Credit note vs refund
One is a document that reduces a balance. The other is a payment leaving your bank account. They often happen together, but they are not the same act.
The difference in one line
A credit note cancels or reduces an amount on an invoice. A refund returns money the customer has already paid.
Which applies when
- Invoice unpaid, something was wrong: issue a credit note. The balance drops and nothing needs to move between bank accounts.
- Invoice already paid, customer is owed money: issue a credit note to correct the record and pay the refund.
- Customer will buy again: a credit note held against their account can be applied to the next invoice instead of refunding cash.
Never just delete the invoice
Editing or deleting an invoice you've already sent breaks your numbering and leaves the customer holding a document that no longer exists in your records. The correct approach is to leave the original alone and issue a credit note that references its number and states what is being credited and why.
What to put on a credit note
Its own number, the date, the customer's details, the original invoice number, the lines being credited with amounts, any tax being reversed, and a one-line reason — returned goods, duplicate billing, agreed reduction. Your accountant will thank you, and so will your future self during a reconciliation.
Issue one now
The credit note generator produces a properly labelled document with its own numbering, and the receipt generator covers the paperwork if you're confirming a refund payment.