How to make a credit memo invoice in 3 steps?

Do you know what a credit invoice is? How to make one? What are the characteristics of invoices in terms of presentation and accounting registration? A credit invoice is a type of invoice that allows a company to cancel or correct a previously established invoice. This document is therefore an acknowledgement of a debt to a customer, and allows the partial or full reimbursement of an invoice to be recorded.

Put the calculator aside for a moment, let's find out the answers to your questions.

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What is a credit invoice?

It is a commercial document where the seller indicates that he owes a debt to the buyer. This claim can be related to:

• a return of goods,

• an error in the original invoice,

• a commercial reduction.

What is the credit invoice for?

For the seller, the credit invoice serves to:

• rectify an error in the price, reference or calculation of the total price,

• rectify an error due to non-compliance with the regulations in force,

• make a discount, partial or full reimbursement,

• correct the VAT rate .

For the customer, the credit invoice serves to:

• receive a refund,

• make a new purchase, partially or fully covering the amount to be paid.

How do they differ from normal invoices?

• They have a different numbering.
• The amount must be in negative.

👆 Another tip: to distinguish the credit invoice from the ordinary invoice, indicate the amounts in negative.

When to make a credit invoice?

1. In the event that the invoice does not comply with the stipulated regulations.

2. In case of an error in the VAT declaration.

3. In the case of a rebate.

Generally speaking, all businesses may need to issue a credit invoice. Even if most of the time, it is companies whose sector of activity is related to the trade of goods that use them (it will not be a common case for a self-employed person, to give an example).

The most common reason for issuing a credit invoice is to rectify an error or to add a financial change (application of discounts, bonuses, etc.). However, we can add 2 reasons why the credit invoice can become a marketing argument:

To drive the act of purchase

You are probably familiar with the formulas "If you are not satisfied, you get your money back", "free return".... The aim is to encourage the act of purchase by reducing the possible brakes. Both in a BtoB (Business to Business) and BtoC (Business to Consumer) context:

• The fear that the size is not appropriate, e.g. in the fashion industry.

• Fear of disappointment when receiving the package: a difference in colours from the online image or unexpected manufacturing materials.

Having a guarantee

The condition in which the goods will arrive is a source of concern for buyers: fragile products or perishable foodstuffs. In case of damaged goods, faulty delivery or delivery error, the prospect of a credit note is an honourable way out for the dissatisfied buyer.

Differences between credit and amendment invoices

A credit invoice is a form of amendment invoice. In fact, before 2013, amendment invoices did not exist as such; the way to correct or cancel an invoice was the credit invoice.

1. Credit invoices are amending invoices with negative amounts.

2. In the case of credit memos, it is not obligatory to specify the reason for cancelling the invoice.

3. It is obligatory to issue credit memos when rebates are made on sales to customers.

4. When it comes to amount errors, entrepreneurs tend to prefer credit memos due to their simplicity.

5. It is compulsory to issue corrective invoices when the errors concern customer data.

How to make a credit invoice?

1. Requirements for generating the invoice

A credit invoice is usually a type of amendment invoice. The clearest thing, from an accounting point of view, is to indicate the invoice number to which reference is made. In fact, to be more precise, we must have all the details of the invoice we want to rectify.

Basically, they must comply with the same regulations as the other types of invoices. These are some of the fields thata credit invoice must contain:

1. Invoice number.

2. Date of issue.

3. Sender's details.

4. Buyer's details.

5. Identification of the goods delivered or services rendered.

6. Tax rate.

7. Reference to the corrected invoice.

2. Setting up automatic calculations

If the credit invoice opens up many possibilities in terms of commercial policy and accounting management, it remains a difficult obligation to handle, particularly due to the calculation and recovery of VAT. Is the product or service subject to VAT, what is the percentage, on what basis is it applied: the initial or final amount?

Any entrepreneur can quickly get lost in this sea of questions, and it is only by being vigilant and scrupulously rigorous that we can avoid mistakes.

Our advice? Use cloud-based software to automate invoice calculations, issuing and sending.

3. Invoice automation

Invoicing software automates the generation of all types of invoices, including credit invoices. Parameterised for automatic calculations such as VAT, these tools serve as a guide to ensure regulatory compliance and proper accounting management. By opting for a cloud solution, you are sure to have updates according to the legal framework.

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Automate invoicing processes

The credit invoice is a valuable tool, both for internal management and for sales representatives. However, it is necessary to know how to use it... The VAT rate and the legal mentions that must be managed without errors.

Invoicing solutions in the cloud help companies to manage their invoices globally.