Sometimes another pair of eyes is all you need ...
Posted by Alison Mead on 11/04/2022 @ 8:00AM
We are all human and all make mistakes, or sometimes things don't go to plan and we have to raise a credit note for an invoice that we have already sent to our customer. It may be a whole invoice needs to be cancelled, or we just need to reduce the amount we invoiced by a proportion to give a discount or a refund for something returned ...
These are my top tips for dealing with credit notes!
Here are a few of my top tips for raising and dealing with credit notes:
make sure when you print or email the credit note that it is really obvious that it is a credit note so the customer is less likely to enter it incorrectly on their system.
In both Sage and Xero if an invoice has not been paid it is really easy to create a credit note from an invoice in the software - then the system will offer to allocate the credit note to that invoice.
When you create a credit note from an invoice and you are only wanting to partially credit the invoice, in Sage you can delete a line using F8 or in Xero you can click the little x to delete a line - you can also edit the amounts if you need to lower them too. Please note in Xero if an invoice is already paid then the credit invoice option will NOT be available - you could delete the payment to be able to credit the invoice to save rekeying all the details then match the payment to something else or rematch the invoice after the credit has been raised.
Sometimes if an invoice is just completely wrong and it is all a bit of a mess is can be easier to just credit the whole invoice to cancel it and then re-raise the corrected invoice as a whole rather than mess about with partial credits.
Be careful which invoices you allocate the credit note to:
In sage when you are doing a receive/make payment option you can go to the credit note line and choose pay in full then go to the invoice line and choose pay in full - if an invoice is completely matched by a credit note then the analysis total should be 0 when you have completed this. If you are reducing your payment by the value of the credit note ensure the analysis total at the bottom matches the payment amount when everything is allocated.
In Xero you must go to the invoice which you want to allocate the credit note to and the system should show you bottom left that there are credits available on the account then you can follow the link and allocate the credit note to the invoice - you can not match a credit note to an invoice in the bank reconciliation area - you need to do the matching before you match the balancing payment to the relevant invoices.
If you find that your customer has matched the credit note against different invoices to the ones you have in your system both Sage and Xero can allow you to remove the allocations and re-enter them to prevent confusion in which invoices are still outstanding. There is nothing more annoying than sending a statement to someone and they say 'we already paid this invoice', but in fact, they still owe you the money, it is just you have allocated payments or credits to different invoices.
If someone has overpaid you or you have overpaid someone, do not cancel this with a credit note. A credit note only cancels an INVOICE. A refund or receipt would cancel an overpayment - this is something that many people get confused with when they first get involved with bookkeeping.
So, those are my top tips for dealing with credit notes. If you just find it too confusing and have a credit note issue in your bookkeeping then we can arrange a bookkeeping handholding session for me to help you work out the best solution for your particular issue.
Sometimes another pair of eyes on an issue is all that is needed to get the issues sorted.
Until next time ...
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about credit notes and how to deal with them, it may be a great idea to give me a call on 01604 217365 and let's see how I can help you.
Alison loves bookkeeping and supporting bookkeepers. She has been helping clients to be better bookkeepers in Sage 50 for over 24 years and has been Xero Accredited in accounts and payroll for a number of years too.
She specialises in a very unique hand-holding method of training, helping bookkeepers and business owners to use their accounts software as and when they need support in setting up and producing their invoices, reports and financial information.
Alison combines her role at Silicon Bullet with her Forever Living network marketing businesses and is often to be seen at business networking meetings as she likes to keep busy.
You know what they say: if you want something done well ask a busy person!
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