Credit Note Template
A credit note brings down, or cancels, the balance due on an invoice the seller already sent
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What a credit note is
A seller sends a credit note to lower, or wipe out, the balance due on an invoice that has already gone out. The original invoice is left untouched. The credit note records the change and names that invoice by its number. Some businesses call it a credit memo.
Common reasons for issuing one:
- the customer was charged too much, or for the wrong quantity
- goods came back, or part of a service was called off after invoicing
- a lower price was settled after the invoice went out
- the same invoice was sent twice by mistake
Credit note, invoice or refund?
An invoice asks the customer to pay. A credit note cuts the balance on an earlier invoice, so its figures run the other way. A refund is a separate step: the credit note documents the reduction, and the refund returns money. When the invoice has been paid already, the seller can refund the credited amount or set it against the customer's next invoice, as the two sides decide.
Fields a credit note normally shows
- a title such as Credit Note, plus its own number and issue date
- the seller's name and address, and the customer's
- the number and date of the invoice being corrected
- each credited item with its quantity and amount
- the total credited, with any tax credited on a separate line
- a brief reason for the credit
In the UK: HMRC's VAT guidance
For VAT-registered businesses, HMRC's VAT guide, VAT Notice 700 (In the UK, HMRC, last updated June 25, 2026), says "If you issue a credit note or supplementary invoice to correct an error in a VAT invoice, it should bear a reference to the number and date of that VAT invoice and show clearly both the correct and incorrect amounts of VAT." The same guide says "If credit notes are issued without a VAT adjustment, they should state ‘This is not a credit note for VAT’." Its section 18.2.3, Valid credit notes, lists the details HMRC looks for. Outside the UK, ask your tax authority or an accountant how credit notes are treated where you trade.
Worked example
Sample figures, before any tax. Invoice 1042, dated March 3, 2026, bills 12 chairs at $50.00 each: 12 × $50.00 = $600.00. Two chairs come back damaged. Credit note CN-007, dated March 10, 2026, refers to invoice 1042, gives the reason as two damaged chairs returned, and credits 2 × $50.00 = $100.00. The amount still due on invoice 1042 is $600.00 − $100.00 = $500.00. If the invoice carried tax, the tax on the credited amount would normally go on its own line of the credit note. Use your own figures; these are only an illustration.
What Billed's features page says
Billed's features page (checked October 31, 2026) has no entry for credit notes. Under Void Invoices it says "Made a mistake while creating invoice? Easily void your invoices in Billed App for better accounting." Under Refund Customers it says "Refund your customers without leaving Billed App and keep track of it." For invoicing in general, see Billed's invoice software page.
Related templates
What's included in this document template
| Document | Who issues it | Effect on the amount owed |
|---|---|---|
| Invoice | Seller | Sets what the customer owes |
| Credit note | Seller | Lowers or cancels the balance on an earlier invoice |
| Refund | Seller | Pays money back to the customer |
When this isn't for you
If an invoice is still a draft and hasn't been sent, you can usually correct the draft itself instead of issuing a credit note. If your accounting system has its own credit note process, follow that process so its records stay consistent. For how credit notes are taxed where you trade, ask your tax authority or an accountant.
How To Create Invoices With Billed
Billed lets you create invoices and send them by email or link.
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Create Your Invoice
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