A credit note is an invoice in reverse. Where an invoice says "you owe me", a credit note says "I owe you" — it reduces or cancels what a customer owes, without touching the original invoice. Sooner or later an invoice goes out wrong — too many items billed, goods come back, a job falls through — and a credit note fixes it without deleting anything: the paper trail SARS expects stays intact, and your income and VAT reports adjust on their own so nothing is overstated. Credit notes are a premium feature.
When to use one
- You over-charged — billed for 12 items instead of 10.
- A customer returned goods — the credit note reduces what they owe.
- You agreed a discount after invoicing — the credit note documents it.
- The job fell through — the credit note cancels the invoice properly.
Create it
The easiest way is from the invoice you're correcting: open it and click ··· → Credit Note. stub links the credit note to that invoice, copies its currency and discount, and pre-fills the line items — remove the lines that don't apply and adjust the quantities so you only credit what's owed back. (The Existing tab of the same window links a credit note you've already created instead.) Click Save, then open the credit note from your Sales list and Send it like any other document.
You can also raise one from scratch: Sales → Create → Credit Note (or press N, then C), pick the customer, add the items being credited and set the date. A standalone credit note isn't linked to any invoice, so add the original invoice number and a short reason ("Returned goods", "Agreed discount") as a note — that's your trail.
What happens in your books
- The credit note reduces the balance on the invoice it's linked to, or the customer's account balance.
- If the invoice was already paid, it shows as an amount refundable to the customer.
- Your income and VAT reports adjust on their own.
Note: Never delete an invoice to fix a mistake. A credit note keeps the trail SARS expects. For the other ways an invoice can end, see Settle, write off or cancel an invoice.
Tip: Match the VAT treatment on the credit note to the original invoice, or your VAT report won't reconcile.