or applied the wrong price or tax.
- You agree a discount or goodwill adjustment after invoicing.
Credit note vs invoice vs refund
An invoice adds to what a customer owes; a credit note reduces it. A credit note isn’t the same as a refund — it adjusts the balance, which the customer can set against what they owe, while a refund actually returns money. You can issue a credit note and then refund if appropriate.
What to include
Reference the original invoice number, show the items and amounts being credited (including tax), and give the credit note its own unique number. Keep both documents on file so your records reconcile.
Create the documents free
You can produce an invoice and a matching credit note with our free invoice generator — label the credit note clearly and reference the original invoice. No sign-up needed.