How do I record a customer credit / issue a credit note?
Credit notes allow you to record money owed or paid to customers - for example, when you want to reduce the amount a customer has to pay, or return a refundable deposit. This article explains how to create, allocate / apply, and unallocate credit notes, and what to do if you can't allocate a credit note to an invoice.
In this article:
Creating a credit note
Creating a credit note is a similar process to creating an invoice. Within the invoicing module, select 'Create Credit Note' and then follow the process as you would for creating an invoice.
Add the amount to be credited as a positive value - ExpensePlus will then automatically create the credit note with the corresponding negative amount.
Payment of credit note
There may be some occasions when you want to make a payment to the customer for the credit note amount - for example, if you have taken a refundable deposit for an event. To do this:
- Create the credit note in ExpensePlus (see above).
- From your bank account (i.e. not from ExpensePlus), make the payment to the customer you are repaying.
When the outgoing transaction appears on your uploaded bank transactions screen:
- On the Match Transactions screen, select the transaction in the left-hand table.
- Select 'Payment of Credit Note' in the dropdown.
- Select the relevant credit note and click 'confirm'.
Allocating a credit note
More commonly, credit notes are allocated to an invoice (to reduce the amount the customer has to pay). This can be done within the Invoicing module in ExpensePlus in either of two (equally valid) ways:
Note: In order to apply a credit note to an invoice, both the credit note and the invoice must have a date that isn't in the future, and both must be for the same customer.
Note: If your accounts are prepared on a Receipts and Payments basis, and the invoice and credit note are for different amounts, you will first need to split the invoice - see the section 'What to do if you are not able to allocate/apply a credit note to an invoice' below.
Option 1: Allocate credit note
In the Invoicing screen, select the 'Allocate' button (plus icon) to the right of the credit note:
In the pop-up, select the invoice(s) you would like to allocate this against, then click 'Confirm'.
Option 2: Apply credit note
In the Invoicing screen, select the 'Update' button (circular arrow icon) to the right of the invoice you wish to apply a credit note to:
Then select 'Apply Credit Note'. In the 'Change status of invoice' pop-up, click 'Apply Credit Note':
In the 'Apply Credit Note to invoice' pop-up, select the credit note you would like to apply to the invoice, and click 'Confirm':
What to do if you are not able to allocate/apply a credit note to an invoice
If you create accounts on an accruals basis, then you will always be able to allocate or apply a credit note to an invoice (as long as the date for both isn't in the future).
If your organisation has an annual income of below £250,000 and you create accounts on a receipts and payments basis:
- Where the credit note total matches the invoice total, you can just allocate/apply one to the other - see Options 1 and 2 above.
- Where you're applying a partial credit note (i.e the credit note total doesn't match the invoice total), you will need to split the income allocation of the invoice - see the example below.
Example: Apply a £10 credit note to a £100 invoice (receipts and payments accounting basis only)
(1) From the Invoicing screen, click on the invoice, and scroll down to the 'Income Allocation' section:
(2) Click the 'Duplicate line' button (circular arrow icon) to the right of the income allocation.
(3) Update the information in the two lines, so one line has the credit note total, and the other line has the invoice reminder total.
(4) You will then be able to apply the credit note to the invoice in the usual way - see Options 1 and 2 above. Even though there is a difference (shown below as 'Remaining Outstanding', you will be able to click 'confirm' to apply the credit note.
And then distribute the credit note to the £10 invoice income allocation you created:
Similarly, you can also do this by allocating the credit note:
How to unallocate a credit note
If you need to unallocate a credit note that you have applied, navigate to the invoice in question (typically using the 'By Customer' or 'All' tab) and click the 'Unallocate Credit Note' icon on the right-hand side:
To help you better understand the invoicing module as a whole, please visit the module overview page here.