Credit notes are documents that decrease the amount owed on an invoice. You can adjust the amount of a finalized invoice using credit notes or by revising it. Some example scenarios where you might use credit notes include:
- You accidentally overbilled a customer—You accidentally charged your customer 110 USD instead of 100 USD because of a data entry mistake. Use a credit note to give your customer a 10 USD credit for the overcharge.
- You’re short on inventory—You billed your customer for five items, but when it’s time to ship them you realize you only have three items left in stock. Use a credit note to refund your customer for the two items they didn’t receive.
- Discounts—Rather than voiding and reissuing a new invoice, you can use a credit note to adjust the amount owed on the existing invoice by a negotiated discount amount.
You can issue a credit note for open, paid and uncollectible invoices. When you issue a credit note for an open invoice, it decreases the amount due on the invoice. When you issue one for a paid invoice, it’s usually because you need to refund or credit a specified amount to the customer. The sum of all credit notes can’t exceed the total amount of the invoice.
Also, for post-payment credit notes, the sum of the refund, credit, and out-of-band amounts must equal the credit note total. You can credit the quantity or amount of an item by adjusting these values on existing line items. For example, if a customer purchases two shirts, and you accidentally charge them for three shirts, you can credit one shirt back. For reporting and tracking purposes, this is the recommended process because the line item and the credit are tied to each other.
If adjusting an existing line item doesn’t cover your use case, you can add a custom line item. For example, if you need to give a general discount on an invoice, you can create a custom line item to decrease the total invoice amount. This, however, makes tracking and reporting the credit note difficult because the credit isn’t connected to an existing line item.
Create credit notes
You can create credit notes for any open or paid invoice.
Open the Invoices page in the Dashboard.
Click on the open or paid invoice you want to add a credit note to.
Click More and select Issue a credit note.
Select a reason for the credit note.
(Optional) Perform the following actions:
Edit line item credit quantities or amounts.
Click Add item to add a custom line item.
Click Set item tax to select a tax rate to use for credit purposes.
Choose whether you want to refund the customer’s card, credit their balance, or credit outside of Stripe (for example, cash).
Click Issue credit note to submit the credit note.
Credit balances and discounts
When you issue a credit note on an invoice with an applied customer credit balance, funds are sometimes credited to the credit balance instead of the initial payment method. For example, if a credit balance of 150 USD is applied to an invoice for 200 USD, then the finalized invoice is for 50 USD. If you issue a credit note for 50 USD or less, the funds are refunded to the customer’s payment method. Anything above 50 USD is added to the customer’s credit balance and is applied to the next invoice.
Discounts apply evenly to all of the line items on an invoice. For example, applying a 50% discount to an invoice with 10 line items at 10 USD each results in each line item costing 5 USD instead. If you credit back one line item, the customer receives a 5 USD refund.
Discounts that are a fixed amount work in a similar way. Applying a 10 USD discount to an invoice with 10 line items at 10 USD each results in each line item costing 9 USD. If you credit back a single item, the customer receives a 9 USD refund. In this case, the original 10 USD discount ends up only being 9 USD. To make sure the customer receives the full 10 USD discount, add a custom line item for 1 USD in the credit note to credit back the single item.
Void credit notes
You can only void a credit note on open invoices. Voiding a credit note reverses its adjustment, effectively restoring the amount due on the invoice to its pre-credit-note amount. To void a credit note in the Dashboard, click on the overflow menu () at the top right of the credit note, then select Void credit note.