The business world is practically sustained by transactions from two ends, which are the customer and merchant. Therefore, these two sides need to communicate, reaching out to each other for a transaction to succeed. More so, one of the means through which they communicate messages is a credit note. A credit note stands in place as a notification from the seller to the buyer under certain circumstances, which are discussed in the latter part of this article.
A credit note is simply a document sent to a customer by a supplier, to notify them that they have been credited with a specific amount. However, although they could be other reasons, this is mostly due to an error that exists in the original invoice. Basically, it tells the customer that credit is being granted or applied to them for certain reasons. Also, a credit note is known as a credit memo, which is a short form of credit memorandum.
Normally, the credit note carries different information including the products it affects, their quantities and prices previously agreed. Also, it references the applicable invoice and states the reason for the credit note in such a way that the customer easily understands it. Ultimately, a credit note could mean the customer getting a refund in cash, or simply applying the deduction to future purchases. The choice could lay on the customer’s part or that of the supplier, depending on the deal they have in place.
We use credit notes in the following situations:
Normally, the supplier is the one who draws up a credit note and he or she decides the details it contains. However, there are standards to adhere to asides including the basic details of products, quantities and service prices. For proper record purposes, it is best to include the following:
A credit note makes it easy to track and revise errors that breach the agreement in an invoice. However, when issuing, it is important that you do it the right way. With all the proper details included to avoid confusion.