A credit note is the document a sole trader issues when an invoice already sent was wrong or the client is owed money back: too many hours billed, a discount agreed afterwards, work returned or not done. It cancels all or part of the original invoice, reverses the tax on the canceled amount, and gives the client a paper trail that matches yours. A credit note template needs the same discipline as an invoice, because it changes what is owed and what tax was charged, and this page gives the fields, an example and the naming.
What the credit note template carries
The words credit note, so nobody pays it. Your details as on the invoice. The client's details. A credit note number from its own sequence, and the date. The number and date of the invoice it corrects, which is the field that makes the document usable. A line per item credited: description, quantity or hours, unit price, net amount. The tax reversed on the credited amount at the rate the original invoice charged, shown separately, because a VAT-registered trader must reverse the VAT and a sales-tax filer must reverse the tax collected. The total credited. Then what happens next: refunded to the client's account, or held against the next invoice, stated in one line.
A credit note example for a part refund
Invoice 0044 billed 20 hours of design at $60 an hour, $1,200 plus tax. The client points out that four of those hours were agreed as included in the earlier quote. Credit note CN-0007, dated today, refers to invoice 0044: four hours of design at $60, $240 net, tax reversed on $240 at the invoice's rate, total credited $240 plus that tax. Note: to be deducted from invoice 0044; balance due on 0044 is now $960 plus tax. The client posts the credit note against the invoice, pays the reduced balance, and both ledgers agree. Reissuing the invoice with a different total instead would leave the client with two invoices for one job and no record of why.
Credit invoice, credit memo and the naming
Credit invoice is the phrase some clients and some accounting systems use for the same document, and credit memo is the American term; a credit note template can be headed any of the three provided it says clearly that it is a credit, not a bill. What matters is the sequence and the reference: credit notes numbered in their own run and each tied to an invoice number, so the tax return and the client's ledger can follow the money. The freelance invoice template on this site produces the invoice the credit note refers to; the paid product keeps invoices and credit notes against the client together, which is where the next statement of account reads them from.
Questions people ask about credit note template
Can I just delete the wrong invoice and send a new one?
Not once it has been sent. Issue a credit note against it and, if needed, a fresh invoice. The pair is the audit trail your tax return and the client's ledger both need.
Does a credit note reverse the tax?
Yes, on the credited amount at the original invoice's rate, shown as its own line. A credit note with no tax line is wrong for a VAT or sales-tax invoice.
Do I refund or offset a credit note?
Either, stated on the note. Offsetting against the next invoice is usual with a continuing client; a refund closes the account with one that has finished.