How to Create a Credit Note from Rental Contract

A credit note from a rental contract refunds a customer who was billed past the point they actually gave the equipment back, so an over-charged hire can be put right without unpicking the invoice you already sent.

Overview

Sometimes the billing runs ahead of the equipment. A machine is invoiced in advance to the end of October, the customer sends it back at the end of August, and now they have paid for two months they never used. Rather than cancel the original invoice and start again, Latner raises a credit note against the contract for the over-billed period.

The credit is raised from the contract, not from the invoice. You use the same Options › Invoice action you would use to bill it - there is no separate "credit note" menu item.
Latner works out which one you are doing from the preview total. When the ticked lines add up to a negative figure, the button at the bottom changes from Create Invoice to Create Credit Note and turns red.
Only two invoice types can credit: Returned/Completed Items and Final Invoice. Invoice in Advance and Progress Invoice never produce a credit.
A credit only arises where equipment has been billed past its actual off hire date. If nothing was over-billed, there is nothing to give back.
The finished record is an ordinary customer credit note with a Source of Rental Contract. Its Remaining Credit is then yours to allocate against the customer's outstanding invoices, or to refund.

Before You Begin

Crediting a rental contract has to be switched on for your business, and you need the permission that lets you invoice a contract.

Requirement	Where to Find It
Enables Crediting of a Rental Contract switched on	Security › Settings › Rental
Invoice Rental Contract permission	Security › Configuration › Permission Groups - Rental › Option
Equipment off hired and returned, with a return date earlier than the date it was billed to	The contract's Options › Off Hire and Options › Return

The Rental settings. This one switch controls the whole feature, for every contract in the business

If Enables Crediting of a Rental Contract is off, there is no error message to tell you so. Latner simply drops the negative lines out of the preview, so the total can never go negative and the button never changes. If a credit you were expecting doesn't appear, check this setting before you go looking at the contract.

You do not need the Create Credit Note permission for this. That one covers manual credit notes and credit notes raised from a customer invoice. The rental contract route is governed by Invoice Rental Contract instead.

Creating the Credit Note

The walkthrough below credits a contract that was invoiced in advance to 31 October, but whose excavator came back on 31 August.

Step 1 - Check the equipment really was returned early

Open the rental contract and confirm the equipment has been through both Off Hire and Return, with the real date it came back. A credit is calculated from that off hire date up to the date the line had already been billed to, so if the equipment is only off hired and not yet returned, or the return date is wrong, the credit will be wrong too.

If the equipment is still on rent, there is nothing over-billed and the preview will come back empty.

Step 2 - Open the Invoice action

Choose Options › Invoice. This is the same action you use for any rental invoice - whether you end up with an invoice or a credit note is decided later, from the figures.

The Invoice option is unavailable once a contract is closed, that is, once its status is Completed, Cancelled or Lost.

The rental contract Options menu. Invoice is the entry point for a credit note as well as an invoice, so there is nothing labelled "credit note" to look for here

Step 3 - Choose the invoice type

The Invoice Rental Contract window opens with the contract, customer, site and branch already filled in and locked. Set the three fields you can change:

Invoice Date - the date shown on the credit note, and the date the due date is calculated from. Defaults to today.
Bill To - the date to bill the contract up until. Defaults to today, which is normally what you want: the credited period is measured back from the date the line was already billed to, not from this field.
Invoice Type - choose Returned/Completed Items to credit returned equipment, or Final Invoice if you are closing the contract out at the same time. These are the only two types that can credit.
Credit Card Surcharge? - leave this unticked for a credit note. It is there for cash customers paying by card.

The Invoice Type list. Invoice in Advance and Progress Invoice are the everyday billing types and can never produce a credit; only the bottom two can

Step 4 - Preview the credit

Click Preview. Latner works out what would be billed or credited and lists it, without writing anything - you can preview as many times as you like.

Read the preview carefully before you go on:

Credited lines show negative amounts, and the Sub Total, Tax and Total in the footer show in red.
Because the total is negative, the button now reads Create Credit Note and is red rather than blue.
The Billing Period column shows the span being credited, and Billed To Date shows how far the line had already been billed - the gap between the two is what you are giving back.
Untick Required on any line you don't want to credit. The totals recalculate immediately, and if what's left adds up to a positive figure the button changes back to Create Invoice.
Some tick boxes are greyed out. Percentage-based charges such as damage waiver and environmental levy follow the line they belong to ("Cannot deselect related lines"), and operator docket lines can't be dropped on their own either.

The preview of a credit. The excavator is credited for the period between its return and the date it had been billed to, and the damage waiver and environmental levy come with it automatically

If the preview comes back empty you'll see a Nothing to Invoice message. That means nothing on this contract is either due to be billed or over-billed for the type you chose.

