Customer Credit Notes

#Understanding Credit Notes

Credit notes are negative invoices that:

• Reduce the customer's outstanding balance
• Create GL entries to reverse revenue and tax
• Can be applied to specific invoices
• Can create usable customer credits for future purchases

#Creating a Credit Note

#From an Existing Invoice

1. Open the original invoice

2. Click Create Credit Note

3. Light pre-populates customer and original invoice details

4. Review and adjust line items:

   • For full credit: All lines are included
   • For partial credit: Manually remove or adjust line quantities

5. Adjust quantities to reflect what's being credited

6. Tax is automatically recalculated

7. Click Create

#Manual Credit Note Creation

1. Navigate to Revenue & Invoicing → Customer credits

2. Click + Create customer credit

3. Select the Customer

4. Select or reference the Original Invoice (optional)

5. Set the Credit Date and Posting Date

6. Add line items:

   • Description of what's being credited
   • Quantity
   • Unit Price (usually negative)
   • Tax category

7. Light calculates negative totals

8. Click Create

Good to know: Credit note amounts appear as negative values in accounting. A credit of $100 shows as -$100 in GL entries.

#Assigning Reasons for Credits

Document why the credit was issued:

1. Open the credit note

2. Navigate to Credit Reason

3. Select from predefined reasons:

   • Return
   • Billing Correction
   • Discount
   • Damaged Goods
   • Service Adjustment
   • Other

4. Optionally, add detailed Description

5. Click Save

#Credit Note States

Credit notes follow similar states to invoices:

• DRAFT: Created but not finalized
• POSTED: Finalized and GL entries created
• APPLIED: Assigned to an invoice or customer account
• CLEARED: Fully applied or used
• ARCHIVED: Retained for historical records

#Applying Credits

#Applying to Specific Invoices

1. Open the posted credit note
2. Click Apply to Invoice
3. Select the target invoice (must be open or partially cleared)
4. Enter the application amount (default is full credit note amount)
5. Click Apply

The invoice balance reduces by the applied amount.

#Creating a Customer Credit Balance

If a credit note isn't applied to a specific invoice:

1. Open the posted credit note
2. Click Create Credit Balance
3. Light converts the credit to an unapplied balance
4. Customer can use this credit on any future invoice

View and manage customer credits in the Customer Credits section.

#Partial Credit Notes

Issue credits for only part of an invoice:

1. Open the invoice
2. Click Create Credit Note
3. Reduce line item quantities to reflect partial return
4. Set the correct credit amount
5. Click Create

The original invoice remains open; the credit note reduces the outstanding balance.

#Tax Handling in Credits

Light automatically handles tax on credit notes:

• Full returns: Tax is fully reversed
• Partial returns: Tax is proportionally reversed
• Damaged goods: Tax may or may not be reversed depending on your jurisdiction

Contact your tax administrator if you need custom tax treatment.

#Multi-Currency Credits

Credit notes in a different currency than the original invoice:

1. Open the invoice
2. Click Create Credit Note
3. Override the Currency if needed
4. Light applies current FX rates
5. You can override the FX Rate for a different rate
6. Click Create

Tip: Use FX rate overrides to credit customers at the rate they were originally invoiced if rates have moved significantly.

#Void vs. Credit

• Credit Note: Issues a refund or reduces balance
• Void Invoice: Cancels an invoice that shouldn't have been created

Use credit notes for legitimate refunds; use void only for administrative errors.

#Receiving Payment on Credits

If a customer asks for cash refund on a credit balance:

1. Open the credit note or customer credit
2. Navigate to Refund
3. Click Record Refund
4. Enter Refund Amount
5. Enter Refund Date and Method
6. Click Record

Light creates GL entries to remove the credit from the customer account and record the cash outflow.

#Reverse/Reverse Credit Notes

To reverse a credit note that was issued in error:

1. Open the credit note
2. Click Create Reverse
3. Light generates an offsetting credit note with negative amounts
4. Post the reverse credit note
5. Original credit note is effectively negated

#Related Articles

• Invoice generation and customization
• Tracking payments and outstanding balances
• Multi-entity AR operations