Glossary · Invoices and billing
Credit note
Also called Credit memo
A credit note cancels or reduces an invoice you already issued, for example after an error, a return or an agreed discount.
A credit note (a credit memo in the US) reduces what a customer owes. You issue one instead of editing or deleting an invoice that has already been sent: the original stays on record and the credit note offsets all or part of it.
Common reasons are a pricing error, a disputed line both sides agree to drop, a cancelled order or a goodwill discount. Credit notes carry their own sequential numbers and, where VAT applies, show the tax being reversed.
In collections, a credit note is often how a dispute ends. If you agree to take something off to settle a complaint, issue the credit note promptly so the customer’s ledger matches yours — a balance that differs between the two sides is a reason for their accounts-payable team to hold payment.
Example
A client disputes two hours on a €4,200 invoice. The firm agrees, issues a credit note for €240, and the remaining €3,960 is paid within the week.