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Invoice Types
Credit Note
Definition
A document issued to reduce the amount owed on a previous invoice due to returns or errors.
Overview
Credit notes are used to correct billing errors, process returns, or provide discounts after an invoice has been issued. They reduce the customer's outstanding balance.
Example
A client returns $500 of goods, so the seller issues a credit note reducing the invoice balance.
Best Practices
Issue credit notes promptly when corrections are needed. Reference the original invoice number.
Common Mistakes to Avoid
Not referencing the original invoice
Incorrect amounts
Not updating accounting records
Frequently Asked Questions
Is a credit note the same as a refund?
No. A credit note reduces what's owed, while a refund returns money already paid.