In short: Here is how to issue a credit note: create a document that mirrors the original invoice but reduces what the client owes, give it its own number, and link it to the invoice it corrects. Never edit or reuse a sent invoice: issue the credit note, then send a corrected invoice with a new number. A client’s unused credit can then be deducted on their next invoice in the same currency.
A credit note is how you take money back off an invoice you have already sent, cleanly and on the record. Say you invoiced a client €500, then agreed a €50 goodwill discount after the fact. You don’t rewrite the €500 invoice. You issue a €50 credit note against it, and the client now owes €450. This guide covers when to issue a credit note, the one rule that keeps your books tidy, and how to issue and apply one in Tally Crow.
If you want the difference between the two documents explained from scratch, start with credit note vs invoice. This post is the practical how-to: the buttons, not the theory.
When should you issue a credit note?
Reach for a credit note whenever you need to reduce or cancel an invoice that has already gone to the client. The three common cases:
- A refund. You are giving money back, in full or in part, on work already invoiced.
- A discount after the fact. You agreed a price cut, a goodwill gesture, or a loyalty discount after the invoice was sent.
- A correction. You spotted a mistake on an invoice the client already has: a wrong quantity, a line that shouldn’t be there, the wrong rate.
In each case the invoice itself stays exactly as it was sent. The credit note sits alongside it and adjusts the balance, so anyone reading your records later can see both the original amount and the change.
The golden rule: never edit or reuse a sent invoice
Here is the one habit that saves you a headache at tax time. Once an invoice has been sent, treat its number as final. Don’t open it up, change the figures, and re-send it under the same number. That leaves two different documents sharing one invoice number, which is exactly the kind of thing that makes an accountant wince.
Instead, when a sent invoice is wrong or needs reducing:
- Issue a credit note against the original, for the amount you are cancelling or reducing.
- If a corrected invoice is needed, raise a new one with its own new number.
Tally Crow builds this rule in. When an invoice moves to *sent*, its financial fields lock, so one invoice number can never produce two different PDFs. Corrections go through a credit note by design, not by discipline. It is one less thing to remember.
What to write on a credit note
A credit note needs enough on it that whoever reads it a year later, you, your client, or an accountant, can see what changed and why. Write:
- The words “credit note” and its own number, separate from your invoice numbering.
- The date you issued it.
- The invoice it relates to, by number and date. This is the field that ties the pair together.
- The client’s details, the same ones as on that invoice, including their VAT number if they have one.
- Only the lines you are crediting, each with a short description, quantity and price. “Logo concept 2, not required” is clearer than “adjustment”.
- The VAT, at the same rate as the original invoice, and the total credited.
- A one-line reason if it helps: a refund, a discount agreed after the fact, or a correction.
A credit note template you can copy
Swap the examples for your own details. This one continues the €500 invoice and €50 goodwill discount from the top of this guide, with VAT at 18%.
| Field | Example |
|---|---|
| Document title | CREDIT NOTE |
| Credit note number | CN-004 (its own sequence, separate from your invoices) |
| Date issued | 20 August 2026 |
| Relates to invoice | Invoice 1031, dated 6 August 2026 |
| From | [Your name or business name], [address], VAT number [if registered] |
| Credited to | [Client business name], [billing address], VAT number [if they have one] |
| Line credited | Goodwill discount on the logo project, 1 × €50.00 |
| Subtotal credited | €50.00 |
| VAT at 18% (the same rate as invoice 1031) | €9.00 |
| Total credited | €59.00 |
| Reason | Goodwill discount agreed on 18 August 2026 |
| How it will be settled (optional) | Deducted from your next invoice, or refunded to your account |
Not VAT-registered? Leave out the VAT row: the total credited is €50.00, and the client owes €450 on that €500 invoice.
In Tally Crow most of that is filled in for you: pick the client and the bank account (which sets the currency), add the lines you are crediting, and the number, VAT and totals are handled. Linking the credit note to the invoice prints that invoice’s number on the PDF, and anything else you want the client to see, such as the reason or the invoice date, goes in the note, which also prints on the PDF. The next section walks through it.
How to create and issue a credit note in Tally Crow
A credit note in Tally Crow has the same shape as an invoice, so if you can raise an invoice, you can raise one of these. The steps:
- Start a new credit note. You can link it to the original invoice so the two are tied together in your records, or create a standalone credit note if there is no single invoice to attach it to.
- Choose the client and currency. You can issue credit notes in any currency, the same as invoices. To be applied later, a credit has to match the currency of the invoice you apply it to (more on that below).
