How to Create Credit Note from Customer Invoice | Latner Software Documentation

A credit note reverses part or all of a customer invoice, so you can put right an overcharge without cancelling the invoice and raising it again.

Overview

Not every billing mistake is worth unpicking. When an invoice is right in most respects and wrong in one - a delivery charged twice, a machine billed for a day it never worked - a credit note is the tidy fix.

Latner builds the credit note out of the invoice's own lines, so descriptions, item codes, tax rates and the rental contract link all carry across.
You pick which lines to credit and, for each one, how many units and how much per unit - so a partial credit is no more work than a full one.
The credit note is a separate document with its own number, status, PDF and email. The original invoice is left exactly as it was.
Creating a credit note does not reduce what the customer owes. It creates credit, which you then allocate to an invoice or refund.
The option only appears once the invoice is finished - an invoice in Completed or Paid status.

Before You Begin

You need one permission and one invoice in the right state. The two settings below are optional and change how the credit note is numbered and approved.

Requirement	Where to Find It
Create Credit Note permission	Security › Configuration › Permission Groups, under Customers › Option
An invoice in Completed or Paid status	Customers › Customer Invoices
Customer Credit Note Number Format (optional)	Security › Settings › Customers
Enforce Credit Note Approval Limits (optional)	Security › Settings › Customers

Enforce Credit Note Approval Limits, in Security › Settings › Customers - off by default, so any user with Create Credit Note can complete a credit note

Turn Enforce Credit Note Approval Limits on and whoever completes a credit note must hold an approval limit that covers every line type on it. Those limits are set up under Customers › Configuration › Credit Note Approval Groups. Leave the setting off and anyone with the Create Credit Note permission can complete one.

Creating the Credit Note

Step 1 - Open the invoice you want to credit

Go to Customers › Customer Invoices and open the invoice. Check the Status at the top of the page: crediting is only offered on an invoice that has been finished, so an Open invoice has to be completed (or simply corrected) first.

A Completed customer invoice. The Total here, $2,005.40, is the figure the credit note is measured against

Step 2 - Choose Create Credit Note from Invoice

Click Options › Create Credit Note from Invoice. If the entry is greyed out, the invoice is not yet Completed or Paid.

The invoice Options menu. Create Credit Note from Invoice sits directly beneath Create Customer Invoice

Step 3 - Review the lines Latner has brought across

The form opens with every line from the invoice listed and ticked, each at its full quantity, so the default is a complete reversal of the invoice.

The four fields along the top - Credit Note for Invoice, Customer, Customer Site and Branch - are copied from the invoice and cannot be changed. A credit note always belongs to the same customer, site and branch as the invoice it credits.

In the table:

Include - whether the line is credited at all. The tick box in the header row selects or clears every line at once.
Line #, Item, Description - copied from the invoice and read-only.
Original Qty - what was invoiced. This is the ceiling for the credit.
Qty To Credit - editable. Starts at the full quantity.
Unit Price - editable. Starts at the invoiced unit price.
Sub Total, Tax, Total - recalculated as you type, using the line's original tax rate.

Equipment hired on a rental rate has no unit price of its own on the invoice, so Latner divides that line's sub total by its quantity to get one. That is why an equipment line can show an unrounded figure such as $634.29.

The Create Credit Note from Invoice form as it opens. Every line is ticked and the Credit Total matches the invoice exactly

A line that was already a negative adjustment on the invoice - a goodwill credit, say - shows its unit price in red, and Latner will refuse to save a credit line with a negative unit price. Clear the tick on those lines. Crediting a credit is a double negative that would add to the customer's bill.

Line 2 of this invoice is a goodwill credit, flagged in red at -$80.00. Untick it before creating the credit note

Step 4 - Set what you are actually crediting

Untick the lines you are not crediting, then adjust the two editable columns on the lines you are:

Qty To Credit - must be more than zero and no more than Original Qty. Typing a quantity ticks the line for you; setting it to zero unticks it.
Unit Price - the amount credited per unit. Lower it to credit part of a charge, for example $250 of a $550 delivery fee. It cannot be negative.

Watch the Credit Total in the footer as you go - it counts only the ticked lines. At least one line has to be ticked, or Latner answers with "Please select at least one Invoice Line to credit".

Only the two transport lines are being credited, and the Delivery unit price has been cut from $550.00 to $250.00. Unticked lines fall to $0.00 and the Credit Total settles at $880.00

Latner warns when the credit adds up to more than the invoice, but it does not stop you. Because each line is capped at its original quantity, this only happens when a unit price has been typed higher than the one invoiced - which is almost always a typo. Read the warning and check the figure before you continue.

