Invoicing is an important part of any service business. An invoice is not only a useful overview of the payment transactions, but also shows you in a clear and concise way which services you have provided. But what happens if you have to make changes after an invoice has been drawn up? A usual administrative tip is to create a credit or debit note instead of a new invoice with the necessary additions.
What does the term “credit note” mean?
Without credit notes, the invoice administration would have to prepare a new invoice every time a change has to be made. Instead, the billing company usually prefers to add a credit note to the original invoice to indicate where a credit should have been applied.
Debit note vs credit note
A debit note informs a customer of pending debt obligations to the company or to the customer. For example, when certain services are provided before the invoice is prepared, the company may send a debit note with the invoice to remind the customer what additional payment is due. Or if a customer returns an item, a debit note can be issued to let them know how much has been refunded or credited to their account.
Unlike a credit note, a debit note lists the services already provided or the items returned by the customer. A credit note is an addition to an invoice when a customer requests additional goods or services, or when a customer changes their mind about a particular service.
Reason why a credit note may be required
A credit note can be a necessary part of the billing process for many reasons. A few examples of when you can issue a credit note:
- A damaged shipment: If a shipment arrives partially damaged, a credit note can be issued for the damaged goods while the customer is still charged full price for the undamaged goods.
- A customer has been overcharged: Automated invoicing has taken an important place in the administrative sector, reducing the number of human errors that used to creep into the system almost naturally. However, there are still situations where the customer is overcharged due to some administrative inaccuracy. With a credit note, this issue can be resolved through refund or chargeback.
- A shipment arrives late and a refund has been agreed: If part of an agreement involves the delivery of goods or services on a certain date and that date is not met, a credit note can be used as a gesture of reconciliation between seller and customer.
- A customer changes his mind about the service: If an invoice is issued for several products or services at the same time, the customer can change his mind about one or more of the articles, but still wish the others. In such a case, a credit note can be added to the invoice, instead of creating a new invoice.
How to make a credit note
A credit note is similar to an original invoice, with the main difference that you must certainly refer to the original invoice in the credit note. Important information that must be in the credit note:
- Customer information
- The creation date
- The number of the credit note
- The original invoice number
- The total amount credited
- Contact details of your company (name, address, VAT number)
How do you process a credit note
How you process a credit note depends on the situation and the customer’s preference. For example, if the credit note is for a particular product that the customer no longer wishes to purchase, the credit note can be set off against future payments. But if the customer wants, he can ask for a refund in cash instead. Whatever the customer chooses, the company must update its records so that it has an accurate record of the transaction.
Why Mollie is useful for your administration
Whether you are issuing invoices or adding new payment options to your website, Mollie is the simple solution for integration into your administration. We help companies integrate an effortless payment experience for their online customers. Learn more today and get in touch with our team.