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How to Create and Manage Credit Notes

Learn how to use Credit notes to reduce the amount owed to you by a customer

Brenda Beckham avatar
Written by Brenda Beckham
Updated over a week ago

Credit notes are similar to invoices, except that they are used to reduce the amount owed to you by a customer. A credit note relates to a particular customer and remains open until its balance is fully applied to raised invoices (reduced the amount payable) or refunded in cash.

As an apparel order management software, Uphance makes it easy to create and edit credit notes without breaking a sweat.

Credit note usage scenarios

Here are some common scenarios in which a credit note can be used:

  • You issued an invoice and the customer noticed (before paying) that you added more quantities than ordered. Rather than delete and recreate the invoice, you can create a credit note for the over-invoiced quantities. That way, when the customer makes another order later on, you can knock off the value of the credit note from the new invoice.

  • You issued an invoice, the customer paid and then returned some or all of the goods. You should create a credit note for the returned goods. You can then either immediately create a refund for the value of the credit note (and transfer the cash) or leave the credit note open to apply to some future invoice for this customer.

  • A customer has overpaid for a certain invoice. When entering the payment for the invoice, Uphance will prompt you to create a credit note for the value of the overpayment. You can then either create a refund for this credit note (refunding the customer immediately) or leave the credit note open to apply to a future invoice.

How to Create a Credit Note

You can create a credit note related to a sale at any time after the sale is confirmed (and content fixed). When looking at the sale details, navigate to the "Create" drop-down on the right-hand side of your Sales Order and select Credit Note from the menu as shown in Figure 1:

Figure 1


On the Create Credit Note screen, you can add a "freeform credit note line item" and/or you can specify a quantity for a particular product you want to provide a credit for as shown in Figure 2:

Figure 2:

Using both of these methods will produce a Credit Note that looks like this:

Figure 3:

In the above example, you can see we provided a discount for damaged goods for the customer.  And, we gave them a credit for 4 of their products that were damaged.

Applying a credit note to an invoice

Find the invoice you would like to apply an open credit note (It does not have to be an invoice associated with the order where the Credit Note originated).  It does need to have a Total Outstanding balance.  

To apply a credit note to an invoice, open the invoice, click Invoicing Options and select Apply Credit

Specify the amount you want to apply for credit against this invoice (Figure 5).  Click "Create Invoice Credit" button (Figure 5).

  1.  Click the "Apply credit" link to open the Apply Credit Note dialog. Choose the open credit note from the drop-down and enter the value you would like to credit, up to the total remaining credit left on the credit note.

Figure 5:

The amount due on the invoice will be reduced appropriately:

Figure 6:

If you navigate back to the credit note in question, you will notice that the remaining credit has been reduced:

Figure 7:

Over-payments

Applying an over-payment to an invoice will result in an "Over-payment" being created. Over-payments are listed at the right of the sale workflow beneath credit notes. Over-payments act like credit notes in that they can be applied as payment to future invoices.

List of All Credit Notes

You can also see a listing of all your Credit Notes by navigating to Order Management >> Credit Notes.

Figure 8:

Refunding

If you need to provide a customer with a refund (you are issuing a credit note for a paid invoice and don't wish to carry a credit over to a future sale) you should create a credit note and then record a refund to reduce the remaining credit and close the credit note.

Navigate to the credit note in question and click the Refund button to open the Add Refund dialogue box:

Figure 9:

You can enter an optional reference and an amount refunded. Refunding (or applying) the entire value of the credit note will close the credit note.

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