You sent an invoice, then realised the amount was wrong, the client returned something, or the project scope changed. The instinct is to delete the invoice and reissue it — but that's exactly what you shouldn't do. The correct tool is a credit note.
What Is a Credit Note?
A credit note (or credit memo) is a document that reduces the amount a client owes on a previously issued invoice. It's essentially a negative invoice: instead of billing the client, it credits them, either partially or for the full value of the original invoice.
Why Not Just Delete or Edit the Invoice?
Once an invoice has been sent, it's part of your financial record. Deleting it creates a gap in your numbering sequence, which tax authorities can treat as a red flag suggesting hidden or destroyed records. Editing a sent invoice means you and the client now hold two different versions of the same document number. A credit note preserves a clean, auditable trail: the original invoice stands, and the credit note formally adjusts it.
When to Issue a Credit Note
- You overcharged — wrong rate, duplicated line, or a maths error.
- The client returned goods or cancelled part of the order.
- You agreed a discount or goodwill reduction after invoicing.
- You need to cancel an invoice entirely (issue a credit note for the full amount).
What to Include
Label it clearly as "Credit Note," give it its own unique number (a separate CN- sequence is cleanest), reference the original invoice number it relates to, show the amount being credited and any tax adjustment, and state the reason. This ties the two documents together for anyone reviewing your books later.
Credit Note vs Refund
They're related but not identical. A credit note reduces what's owed; it may result in a refund if the client already paid, or simply reduce the balance if they hadn't. A refund is the actual movement of money back to the client. Often a credit note documents the adjustment, and a refund (if applicable) follows.
Create a matching credit note by building an invoice and labelling it accordingly in Invoice Pro Lab — free and instant.