The essentials
Everything worth knowing about a credit note.
What is a credit note?
A credit note (also called a credit memo) is a document a seller issues to reduce the amount a buyer owes on a previous invoice. Common reasons include returned goods, damaged items, billing errors, overcharges or a discount agreed after invoicing.
Because invoices should never be edited or deleted once issued, a credit note is the correct way to correct one. It keeps an auditable trail - especially important for GST and VAT, where the tax on the original invoice must be adjusted too.
Credit note vs debit note vs refund
| Document | Issued by | Effect |
|---|---|---|
| Credit note | Seller | Reduces what the buyer owes |
| Debit note | Buyer (or seller) | Requests or records an increase / a return |
| Refund | Seller | Money actually paid back - often accompanied by a credit note |