How to Write a Credit Note

You sent an invoice. The client paid. Then you realized you overcharged them by €200 because you miscounted the units. Or a client returned a product. Or you promised a discount after the work was done and forgot to apply it before sending the invoice.

Whatever happened, money is moving the wrong direction, or an amount already charged needs to come down. That is exactly what a credit note is for.

---

What a credit note actually is

A credit note is a document that reduces or cancels what was charged on a previous invoice. It does not delete the original invoice. The original stays in your records. The credit note sits alongside it, adjusting the balance.

Think of it as a negative invoice. Where an invoice says "you owe me €500," a credit note says "ignore €200 of that."

This matters for accounting. Invoice sequences need to be intact. If you delete an invoice and reissue a corrected one, you create gaps in your records that look suspicious to anyone reviewing your books, including a tax authority. The credit note preserves the trail while correcting the balance.

---

When to issue one

The most common reasons:

Billing error. Wrong quantity, wrong rate, charged for something not delivered. Issue a credit note for the difference, not a replacement invoice.

Return or cancellation. A client sends goods back or cancels a service partway through. If they have already paid, you owe them a refund. If the invoice is still outstanding, the credit note reduces what they owe.

After-the-fact discount. You agreed to bring the price down after the invoice was already sent. The credit note documents that agreement and keeps the original invoice intact.

Duplicate invoice. You sent the same invoice twice by accident. Credit one of them so your client's accounts do not show the same job billed twice.

The rule of thumb: any time an existing invoice needs to change after the fact, a credit note is how you do it properly.

Refund or adjustment

These are the two main types of credit note, and they describe what happens next.

A refund credit note means money goes back to the client. They paid the original invoice. You are returning some or all of it. Issue the credit note, then send the actual transfer.

An adjustment credit note means you are reducing an unpaid balance. The original invoice is still outstanding, and the credit note brings the amount owed down. No money moves; the balance just changes.

Both types look nearly identical as documents. The difference is in what follows.

---

What to include

Your details and the client's. Same as any invoice: name, address, any tax ID numbers required in your country.

A credit note number. Keep a separate sequence from your invoices. Start at CN-001 and go up. Never reuse a number, never skip one.

The issue date. When you are issuing the credit, not when the original invoice was dated.

The related invoice number. This connects the credit note to the original in your records and in the client's. Without it, nobody knows what the credit is for.

Line items. What exactly is being credited, described as specifically as the original invoice. If you are crediting two returned units, say so. If you are crediting a fixed amount from a larger invoice, say what it covers.

Totals shown as negatives. A credit note reduces what is owed, so the amounts appear as negative figures. Minus €150, not €150. This is how your client's accounting system reads it, and how yours should too.

A short note if helpful. One line explaining the reason saves everyone time later. "Credit issued for return of two units, ref INV-047" is clear. A blank notes field invites a follow-up email.

---

VAT, if it applies

If the original invoice included VAT, the credit note should also include VAT on the credited amount at the same rate. Your client may need to adjust their VAT reclaim. You may need to adjust your VAT liability.

The rule varies by country, but the general principle holds: what you did on the invoice, do the reverse on the credit note.

If you are not sure whether your situation has VAT implications, ask your accountant before issuing the credit note. It is easier to ask once than to issue a corrected version twice.

---

Create your credit note

The credit note generator on Invoice No. handles the structure for you: negative totals, a field for the related invoice number, CN-numbered sequence, and the same five templates as the invoice tool. Fill in the details, download the PDF. Nothing is stored on a server.