Credit invoice: when and how (with example)

A wrong amount, a cancelled job or a discount after the fact: sometimes you have to reverse an invoice. You do that not by deleting the old one, but with a credit invoice. Here is how to set it right.

What is a credit invoice?

A credit invoice (or credit note) is a negative invoice that reverses an earlier invoice wholly or in part. You send it as a correction: the original amount was wrong, the job fell through, or you grant a discount afterwards. You never quietly adjust or delete a sent invoice; your administration must stay a continuous, complete whole.

When do you send one?

• You made a mistake: wrong amount, wrong VAT rate or the wrong client.
• The job (partly) falls through after you already invoiced.
• You grant a discount or goodwill afterwards.
• Return or complaint: the client does not pay the full amount.

What must it contain?

A credit invoice meets the same invoice requirements as a regular invoice, with a few points to note:

• Its own sequential invoice number from your normal series.
• A reference to the original invoice: the number and date of the invoice you are correcting.
• Negative amounts: both the amount excluding VAT and the VAT amount carry a minus sign.
• The same VAT rate as on the original invoice.

Example

You invoiced 1,000 euros excluding VAT, but it should have been 800 euros. You send a credit invoice of -200 euros excluding VAT and -42 euros VAT (21%). Net, the client has then paid 800 euros plus VAT. Alternative: credit the whole 1,000-euro invoice and send a new, correct 800-euro invoice. Especially with multiple errors, crediting in full and reinvoicing is clearer.

And your VAT return?

The VAT on a credit invoice corrects the VAT you remitted earlier. In the quarter you credit, the credit note lowers the VAT you owe. As long as your invoices and credit invoices are all in your administration, this works out automatically.

In Finq you make a credit invoice in the same style as your regular invoices, with a reference to the original and the VAT split correctly and automatically. See how invoicing works.