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Common Scenarios for Credit Notes

Common Scenarios for Credit Notes

Here Clickentry explaining the typical occasions when you might be in need to use a credit note and how you can do that. 

You Invoiced to a Customer, But They Noticed a Mistake 

In such a case, the customer will not pay the original invoice because he has noticed some mistakes. Eg you created the invoice for 22000 and sent it to the customer but it was supposed to be for only 20000, in this situation you can create a credit note for 2000 against your sales account. As soon as you raise a credit note, an allocation window appears immediately. You can apply this credit note to the invoice to reduce the amount owing on the invoice to 20000. Now the Profit and Loss report will only reflect 20,000 of sales and the tax liability will be adjusted accordingly. 

You Invoiced to a Customer, They Paid, then Returned Goods 

In such a case, the customer bought 50 items for $1000 each. He paid the whole amount against the invoice but later he returned 10 items. Now you can raise a credit note for this customer. But as the customer had already paid the whole amount, you will not be able to apply the credit note against his invoice. In this case, the credit note will remain in an ‘Awaiting Payment’ status. You can apply this credit note later against the next invoice you will be raising for this customer. 

You Invoiced to a customer, then Agreed to Apply a Discount 

In such a case, you raised an invoice for 20,000 against the sales account but later you agreed to give a discount of 10%. Now the customer is liable to pay only 18,000 and the remaining 2,000 will be an outstanding amount on the invoice. Now you can raise a credit note for 2,000 against the discount account. You can apply this credit note  

You Issued a Credit Note and Want to Pay a Cash Refund 

You can simply apply such a cash refund at the bottom of the credit note. 

You Invoiced to a customer, but They Overpaid You 

In such a case, you are not supposed to reduce the amount your customer owes because your customer has simply overpaid against the invoice. For example, you raised the invoice for 5,000 but your customer paid 6,000. Now instead of refunding them 1000, you can raise a credit note to reduce the amount on his next invoice. When you are reconciling the bank account then record this overpayment so that you can allocate the credit to the next invoice you issue them. 

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