A Credit Note is a negative invoice used to correct billing errors or handle returned goods. It effectively documents that you owe money to the customer.

You can use credit notes to either issue a direct refund to the customer or keep the amount as “store credit” to pay off future invoices.

Create a credit note

When a customer returns an item or requires a billing adjustment, start by creating a credit note record.

Manage credit note status

After saving, the credit note enters a lifecycle similar to an invoice. The status bar at the top right helps you track its progress.

• Draft: The credit note is created but not yet finalized. In this state, no financial actions (refunds or applications) can be taken.
• Open: The credit note is finalized and active. The balance is now available to be used.
• Applied: The credit has been used to pay off another invoice.
• Refunded: The credit has been paid back to the customer in cash or bank transfer.
• Void: The credit note has been cancelled.

Use available credits

Once a credit note is in the Open status, you will see a sidebar on the right with two options: Credit Apply and Credit Refund.

Option 1: Apply to invoices (Store Credit)

If the customer has other unpaid invoices, you can use the credit note to pay them off.

1. In the right sidebar under Credit Apply, click the Apply button.
2. A modal will appear listing all open invoices for that customer.
3. Locate the invoice you want to pay. The table shows the Invoice Amount, Due Amount, and an input field for Credits to Apply.
4. Enter the amount you wish to allocate to that invoice.
5. Click Apply to complete the transaction.

Option 2: Issue a refund

If you need to return money directly to the customer (e.g., via cash or bank transfer), use the refund option.

1. In the right sidebar under Credit Refund, click the Refund button.
2. In the Credit Note Refund modal, fill in the transaction details:
   • Amount: The total amount being refunded (e.g., Rs 3,500.01).
   • Refund Date: The date the money left your account.
   • Account: Select the bank or cash account the money is withdrawn from.
   • Payment Mode: Choose the method (e.g., Check, Cash, Bank Transfer).
3. Add a Description if necessary, then click Refund.