What Are Credit Notes?

Modified on Fri, 19 Aug, 2022 at 11:46 AM

Credit Notes are generated when invoiced services are cancelled, or have a reduced value. Credit notes are mostly used when you Invoice in advance of service delivery. They help you easily manage a client's account balance by allowing you to Credit a client for a walk they cancel, instead of having to create a refund or manage their balance in another way. There is also a system for Debit Notes.

Tip: When you cancel invoiced services:
A credit note associated with the original invoice is created.
Credit notes can have additional cancelled services added to the same credit note until it is committed.
Credit notes can be committed from the Service Order, Invoice, or Credit/Debit Notes Report.

When is it Appropriate to Create a Credit Note?

Credit notes are most often used when clients are invoiced in advance of service delivery.

For example, a client receives walks every weekday and they are invoiced monthly on the 1st of the month. The client cancels 5 dog walks during the month. So your workflow would be as follows:

Client Invoiced on the 1st of the month.
Payment received on the 5th of the month.
Client cancels a service, creating a credit note which remains open until it is committed (applied).
Client cancels additional services during the month, the credits are added to the same uncommitted credit note created above.
At the end of the month, before creating the invoice for next month, commit or "apply" the credit note to their account from the service order or from the Credit/Debit notes report.
When the Invoice is created, it reflects the total amount for the upcoming services (say $300), but the client's account shows the amount of the Credit ($120), so the balance due is $180.

When is it NOT Appropriate to Generate a Credit Note?

Creating a credit note may not be appropriate if your client books services occasionally, such as annual vacations.

For example, a client books 7 vacation visits, you invoice them, but they have not paid. They cancel one and now only need 6 visits. You want to send them a new invoice for 6 services, so you would:

Void the current invoice.
Cancel the service.
Create and re-send a new invoice for the lower amount.