In business, it happens regularly: an invoice that needs to be adjusted. Perhaps a mistake was made, an order was cancelled or the customer returned (part of) the goods. In such cases, the concept of crediting comes around the corner. But what exactly does that entail?
What does credit mean?
Crediting is the process of reversing (part of) an invoice previously sent. This is done via a credit invoice, also known as a credit note.
A credit invoice is an official correction to a previously sent invoice and states the amount credited – in other words, returned or waived.
When do you credit an invoice?
There are several situations where a credit note is needed. The most common are:
- Invoice error
Think of an incorrect amount, wrong VAT rate, wrong customer details or a product accidentally double-billed. - Return shipment
The customer has returned (part of) the delivery. In this case, (part of) the invoice amount is forfeited. - Cancellation of an order
If an order is cancelled after invoicing, the corresponding amount must be reversed. - Discounts or compensation after the fact
Sometimes it is decided after the invoice date to grant a discount or compensation. This too can be processed via a credit invoice.
What’s on a credit invoice?
A credit invoice is very similar in format to a regular invoice, but with negative amounts. Important elements are:
- Reference to the original invoice (invoice number and date)
- Negative amount or positive amount clearly marked “credit invoice”
- Description of the reason for crediting
- Customer and company data
- VAT specification (if applicable)
Accounting effect of a credit invoice
In your records, you process a credit invoice as a negative revenue. This reduces your total revenue and the amount of VAT to be remitted. For the customer, it often means a refund or a reduction in the outstanding amount.
What about VAT?
If the original invoice included VAT, then the credit invoice should also include the correct VAT treatment. So you correct not only the net amount, but also the VAT you paid in the first place.
Note that if you send a credit invoice on a supply that never took place, and the VAT has already been remitted, you can correct that VAT in your tax return.
Tips for correct crediting
- Make sure your credit invoices are clear and traceable.
- Use invoice numbers that are continuous, including for credit notes.
- Always state the reason for crediting.
- Send the credit invoice as soon as possible after discovering the error or change.
Easy crediting with TriFact365
Are you already working with TriFact365? Then crediting becomes a lot easier. In our software, you can process a credit invoice with just a few clicks. The automatic recognition ensures that credit notes are quickly and correctly recognised, so your administration is up-to-date faster. Whether you draw up a credit invoice yourself or receive one: TriFact365 helps you make this process smooth and error-free.
In conclusion
Crediting is an important part of accurate and transparent administration. It prevents misunderstandings with customers and ensures you comply with tax rules. Whether it is an error, a return or a concession: a good credit invoice helps you remain professional and maintain trust.
