Credit Note

What is a credit note?

A credit note (or credit memo) reduces the amount a client owes you. If you overbilled, need to issue a partial refund, or want to provide a courtesy credit, you send a credit note rather than modifying the original invoice. It creates a clear paper trail showing why the amount owed changed.

When to issue credit notes

Common reasons for credit notes include:

• Billing errors — You charged the wrong amount
• Returned goods — Client returned products
• Service adjustments — Work didn't meet expectations and you're adjusting the price
• Discounts applied late — A discount that should have been on the original invoice
• Goodwill gestures — Courtesy credits to maintain client relationships

Credit note vs. refund

A credit note reduces what's owed—the client can apply it to future invoices. A refund returns actual money to the client. Credit notes work well when you have an ongoing relationship; refunds are appropriate when the relationship is ending or the client prefers cash back.