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Invoicing

Credit note

A document that reduces or cancels an amount previously invoiced, used for refunds, corrections and downgrades.

A credit note reverses part or all of an issued invoice. It is how billing corrects itself without editing history.

Common causes are a genuine billing error, a downgrade mid-cycle, a goodwill adjustment, or a service credit under an SLA.

A credit note reduces what is owed; it is not the same as a refund, which moves money back. A customer can hold a credit balance that is applied to their next invoice without any money ever changing hands, and the accounting treatment of the two differs.

Related terms

  • Invoice The document that states what a customer owes for a period, line by line, with tax and totals.
  • Proration Charging or crediting for part of a billing period when a subscription changes mid-cycle.
  • Refund Returning money already captured, as opposed to reducing an outstanding balance with a credit note.