- Add the lines you are crediting. List what you are reducing or refunding, with VAT and any discount, just as you would on an invoice.
- Give it its own number. Credit notes are numbered in their own right, separate from your invoices, so nothing collides.
- Generate the PDF and send it. Tally Crow produces the credit note as a polished PDF you can download and send on to your client, so they have a clean record of the adjustment alongside their invoice.
That’s the whole job. See features for how credit notes sit next to invoices, expenses and clients in one dashboard.
Tally Crow links a credit note to the original invoice and deducts unused credit on the next one, automatically.
Start invoicing freeHow to apply a credit note to a new invoice
Issuing a credit note reduces or cancels a past invoice. Applying one puts that credit towards the client’s *next* bill instead of refunding it. This is handy when a client has credit sitting with you and more work coming up.
Here is how it works in Tally Crow. When a client has an unapplied credit in a given currency, you can deduct it on a new invoice in that same currency. So a client with, say, €50 of unused credit and a new €300 invoice ends up owing €250, and the credit is marked as used. The currency has to match: a credit issued in euros applies to a euro invoice, not a pound one.
In short:
- Refund the client and the credit is settled by paying them back.
- Apply the credit and it comes off their next same-currency invoice automatically.
How to record a credit note in your books
Recording a credit note means making sure it exists in your records, attached to the right invoice, so your totals and your client’s agree. In Tally Crow the credit note is the record. Once you issue it, it sits alongside your invoices with:
- The document itself, numbered and dated, with the client, the lines credited and the VAT.
- The link to the original invoice, where you linked it, so the pair can be read together later.
- Per-currency figures. Tally Crow reports each currency on its own and never adds different currencies together, so a credit note in euros adjusts your euro numbers only.
- An export when you need one. You can export your data, so handing a period to an accountant or to your own spreadsheet is a download rather than a retyping job.
One thing to be straight about: Tally Crow is not double-entry accounting software. There is no chart of accounts, no journals and no balance sheet, and it does not file VAT returns. It calculates the VAT on your invoices and credit notes and keeps the documents in order. If your accountant posts journal entries, they do that in their own system, from the documents you send them.
A note on plans: which tiers include credit notes
Credit notes are a paid feature, so it is worth knowing where they sit:
- Free: credit notes are not included.
- Basic (€8.99/mo, €89.90/year): up to 10 credit notes a month.
- Pro (€14.99/mo, €149.90/year): unlimited credit notes.
If you issue the odd correction now and then, Basic’s ten a month is plenty. If credits and refunds are a regular part of how you work, Pro takes the cap off. See pricing for the full comparison. You can start on the Free plan with no card, and upgrade when you need credit notes.
VAT and record-keeping rules for credit notes vary by country, so check your obligations, or ask an accountant.
Getting the PDF to your client
Whichever route you take, the client should end up with a document. Tally Crow produces the credit note as a PDF, the same polished format as your invoices, which you download and send to the client so their records match yours. If you are also sending a corrected invoice, send both together with a short line explaining the change. It keeps the conversation simple and your client’s file complete.
For the wider picture on raising and sending the invoice itself, see how to invoice a client as a freelancer.
Issue your first credit note
You don’t need accounting software you have to learn to handle a refund or a correction properly. You need to reduce the right invoice, keep the numbering clean, and send a tidy document. Tally Crow does that: credit notes that mirror your invoices, link to the original, work in any currency, and deduct against a client’s next bill.
Frequently asked questions
Quick answers to common questions.
Not quite. A credit note is the document that reduces or cancels an invoice. A refund is one thing that document can lead to: you pay the client back. The other option is to apply the credit to their next invoice instead of handing money back.
Yes. In Tally Crow you can link a credit note to the original invoice so the two are tied together in your records, or create a standalone credit note when there is no single invoice to attach it to.
When a client has unapplied credit in a currency, you can deduct it on a new invoice in that same currency. The credit comes off the amount due and is marked as used. The currency of the credit and the invoice must match.
Yes, that is the clean way. Don’t edit or re-send a sent invoice under the same number. Issue a credit note against the original, then raise a corrected invoice with a new number if you need one. Tally Crow locks a sent invoice’s figures so corrections go this route.
Yes. A credit note can cancel an invoice in full or reduce it by part, for example a €50 discount on a €500 invoice. Credit only the lines or the amount you are adjusting.
Credit notes are not on the Free plan. Basic includes up to 10 a month, and Pro includes unlimited credit notes. See the pricing page for the full breakdown.
