Getting Started

Building Blocks

Subscription Features

Localization

Invoices

Credits

Billing Features

Taxes

Payment Methods

Direct Debit Payments

Configuring Gateways

Fraud Management

Hosted Pages

Attach Additional Data

Migration

Open Source Resources

Other Features

API Integration

Third Party Integrations

Credit Notes 

A "credit note" is a document that specifies the money owed by a business to its customer.

It also serves as a record for filing tax returns. When you pay taxes to the government, the tax paid is based on the invoice amount. If the amount has been refunded to the customer in the form of credits, then supporting documents showing this information are required for tax reversal purposes, while filing tax returns.

A credit note includes details such as the credit amount, date of issue and the reason for issuing the credit.

The Credit Notes tab in Chargebee lists all the Credit Notes that have been generated, with details of the Credit Note type, (Refund Due, Adjusted, etc.), available credits, customer details, Credit Note date, etc.

Why or when would a credit note be issued?

A credit note can be issued for the following reasons:

  • Return of products due to

    • Expiry or damage
    • The product being different from what the customer had ordered
    • Change in the quantity
    • Customer's dissatisfaction
  • Cancellation of the purchase

  • Invoice amount wrongly stated.That is, miscalculation of price, tax, or discounts

  • Partial or complete waive off of the product sale after the invoice is generated and sent to customer

In Chargebee, you can select one of the following reasons while creating a Credit Note:

  • Product Unsatisfactory
  • Service Unsatisfactory
  • Order Change
  • Order Cancellation
  • Waiver
  • Other

The following reasons, however, are shown/recorded during certain operations alone:

  • Chargeback

    • This reason will only be shown during the Record Refund operation.
  • Write off

    • This reason will be recorded during an invoice Write Off operation.
  • Subscription change

    • This reason will be recorded during changes in a subscription when the proration option has been enabled.

Types of Credit Notes 

In Chargebee, two types of Credit Notes can be created:


Adjustment Credit Note

An Adjustment Credit Note could be used to adjust the amount of an already existing invoice that is in Payment Due or Not Paid state. This type of Credit Note can be created when the price of an invoice has to be reduced as a discount to the customer.

An Adjustment Credit Note is automatically created when

  • An invoice has been written off
  • A subscription is changed with the proration enabled and the current term's invoice is in the Payment Due or Not Paid state
Note

Adjustment Credits appear as "Adjustments" in the invoice.


Refundable Credit Note

A Refundable Credit Note can be created if you would like to repay a certain amount to the customer. This can be retained as credits which are then automatically applied to future invoices. You can also choose to apply them on existing unpaid invoices, or refund the amount to the extent of credits available.

In Chargebee, Refundable Credits are automatically created during:

  • Refund of an invoice. In this case, a Credit Note will be created for the particular invoice and the refund will be issued against the same.

  • A subscription is changed with the proration enabled and the current term's invoice is in the Paid state. In this case, the Refundable Credits will be automatically applied to the forthcoming invoices or refunded back to the customer.

Note

Refundable Credits appear as "Credits" in the invoice.

Statuses of a Credit Note 

The following are the different statuses of a Credit Note:

  • Refund Due - When the credits are yet to be used, or have been partially used.

  • Refunded - When the entire credits have been used, the status of the Credit Note will change from Refund Due to Refunded

  • Voided - When a Credit Note has been canceled

  • Adjusted - When a Credit Note has been adjusted against an Invoice amount

Creating a Credit Note 

If you would like to return an amount to the customer but would like to retain the same in the form of credits, you could use the Create Credit Note operation. The option will be present in the Actions panel of the particular invoice's details page.

When using the Create Credit Note operation, by default, the amount given will be prorated against all the line items present in the invoice.

Upon selection, you could choose the

  • Credit amount
  • Credit Note type (Adjustment or Refundable) to be given
  • Reason code for issuing the Credit Note
  • Add notes to be displayed in the PDF Credit Note

Line Item Mode

If you'd like to capture the amount against some line items alone, click Switch to Line Items Mode. This option allows you to create the Credit Note with credits against specific line items present in the invoice.

For example, if the subscription has 3 items (1 unit of Product A+2 units of Product B), and 1 unit of Product B is returned by the customer, you could use the Line Item Mode to record credits against this particular line item.

Note

The type of Credit Note that can be created would depend on the invoice status. For example, if the invoice is in Payment Due state, then only the option to create a Credit Note to adjust the due amount would be allowed. Similarly, if the invoice is in the Paid state, only the option to create a Credit Note to provide refundable credits would be allowed. If the invoice is partially paid, you could create a Credit Note to:

  • Adjust the due amount for the unpaid amount
  • Provide credits against the paid amount

Proration and Credit Note Creation

As mentioned earlier, during a subscription change, Credit Notes created due to proration (Adjustment/Refundable), or charges, will be generated depending on the invoice status. More information on how proration works, here.

Removing Credits/Adjustments Applied 

Once the credits have been applied, the option to remove the applied credits or adjustments is shown in the particular invoice's page as part of the Payments & Credits and Adjustments sections.

Note

The credit balance available for each customer will appear in the Summary section of the customer's details page in Chargebee.

Issuing Refunds 

To issue refunds to a customer, use the Refund option on the Actions panel of the Credit Note's details page:

Fill in the amount you'd like to refund and provide a comment on the same, if required.

Click Refund.

The refunded amount and the comment will appear in the Refunds & Allocations and Comments sections, respectively.

Recording Refunds 

Use the Record Refund option to record refunds that have been made via payment methods other than card such as cash, check, bank transfer, and so on.

Click Record Refund to provide details of the refund, such as the amount, refund method, refund date, reference number, and a comment if required.

The refunded amount and the comment will appear in the Refunds & Allocations and Comments sections, respectively.

Allocating Credits 

The option to allocate credits is present in the credit note's page and has the same operation as Apply Credits.

The Allocate Credits option is only available when

  • The Credit Note has unused credits
  • The customer has invoice(s) in Payment Due or Not Paid state

When this operation is selected, a list of the available Not Paid or Payment Due invoices will be displayed and the credits can be allocated to any of them.

Voiding or Deleting a Credit Note 

The option to Void or Delete a Credit Note can be used to remove wrongly generated Credit Notes. If the Void option is used, the status is marked as Voided but the Credit Note will still be available in the system. However, if a Credit Note is deleted, it is removed from the system and the operation cannot be undone. It is good accounting practice to void an invoice instead of deleting one.

A credit note can be voided or deleted if:

  • It has not been allocated to any invoice
  • No refunds have been done

Removing Allocated Credits 

The option to remove allocated credits is present in the particular Credit Note's details page.

When the allocated refundable credits are removed using this option, the following occurs:

  • The invoice's due amount will be increased
  • The credit note's available amount will be increased

If the credit note is of the type Adjustment,

  • The invoice's due amount will be increased
  • The credit note will be voided

Customizing Credit Notes 

You can customize your Credit Notes to suit your requirements. To customize your Credit Notes, go to SettingsSite SettingsCustomize Invoice & Credit Note.

This is similar to customizing invoices, except for the following options which are available only for invoices:

  • Billing Period
  • Next Billing Date
  • Invoice Status
  • Custom Fields
  • VAT Exemption Text

How is a credit note different from Promotional Credits? 

Promotional Credits can be used to give discounts to your customer in the form of credits. This differs from a credit note, which can be used to return the amount the customer paid in the form of credits or cash.

Loading…