What Information Should an Invoice Include?

An invoice tells a customer how much they owe. A credit note does the opposite: it reduces or reverses some or all of an amount that was previously invoiced. The two documents are connected, but they serve different purposes.

Understanding credit notes is useful when a sale changes after an invoice has already been issued—for example, because goods are returned, the price was wrong, a service was cancelled, or a discount was agreed later.

What is an invoice?

An invoice is issued by a seller to request payment for goods or services. It normally shows seller and customer details, invoice number, invoice date, items or services, tax, total amount due, due date, and payment instructions.

Read what information an invoice should include for a complete checklist.

What is a credit note?

A credit note, sometimes called a credit memo, is a document issued by the seller to reduce the amount previously billed to the customer.

It usually references the original invoice and explains the reason for the credit.

Credit note vs invoice comparison

Feature	Invoice	Credit Note
Purpose	Increase amount owed/request payment	Reduce amount previously invoiced
Created by	Seller	Seller
Reference	Unique invoice number	Unique credit note reference and original invoice

When might a credit note be used?

Returned goods

A customer returns part of an order after receiving the invoice. The seller may issue a credit note for the returned items.

Overbilling

The invoice accidentally charged 12 units instead of 10. A credit note may be used to reverse the excess charge according to the business’s accounting process.

Post-sale discount

The seller agrees a discount after the invoice has already been issued.

Cancelled service

An invoice covers a service that is later cancelled or reduced.

Why not simply edit the original invoice?

Once an invoice has been issued and entered into accounting records, changing it silently can create inconsistencies. The customer may have one version while your records contain another.

A credit note creates a visible audit trail showing the original invoice and the later adjustment. Exact legal and tax requirements vary, so follow the rules that apply to your business.

Example

You issue Invoice INV-1050 for ten units at £100 each. The customer later returns two units. The appropriate adjustment may be documented with a credit note that references INV-1050 and reduces the billed amount according to the applicable tax treatment.

The customer then owes the original invoice amount minus the credit, unless payment or other transactions have already occurred.

Should a credit note have its own number?

Businesses normally give credit notes unique references so they can be tracked separately from invoices, for example CN-2026-001 and CN-2026-002.

Keep the sequence consistent with your accounting process.

What information should a credit note contain?

Requirements differ, but a clear credit note commonly includes seller details, customer details, credit note number, date, original invoice reference, reason for the credit, items or amounts being credited, tax adjustment where applicable, and total credit amount.

Credit note vs refund

A credit note is a document that adjusts the account. A refund is the movement of money back to the customer. They may happen together, but they are not the same thing.

If the customer has not paid the original invoice yet, the credit may simply reduce the balance. If the customer already paid, the business may also need to refund money.

Credit note vs receipt

A receipt confirms that payment was received. A credit note reduces an amount that was invoiced. They serve very different functions.

What if the original invoice has a small typo?

How you correct an invoice depends on the type of error, whether it affects the amount or tax, and the rules that apply to your records. A minor non-financial correction may be treated differently from a price or tax correction.

If the correction affects the financial amount, follow your accounting and tax requirements rather than improvising.

Preventing invoice corrections

The easiest credit note is the one you never need because of a preventable mistake. Before sending an invoice, check the customer name, quantities, rates, tax, discounts, PO number, and final total.

Create the original document carefully using the Invoice Generator.

Create accurate invoices before sending

Add line items, tax, discounts, customer details, references, due date, and totals in one place.

Create an Invoice

Where does a quotation fit?

A quotation comes before billing and helps confirm the expected price. If the quote is clear and the customer accepts it, there is less chance of a later price dispute.

Use the Quotation Generator before the sale, and read invoice vs quotation if you are unsure which document you need.

Common credit note mistakes

• Editing an old invoice without keeping a clear record.
• Failing to reference the original invoice.
• Using vague reasons.
• Applying tax incorrectly.
• Confusing a credit note with a refund.
• Issuing duplicate credits.

Frequently asked questions

Does a credit note cancel an invoice?

A full credit can effectively reverse the financial amount of an invoice, while a partial credit reduces only part of it.

Is a credit note the same as a negative invoice?

The concepts are related, but terminology and legal requirements vary. Use the document type recognized by your accounting process and jurisdiction.

Can I issue a credit note after payment?

Yes. You may then also need to refund or carry forward the credited amount depending on the agreement.

Final thoughts

An invoice increases the amount a customer owes; a credit note reduces an amount that was previously billed. Credit notes create a clear record when a sale changes after invoicing. Reference the original invoice, explain the reason, calculate the adjustment carefully, and follow the accounting and tax rules that apply to your business.