They can also be issued if your business cannot supply the goods or services included in the invoice. Credit memos for unpaid invoicesĬredit memos should be issued in the case that a customer backs out of the sale before issuing a payment. This cancels the one item line rather than the entire invoice, so there’s no need to create a brand new invoice. If you accidentally entered a product or service that shouldn’t have been included in the sale, you can simply issue a credit memo for the one product or service. Then, you should create and issue an entirely new invoice with the correct information. If you incorrectly type your customer’s details and send it to your customer, you should issue a credit memo to cancel the entire invoice.
Credit memos for canceling incorrect invoicesĮveryone accidentally makes mistakes, and every business at one point or another will make a mistake on an invoice. However, this needs to be agreed upon by both parties, or included in your Terms & Conditions. Instead, offer the customer a credit towards future purchases.
In this case, a standalone credit memo should be issued separate from the original invoice, and the refund transaction should be linked to the standalone credit memo.Īn alternative method is to keep the funds that would have been returned to the customer. On the other hand, if a customer overpays an invoice and you are just refunding the difference, the credit memo should not be linked to the invoice because the invoice is already paid in full. In the case that a customer returns products from an existing sale, the credit memo should be linked to the original invoice and the refund transaction should be linked to the credit memo. If a customer accidentally overpaid an invoice or returned a product for a refund, you should issue a credit memo to document the returned funds. The software ensures that the mandatory fields are input before you send it to your customer. The total amount being cancelled/refundedīelow, you'll find a sample credit memo created with SumUp Invoices. The original invoice number and issue date (if applicable) You and your clients’ full name and address Credit memos should include the following: As a general rule, they should include the same details that you’d find on an invoice, plus a few additional details to specify the credit. While invoices are a request for payment, a credit memo indicates a cancelation or return of funds to the client.Ĭredit memos are financial documents that require certain information in order to be valid. What information needs to be on a credit memo?Ĭredit memos follow a similar format to invoices, but they serve an entirely different function. It’s beneficial for both your business for accounting purposes, and the customer to ensure that the sale has been cancelled or a refund has been issued. To cancel all or part of an invoice before payment is madeĪny time you return money to a customer or cancel either all or part of a sale, a credit memo should be issued. To cancel an invoice due to incorrect invoice information A credit memo has a few different functions, including: Create credit memos for freeĬredit memos are usually linked to an invoice, but they don’t need to be if the credit memo does not relate to a specific sale. This article describes the cases you’ll need to issue a credit memo, what details need to be on them, and how to create them.
A credit memo, also known as a credit note, is a document that’s issued from a business to a customer to cancel all or part of a sale. Since invoices are legally binding documents, canceling them must be done correctly by issuing a credit memo. Whether it’s due to incorrect customer information, a forgotten discount, or a refund, the cancelled invoice must be accurately recorded for your records. At some point, a business owner might need to change or cancel an invoice.