What is a credit note, and when do you issue one?

A credit note is a document that reduces or cancels an invoice you have already issued. It does not delete the original invoice — it sits alongside it and offsets it, so the audit trail shows both what you originally billed and what you corrected.

You issue one when an invoice has gone out and turns out to be wrong or no longer due: an overcharge, a duplicate, work that was cancelled, goods returned, or a discount agreed after the fact. If the invoice has already been paid, the credit note is what backs the refund.

Why not just edit the invoice?

Because an issued invoice is a record, not a draft. Your customer has a copy, their accounts payable system has a copy, and both of your tax records reference it by number. Changing it after the fact means two parties hold different documents with the same number — which is the single most common cause of a payment dispute, and in most jurisdictions it is not permitted for a tax invoice.

A credit note solves this by being a second document that references the first. Nobody's copy of the original becomes wrong; there is simply a second document that says how much of it no longer stands.

When should you issue a credit note?

• You overcharged. The wrong quantity, the wrong rate, or a line that should not have been billed at all.
• The work was cancelled. You invoiced in advance and the engagement did not go ahead.
• Goods were returned. Partially or in full.
• You agreed a discount after invoicing. A goodwill reduction, or a late-delivery credit.
• You are refunding a paid invoice. The credit note is the paperwork; the refund is the money.

Full or partial?

A full credit note cancels the entire invoice. Use it when the invoice should never have been issued — a duplicate, or a cancelled engagement.

A partial credit note reduces it by a stated amount. Use it when most of the invoice stands and one line or one quantity was wrong. This is the more common case, and it is the one where tax gets interesting: the tax on a partial credit has to be back-calculated from the credited amount at the rate the original line used, not recalculated from scratch. Getting that wrong by a rounding step is how a set of books stops reconciling.

What goes on a credit note?

Broadly the same fields as an invoice, plus the link back:

Does a credit note mean money moves?

Not by itself. A credit note against an unpaid invoice simply reduces what the customer owes — they pay the reduced amount and nothing is refunded. A credit note against a paid invoice creates a balance in the customer's favour, which you then either refund to their original payment method or leave on account against their next invoice.

Keeping those two separate matters: the credit note is an accounting document, and the refund is a payment. Treating them as one thing is how a refund gets issued twice.

How this works here

In Quantum Solutions Invoicing you issue a credit note from the invoice itself, choosing full or partial. Tax is back-calculated per line at the original rate, so a partial credit reconciles without manual adjustment. If the invoice was settled by card, you can refund against the original payment in the same step, and the customer sees both the credit note and the refund in their own portal.

Frequently asked questions

Can I issue a credit note for more than the invoice? No. A credit note offsets a specific invoice and cannot exceed it. If you owe a customer more than one invoice's worth, issue a credit note per invoice.

Do credit notes need their own numbering sequence? Yes, in most jurisdictions. Keeping them in a separate sequence from your invoices is what lets an auditor tell at a glance which documents are charges and which are credits.

Is a credit note the same as a refund? No. A credit note is the document that says an amount is no longer owed. A refund is the movement of money. A credit note against an unpaid invoice involves no refund at all.

Can I cancel a credit note? Not by deleting it, for the same reason you cannot delete an invoice. If a credit note was issued in error, the correction is a new invoice for the amount wrongly credited.