If you get any mistake in any of your existing invoice, you can send a credit note to your client. The credit note will reverse the amount of the invoice.

To create the credit note, please go the the invoice details view. 

• Click on the Create credit note menu form the Actions dropdown. 
• A confirmation modal will appear there.
• You can create credit note from there.  

The main invoice's status will be changed to Credited and a new credit note will be created. You can see the credit note on the invoices list view.  

The distinction between a credited invoice and a refunded credited invoice comes down to where the money actually ends up. In accounting and billing, one is usually a stepping stone to the other, but they represent entirely different states of cash flow.

Here is the breakdown of each concept and how they differ.

What is a Credited Invoice?

A credited invoice (often resulting from a Credit Memo or Credit Note) means that the original amount the customer owed has been legally reduced or canceled. However, no physical money has changed hands yet.

If the customer had already paid the invoice, that payment is now sitting on their account as an overpayment or "store credit." They can use this credit balance to pay for future invoices.

• Customer's perspective: "I have credit with this company that I can use later."

• Business's perspective: "We owe this customer services/goods in the future, but we still hold their cash."

What is a Refunded Credited Invoice?

A refunded credited invoice means that not only was the original invoice canceled or reduced (credited), but the actual funds were also physically returned to the customer's original payment method (bank account, credit card, cash, etc.).

The credit balance on the customer's account is wiped out because the money has left the business.

• Customer's perspective: "I got the cash back in my bank account."

• Business's perspective: "We canceled the charge and we have sent the money back. The transaction is completely reversed."

  
  

  To refund a credit note you need first to create the credit note, then marked as CREDITED, once is marked as credited you can add a refund in the side right panel

The Essential Differences

A Real-World Example:

Imagine you buy a $1,000 software subscription and pay the invoice. A week later, you decide to cancel.

• If the company issues a Credited Invoice , they acknowledge you no longer owe the $1,000. Because you already paid, you now have a $1,000 credit on your account to buy a different software package from them next month.

• If the company issues a Refunded Credited Invoice, they cancel the invoice and initiate a $1,000 transfer back to your credit card. You walk away with your money.