Credit notes

A sent invoice is immutable — that is what keeps your books honest. When a sent invoice overcharged, billed the wrong thing, or should be partly or fully reversed, you issue a credit note: a document of its own, numbered and dated, that reduces the client's balance while both documents stay on the record.

When to use one

• The invoice charged too much, or for the wrong items.
• Goods came back or work was not delivered, and part of the invoice should be given back.
• The whole invoice must be reversed but you want the paper trail a cancellation alone would not carry.

A mistake on a draft invoice never needs a credit note — drafts are editable and deletable. And a pro forma invoice cannot be credited at all: it posts nothing to your books, so there is nothing to reverse. Cancel the pro forma instead. See Invoices.

Creating a credit note

Go to Credit notes → New, or use Create credit note on a sent invoice's page — that pre-fills the client and currency and links the note to the invoice (you can unlink it if the credit is not against a specific invoice).

Pick the client, set the issue date, optionally record a reason, and add line items with a description, quantity and unit price. Totals and tax are computed the same way as on an invoice, using your organisation's tax rate for taxable lines. Numbering is automatic and sequential (CN-0001, CN-0002, …).

The note is saved as a draft — nothing has touched your books yet.

Statuses

• Draft — editable, and the only status in which a credit note can be deleted.
• Issued — the credit is real and posted to your ledger. An issued note can no longer be edited, only applied or voided.
• Applied — you have recorded that the credit was settled against the client's account. Mark applied on the note page moves it here.
• Void — the note is cancelled and its ledger posting is reversed. The document and its number remain on the record.

Issue, Mark applied and Void all live on the credit note's page, each behind a confirmation.

How it affects the ledger and the client's balance

Issuing a credit note posts the exact mirror of issuing an invoice: your income (and VAT output, where tax applies) is reduced, and accounts receivable — what the client owes you — is reduced by the note's total. You can see the entry under Journals.

On the client's side:

• The note appears as a credit on their account statement, reducing the running balance.
• The linked invoice itself is not modified — its own totals and payment history stay exactly as they were. The credit note is a separate document that offsets it.

Voiding an issued note reverses the posting, so the income and the receivable are restored. If the note was issued into a period you have since closed, the status change is refused until the period is reopened — see Period close.

PDF

Download PDF on the credit note page produces the document to send to your client, laid out like your invoices and clearly numbered as a credit note.

Working with an assistant

A connected AI assistant can draft a credit note and correct a draft's details, but issuing it — putting the credit into your books — is always done by you in PulseBooks. See Connect your AI assistant.