How to Cancel a Credit Note or Remove a Credit Allocation

When a credit note is raised for the wrong amount, or applied to the wrong invoice, you can unwind it yourself. The steps have to be done in a set order, because each one is blocked until the one before it is finished.

Overview

Latner never deletes financial records - it reverses them. Unwinding a credit always runs in the same direction, from the most recent action back to the earliest:

Remove the credit allocation - the link between the credit note and the invoice it was applied to.
Cancel the credit note - only possible once no credit is allocated or refunded.
Cancel the invoice - only needed if the invoice itself is wrong, so you can correct and re-invoice.

Work in this order and each step is straightforward. Skip ahead and Latner will stop you with a message explaining what is still in the way.

Before You Begin

Removing an allocation needs the Create Customer Payment permission. Cancelling a credit note or an invoice both need Cancel Customer Invoice. If a rental contract is involved you may also need Reopen Rental Contract.

Always apply and remove credits in Latner, never directly in Xero, MYOB or Sage. Latner pushes the allocation to your accounting system and keeps both sides matched. If you allocate the credit in the accounting system instead, it attaches to the wrong document and the two records no longer agree.

Step 1 - Remove the Credit Allocation

Open the credit note and go to its Credit Allocations tab. Tick the allocation you want to remove and click the bin icon that appears above the table, then Confirm.

Do this from the credit note, not the invoice - the invoice's Credit Adjustment tab shows the same allocation but is read-only. Allocations also can't be edited, so if the amount is wrong, remove it and create a new one.

Removing the allocation frees the credit and reopens both documents: a credit note or invoice that had gone to Paid returns to Completed, and the credit shows as available again under Remaining Credit.

Step 2 - Cancel the Credit Note

With no allocation left, choose Options › Cancel Credit Note, enter Cancellation Notes explaining why, and click Confirm. Cancelling rolls back any billing the credit applied to the related rental contract, sales order or work order, and voids or deletes the credit note in your accounting system.

If you see "Unable to cancel a (partially) paid or credited invoice" or "Unable to cancel a PAID invoice", there is still an allocation or a refund attached - go back to step 1. A fully allocated credit note sits in Paid status, which is why the allocation has to go first.

Step 3 - Cancel and Re-Raise the Invoice

If the original invoice was wrong, cancel it with Options › Cancel Customer Invoice on the invoice, fix whatever was wrong, then invoice again. There is no "re-raise" button - correcting an invoice always means cancel, fix, re-invoice.

Cancelling puts everything the invoice consumed back into play: rental contract lines return to Pending so they can be billed again, operator dockets go back to Approved, sales order quantities are released, and a linked work order is reopened.

Note: invoices synced to Sage cannot be cancelled from Latner - you will see "Cannot Cancel Invoices Synced to SAGE". Contact Latner support for these. Xero and MYOB are handled automatically, with the invoice voided or deleted on their side.

Rental Contracts: Two Extra Wrinkles

If the credit relates to a rental contract, two things commonly get in the way.

The contract has completed. You cannot cancel an invoice attached to a completed contract - you will see "Cannot Cancel an Invoice that is linked to a Completed Rental Contract". Open the contract and choose Options › Reopen Rental Contract first, which returns it to Active. So the full sequence becomes: remove the allocation, reopen the contract, cancel the invoice, fix the contract, invoice again.

"Nothing to Invoice". After crediting a contract, pressing Preview in the Invoice Rental Contract window can report Nothing to Invoice. That means the lines are still marked as billed up to that date - crediting an invoice does not by itself release them. The message clears once the invoice that consumed those lines is cancelled, which resets them to Pending. You can also reach the same result by choosing a later Bill To date, or by using a Return or Final invoice type.

Checking It Worked

Open the invoice and look at its summary panel. Balance Credited shows how much credit has been applied and Balance Outstanding what is still owed - these also appear in the footer of the invoice PDF, which is the easiest way to show a customer that their credit has been applied. On the credit note itself the same figures are labelled Used Credit and Remaining Credit.

FAQs

The credit note is Paid and there is no Cancel Credit Note option. What now?

Cancel Credit Note is hidden while a credit note is Paid or already cancelled. Remove the allocation on the Credit Allocations tab first - that returns the credit note to Completed and the option reappears.

I allocated a credit to the wrong invoice.

Remove the allocation from the credit note's Credit Allocations tab, then use Options › Allocate Credit to apply it to the correct invoice. The credit note itself does not need to be cancelled.

Can I just change the amount on an allocation?

No - allocations cannot be edited. Remove the allocation and create a new one for the right amount.

I created a duplicate credit note.

Remove any allocation on it, then cancel it. The customer's remaining credit is corrected automatically.

We applied the credit in Xero instead of Latner. How do we fix it?

Reverse the allocation in the accounting system so the two sides match again, then allocate the credit properly in Latner so it flows back out. Always start in Latner for credits.

Does cancelling a credit note remove it from our accounts?

Yes. Latner voids or deletes the credit note in the connected accounting system as part of the cancellation. If that step fails, the whole cancellation is rolled back so the two systems never drift apart.