How to create a credit note

You spot an error after the invoice has already been sent. Perhaps it shows the wrong number of hours, a material line was missed, or an item needs to be removed after all. Creating a credit note is the proper way to correct your invoice without making your records unclear.

Do not quietly edit or delete an issued invoice. Your customer has already received a document with an invoice number. By keeping the original invoice and adding a credit note, you, your customer and your accountant can all see what happened.

When should you issue a credit note?

You issue a credit note as soon as an issued invoice is no longer correct. This may be a full correction, or a correction to just one line. The original invoice remains in place; the credit note refers to that invoice and reverses all or part of the amount.

Common situations include:

You invoiced the wrong number of hours or materials, or used the wrong price.
A customer receives an agreed discount that was not yet included on the invoice.
An item was not delivered or a job was partly cancelled.
You sent the invoice to the wrong customer and need to correct the entire invoice.
A VAT rate or invoice line needs to be corrected.

As long as an invoice is still a draft, you can simply edit it. Once it has been sent, a credit note is the right route. This prevents your records from showing something different from the document your customer has received.

How do you create a credit note in Klantly?

In Klantly, you create a credit note from the issued invoice you want to correct. You do not need to enter the details again. Open the invoice and choose to credit it. Then decide whether to credit everything or only specific lines.

Follow these steps:

Open the issued invoice that is incorrect.
Choose the option to credit the invoice.
Choose whether to credit the entire invoice or only specific lines.
Check the amounts, quantities and VAT rates on the credit note.
Send the credit note to the customer.

The credit note receives its own number and refers to the original invoice. This makes the correction traceable. Rather than changing the old document afterwards, you record a clear reversing entry.

Want to see first how invoices and corrections come together in your records? The page on creating and sending invoices shows the invoicing features in Klantly.

When should you issue a full or partial credit note?

Use a full credit note when the entire invoice is incorrect. For example, if an invoice was sent to the wrong customer or an order was cancelled in full. The original invoice is then credited in full. You can then create a new, correct invoice if needed.

A partial credit note makes sense when only part of the invoice is incorrect. You do not need to reverse the entire invoice. You credit only the lines or amounts that need to be removed or corrected.

Example: too much material invoiced

Say you install awnings and send an invoice afterwards for installation, materials and an extra control unit. You later find out that the extra unit was not delivered. The invoice has already been sent.

You do not delete the original invoice. You create a partial credit note for the control unit only, including the correct VAT rate. The customer can see exactly which item was corrected. Both the original invoice and the correction remain visible in your records.

This avoids confusion if the customer calls later or if your accountant asks why the invoice amount differs. It also prevents hours, materials and invoice lines from getting mixed up afterwards.

What happens to invoice numbers, reports and VAT?

A credit note has its own number. The numbering of the original invoice therefore remains intact. This is exactly why you should not delete an issued invoice: a document with a number would disappear from your records, while your customer has received that number.

In your reports and VAT overview, the credit note amount is deducted in the period in which you issue the credit note. This also applies when you credit only part of an invoice. Your revenue and VAT are then corrected in a way you can trace later.

For your VAT return, it helps to always include credit notes in your checks. In Klantly, you can view an overview for each period showing revenue and VAT by rate, including credit notes. Also see how to create a VAT overview for your return if you want to spend less time tracking things down.

Please note: a VAT overview supports the sales side of your records. You still submit the return yourself or together with your accountant.

How do you avoid confusion after a correction?

A credit note is clear from an administrative perspective, but your customer also needs to understand what is happening. So do not just send the document: briefly explain which line was corrected and why. Especially with a partial correction, this prevents questions about the new amount.

Before sending, check once more:

Whether you selected the correct original invoice.
Whether you want to credit the invoice in full or in part.
Whether the lines, amounts and VAT rates are correct.
Whether the customer needs a new invoice after the correction.

Do several people work on invoices? Then also record internally why the correction was made. That way, a colleague will later know why a credit note exists and the customer will not have to explain their situation again.

An error on an issued invoice is inconvenient, but it does not have to result in messy records. A credit note keeps the correction visible, your numbering complete and your reports easy to understand.

Want to organise your invoicing more clearly, from sending and correcting to follow-up? Start for free and discover what Klantly can do for your business.

How to create a credit note: correct an issued invoice properly