Today we will take a closer look at credit notes and how to offset invoices.
Case 1: Client has not paid and is not going pay the invoice. Thus, the invoice needs to be canceled.
If the invoice is the last in the sequence and no invoices have been issued after this particular invoice, you can simply delete the invoice (This is only possible if you have not claimed VAT for this invoice).
If there are other invoices following after the invoice, or you have already included the invoice in your accounting, then you have to create a credit note for this particular invoice.
To create a credit note, simply select the option “Credit note” from the details of the particular invoice. By doing so, the invoice is automatically going to be marked as paid by a credit note. This will mark the credit note as claimed and will ensure that the invoice is offset.
Case 2: Client has paid the invoice, however goods or services have been returned and a refund is required.
In this case, you must create a credit note with a value that is equal to the sum refunded. Similarly to the previous case – you create a credit note, however the status of the paid invoice does not change. Instead, an unclaimed credit note will be created.
After you refund your client, you have to manually add the payment to the credit note. As a result, a credit note will be marked as claimed and this will automatically even out the books.
Let me note, that if you decide to delete a credit note of an unpaid invoice, this will automatically cancel the offset and the invoice will be displayed as outstanding. On the other hand, if you delete the invoice, the credit note that has been used to offset this invoice will be also deleted.