2 min read
Definition
A credit note is a document that reduces the amount a customer owes, offsetting an existing invoice for a return, price adjustment or billing error. It lowers your accounts receivable and, if VAT-registered, adjusts the VAT you owe.
In plain terms
Think of it as a negative invoice. It corrects the ledger without you handing back cash unless the customer has already paid.
Why it matters for your company
Unmatched credit notes distort your true receivables and can mask slow payment. Reconcile them promptly so debtor days reflect reality. See also the debit note, its supplier-side counterpart.
Related reading
Debit note
A debit note flags that an amount is owed — a buyer uses it to request a supplier's credit; a supplier uses…
Read →
Accounts receivable
Accounts receivable is what customers owe you for credit sales — a current asset whose growth ties up cash…
Read →
VAT return
A VAT return is the report — usually quarterly — that tells HMRC how much VAT you charged, how much you paid,…
Read →
Remittance advice
Remittance advice tells your supplier which invoices a payment settles — the key that lets them match cash to…
Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.