Credit Note

A Credit Note (often referred to as a credit memo) is a heavily utilised commercial document issued by a seller to a buyer. Unlike an invoice, which acts as a demand for payment, a credit note explicitly states that the seller owes the buyer money (or credit).

When do you use a Credit Note?

Credit notes are strictly regulated under accounting and GST guidelines to ensure transparent revenue reconciliation. You issue a credit note when:

1. Goods are returned: The buyer rejects the delivery or returns damaged products.
2. Overbilling occurred: You accidentally charged the client more than the agreed total.
3. Discounts applied post-sale: If a volume discount is triggered after the original invoice was generated.

When you issue a credit note, the outstanding value of the original invoice is immediately reduced by that exact amount.