How it works
Instead of editing or deleting an issued invoice, the seller issues a credit note referencing it. The credit reduces accounts receivable and reverses some or all of the revenue and tax. It can be applied to the original invoice, to a later invoice, or refunded as cash. Suppliers issue the mirror image, a vendor credit, which reduces payables.
Example
A customer returns two of ten units. The seller issues a credit note for $180 plus tax, applies it to the open invoice, and the customer pays the reduced balance.
In integrations
Credit notes matter for accurate receivables and sales tax. The Unify Accounting API is designed to read credit notes with their allocations to invoices, and the Orders API links ecommerce refunds and returns to the orders they adjust. Products that ignore credit notes overstate receivables and revenue. Lenders, collections tools and tax engines all need credits applied correctly to see the real balance.