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What is a credit note and when do you need one?

A credit note is how you correct a sent invoice properly without rewriting history.

A credit note is how you correct a sent invoice without pretending the original never happened. Once an invoice has been sent to a client, you should never edit it — a credit note creates the correction as a separate, traceable document.

1

Understand what a credit note does

A credit note reduces or cancels the amount owed on a sent invoice. Think of it as the opposite of an invoice: an invoice says "you owe me £X", a credit note says "actually, £X less than that" — or, for a full credit, "you owe nothing."

Terminology varies: Australia and New Zealand may refer to these as adjustment notes. US accounting often uses the term credit memo. The concept is the same — a separate correction document that leaves the original invoice intact.
2

Know when you need one

You need a credit note whenever something changes after an invoice has been sent:

  • You made an error — wrong amount, wrong line item, wrong tax rate
  • The client returned goods or cancelled part of the work after you invoiced
  • You agreed a discount after the invoice was sent
  • The project scope changed and the final cost was lower than invoiced
  • You need to cancel a sent invoice entirely
3

Never edit a sent invoice directly

Once an invoice has been sent, editing it creates problems:

  • The client has a copy of the original. If you change yours, the two records no longer match.
  • Edited invoices are harder to explain to an accountant or tax authority.
  • If the invoice has been partially paid, editing the total breaks the payment record.

A credit note leaves the original invoice unchanged and documents the correction separately — that's the audit trail both you and your client need.

4

Issue the credit note in Invoicetastic

Open the invoice you need to correct and click Issue credit note. You can issue a partial credit (for a specific amount or line item) or a full credit (cancelling the invoice entirely). The credit note gets its own CN- reference number and is linked to the original invoice.

The original invoice stays exactly as it was. The credit note documents the correction.

5

Understand what happens next

A credit note is an accounting document — it corrects the record. What happens to the actual money is a separate decision:

  • Refund — you return the money to the client
  • Offset against a future invoice — the client's next invoice is reduced by the credit amount
  • Reduce an outstanding balance — if the original invoice is still unpaid, the amount the client owes decreases

The credit note handles the record. The money arrangement is handled separately between you and the client.

Correct it without rewriting history.

Issue a credit note from the original invoice. The original stays intact. The correction is documented. Your records stay clean.

Invoicetastic Learn is general information only. It is not legal, tax, accounting, or financial advice, and Invoicetastic is not liable for decisions made from this content. Always check current rules with the relevant authority or a qualified professional.