The over-credit warning. A Delivery unit price fat-fingered as $3,000.00 pushes the Credit Total to $4,700.40 against an invoice of $2,005.40

Step 5 - Create the credit note

Click Create Credit Note. Latner creates the document and takes you straight to it. It arrives in Open status with Source set to Manual, its own number from the Customer Credit Note Number Format setting, and a Credit Date of today - not the date of the original invoice.

The new credit note in Open status. Amount Owing already shows the full $880.00 as Remaining Credit

Scroll down and the Details tab holds only the lines you chose, renumbered from 1. Credit Note for Invoice links straight back to the invoice you started from, and behind the scenes the credit note also inherits that invoice's rental contract and delivery address.

Two credited lines, renumbered 1 and 2, with Credit Note for Invoice pointing back at invoice 188

Step 6 - Complete the credit note

An Open credit note is still a draft. While it is open you can use Options › Add Credit Note Detail to add a line the invoice never had, or delete lines you no longer want.

When it is right, choose one of:

Options › Complete Credit Note - finalises it immediately.
Options › Request Approval - sends it to a colleague instead. Pick an Approver and add Notes; the credit note moves to Pending Approval and the approver is notified. They complete it with Approve Credit Note, or send it back with Reject Credit Note, which returns it to Open.

Either way the credit note needs at least one detail line, and its total cannot be negative.

The credit note Options menu while it is Open. Refund Payment and Allocate Credit stay greyed out until the credit note is completed

Completing the credit note stamps Date Completed and Completed By, pushes it to any active accounting integration, and unlocks Generate Credit Note PDF, Email Credit Note, Allocate Credit and Refund Payment.

The same credit note once completed. Status reads Completed and the $880.00 is now credit that can be allocated or refunded

After Creation

The credit note appears in Customers › Customer Invoices alongside your invoices, with Type of Credit Note and Source of Manual.
The original invoice is unchanged - same total, same balance outstanding. Creating credit does not spend it.
The credit note's Amount Owing card tracks the credit: Total Credit, Refunded Credit, Used Credit and Remaining Credit.
To reduce what the customer owes, use Options › Allocate Credit on the completed credit note. The allocation then shows on the invoice's Credit Adjustment tab.
To hand the money back instead, use Options › Refund Payment.
Once the credit is fully allocated or refunded, the credit note moves from Completed to Paid.

Credit note 198 at the top of the Customer Invoices list, typed as a Credit Note with a Manual source

A credit note in Paid status can no longer be cancelled - all of its credit is committed to an allocation or a refund. If you need to undo it, remove the allocation or the refund first and the credit note drops back to Completed, where Cancel Credit Note is available again.

FAQs

Create Credit Note from Invoice is greyed out. Why?

The invoice is not Completed or Paid. An Open invoice can still be edited directly, so there is nothing to credit yet - correct the lines, or complete the invoice first.

I created the credit note but the invoice still shows the full balance outstanding. Did it work?

Yes - that is how it is meant to behave. Creating a credit note produces credit; it does not decide where the credit goes. Complete the credit note, then use Options › Allocate Credit to apply it to the invoice. Only then does the invoice's balance outstanding come down.

Can I credit only part of a line?

Yes, in either direction. Reduce Qty To Credit to credit fewer units, or reduce Unit Price to credit less per unit. Both can be changed on the same line.

Can the credit note come to more than the invoice?

Latner shows a warning but does not block it. Since Qty To Credit is capped at the invoiced quantity, this only happens when a Unit Price has been typed higher than the one invoiced - so treat the warning as a prompt to re-check the figure.

Can I add something to the credit note that wasn't on the invoice?

While the credit note is still Open, yes - Options › Add Credit Note Detail. If the credit has nothing to do with a particular invoice, raise it on its own instead with Create Manual Credit Note.

Completing the credit note fails with a message about approval limits. What now?

Enforce Credit Note Approval Limits is switched on, and your user either has no limits at all ("User does not have any Credit Note Approval Limits") or none that stretches to the value of one of the line types on this credit note. Ask an administrator to check your limits under Customers › Configuration › Credit Note Approval Groups, or use Request Approval to send it to someone whose limit does cover it.

I picked the wrong lines. Can I edit the credit note?

Only while it is Open - at that point you can add and remove detail lines. Once it is completed, cancel it and create a fresh one from the invoice. Latner reverses financial records rather than editing them.

Watch the Demo

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