Step 5 - Create the credit note

Click Create Credit Note. Latner creates the credit note and confirms it with a message you can click through to open the new record.

On the credit note itself, Source reads Rental Contract and Linked To points back at the contract it came from, so the two records always find each other. Rental Invoice Type records which type you used.

The finished credit note. Amounts are shown as positive figures even though the preview was negative, and the whole balance sits in Remaining Credit until you do something with it

After Creation

The credit note appears on the contract's Invoices tab alongside the invoices, marked with a Credit Note type chip, and on Customers › Customer Invoices. There is no separate credit notes list - invoices and credit notes share one screen and one number sequence.
Amounts are stored as positive figures on the credit note. The negatives you saw in the preview describe the effect on the contract; the credit note itself records what the customer is owed.
The contract's Credit Balance (incl.) goes up by the credited amount. That figure is the credit still sitting unused against this contract.
With Latner's usual configuration the credit note is created as Completed straight away and pushed to your accounting system. If your business has chosen to open rental records for review instead, it lands as Open and goes through approval first.
The credited rental lines have their billed-to date and invoiced totals wound back, so the contract's own figures stay consistent with what has actually been charged.
Nothing is refunded or applied yet. Use Allocate Credit on the credit note to put it against an outstanding invoice, or Refund Payment to pay it back.

The contract's Invoices tab. Credit note 208 sits directly under the advance invoice 207 it corrects, with the invoice type it was raised under

Financial Details on the contract, where Credit Balance (incl.) shows the credit raised against this contract but not yet used

A Completed credit note has already been sent to your accounting system, so it is not something to raise by accident. Undoing one means Cancel Credit Note, and only the most recent invoice or credit note on a contract can be cancelled - so if you have billed the contract again since, you have to unwind those records first. Check the return date and untick anything you don't mean to credit before you click the button.

FAQs

I clicked Preview but the button still says Create Invoice. Why?

The ticked lines don't add up to a negative figure, so Latner still sees this as an invoice. Check three things: the invoice type is Returned/Completed Items or Final Invoice; the equipment has been returned, not just off hired; and the return date is genuinely earlier than the date the line was billed to. It can also happen when a genuine credit is outweighed by new charges on the same preview - untick those charges and the button will flip.

The preview is empty and says "Nothing to Invoice".

There is nothing to bill and nothing over-billed. Either the equipment is still on rent, or it was only ever billed up to the date it came back, so no money is owed back. Process the return first, then preview again.

The credit lines don't appear at all, on any invoice type.

This is almost always the Enables Crediting of a Rental Contract setting being off. With it off, negative lines are filtered out of the preview before you ever see them, so the screen looks like there is simply nothing to credit. Your administrator can switch it on under Security › Settings › Rental.

Do I need the Create Credit Note permission?

No. Credit notes raised from a rental contract are covered by the Invoice Rental Contract permission, under Rental › Option. Create Credit Note applies to manual credit notes and credit notes raised from a customer invoice.

Why is the credit note total positive when the preview showed negatives?

They are two views of the same thing. The preview shows the effect on the contract, so the amounts come off as negatives. The credit note is a record of what the customer is owed, so it stores those amounts as positives. The figures match.

Can I credit only some of the lines?

Yes - untick Required on the lines you want to leave out before you create it. A few tick boxes are locked: percentage charges such as damage waiver and environmental levy are credited with the line they were charged on, and operator docket lines can't be excluded individually.

Does a credit note from a rental contract need approval?

Usually not. Rental contract records are normally set to complete straight away, so the credit note is Completed the moment you create it. If your business has turned Default Rental Contract Customer Invoices to Completed off, it is created as Open and goes through Request Approval and Approve Credit Note instead - and where Enforce Credit Note Approval Limits is also on, the approver needs a credit note approval limit covering every line type on it.

I've raised it against the wrong contract. How do I undo it?

Use Cancel Credit Note from the credit note's own Options menu, which rolls back the related billing on the contract. It has to be the most recent invoice or credit note on that contract, and it can't be cancelled once any of it has been allocated or refunded - remove those first. See How to Cancel a Credit Note or Remove a Credit Allocation.

The credit doesn't seem to have reduced what the customer owes.

It won't until you tell Latner where to put it. A credit note holds a balance against the customer's account; use Allocate Credit to apply it to an outstanding invoice, or Refund Payment to hand the money back. See How to Allocate Credit Note to a Customer Invoice.

The Invoice option is greyed out.

The action is unavailable once the contract is closed - Completed, Cancelled or Lost. Reopen a completed contract if you need to credit it. If the option is missing altogether rather than greyed out, you don't hold the Invoice Rental Contract permission.

Watch the Demo

Prefer to watch it? Step through the same flow here.