Credit Notes And Write-Offs

Credit notes and write-offs both reduce what remains collectible, but they mean different things. Use the correct action so billing history, statements, aging, and accounting remain explainable.

Open the relevant action from Billing -> Operations -> Invoices or the invoice detail view where your role allows it.

Workspace Reference

Workspace	How Users Reach It	What Users Usually Do There
Invoices	Billing -> Operations -> Invoices	Find the invoice, confirm party and balance, then open the available credit-note, write-off, or payment action.
Invoice Detail	Billing -> Operations -> Invoices, then open an invoice	Review invoice lines, allocations, adjustments, write-offs, approval, and posting state before acting.
Aging And Statements	Billing -> Operations -> Aging And Statements where available	Confirm the customer-facing and finance-facing balance after approved adjustments.

Credit Notes

Use a credit note when the original invoice amount should be reduced because billing changed.

Common reasons:

• returned goods
• pricing correction
• cancelled service
• approved discount
• duplicate charge
• dispute resolution
• quantity or tax correction

A credit note says: “The invoice amount should be lower.”

Credit Note Review

Before submitting a credit note, confirm:

Check	Reason
Correct invoice	Prevents reducing the wrong receivable.
Correct party	Confirms the adjustment belongs to the billed party.
Amount	Should not exceed the eligible invoice balance unless policy allows it.
Reason	Explains why the invoice is reduced.
Tax effect	Confirms whether tax must also be reduced.
Approval	Ensures governance before balance reduction.
Posting status	Confirms accounting was updated or is pending follow-up.

Write-Offs

Use a write-off when the debt is valid but the organisation has decided it will not be collected.

Common reasons:

• bad debt
• small balance cleanup
• management-approved waiver
• legal or settlement decision
• customer closure
• collection exhaustion

A write-off says: “The debt existed, but we will no longer collect it.”

Write-Off Review

Before writing off a balance, confirm:

• collection attempts are complete or not required
• management approval is complete
• amount is correct
• reason is clear
• supporting notes or attachments are present where required
• the action follows finance policy
• the posting outcome is reviewed

Write-offs normally require stronger permissions than ordinary invoice edits.

Choosing The Correct Action

Situation	Use
Original invoice was too high	Credit note
Customer returned goods	Credit note
Service was cancelled after billing	Credit note
Tax or discount was wrong	Credit note
Debt is valid but will not be collected	Write-off
Management waived a valid balance	Write-off
Customer paid the invoice	Apply payment
Payment was received but not allocated	Apply payment

Do not use write-off to hide a billing error. Do not use a credit note to hide uncollectible debt.

Effect On Aging And Statements

Once approved and posted:

• credit notes reduce the invoice balance and appear as adjustments
• write-offs reduce collectible debt and should remain visible as write-off activity
• aging should show the updated outstanding balance
• statements should explain the balance movement

If the action is pending approval or failed posting, aging and statements may not yet show the final effect.

Accounting Impact

Credit notes and write-offs normally use different accounting treatment.

Credit notes usually reverse or reduce the original billing effect. Write-offs usually move a valid receivable to a write-off or bad-debt treatment according to finance setup.

If posting fails, review:

• invoice status
• approval status
• amount and currency
• charge or tax classification
• write-off reason
• receivable and write-off account setup
• required detailed tracking

Common Mistakes

Mistake	Better Practice
Using write-off for a pricing mistake.	Use a credit note.
Using credit note for bad debt.	Use write-off with approval.
Reducing the wrong invoice.	Verify invoice, party, and balance first.
Leaving unclear reasons.	Capture a clear business explanation.
Assuming pending actions changed aging.	Confirm approval and posting status.

Related Guides

• Invoices
• Applying Payments
• Aging And Statements
• Recurring Billing And Dunning