What Is a Credit Invoice: How and When to Use

Credit invoices are a way of managing the flow of and accounting for your business expenses. Although they’re often confused with credit notes, they’re much more important. In this post, we’ll cover what a credit invoice is, why it matters to your business, how to write one, and more!

Credit Invoice Definition

A credit invoice is a document issued by a business to an individual, company, or government agency that records the sale of goods or services. It is usually issued after the goods are delivered and paid for, although sometimes it can take place before payment has been made. Credit invoices are essential for businesses to be able to track their incoming payments and keep track of monthly expenses.

Why Is a Credit Invoice Necessary?

Receiving a credit invoice from a customer is an acknowledgment that you have received payment for your goods or services. It also confirms the amount that they owe you, which can lead to the question: “Can I just write this off?”

No! You can’t just write it off by itself. The credit invoice must be linked with another transaction—like an invoice number or purchase order number—to be valid. In some cases, companies may have multiple invoices associated with one purchase order (more on this below). If these documents don’t match up exactly, then there could be errors in your financial records and processes.

When Do You Send a Credit Invoice?

You send invoices online when you have completed a project, delivered a product or service, and received payment for it. In other words, when you have been paid for your work.

The easiest way to remember this is that you should use a credit invoice when:

• You’ve completed a project that involved making something for someone else (and they’ve paid for it).
• You’ve delivered an item to someone (and they’ve paid for it).
• Someone has ordered something from your business or store (and has given their payment details).

How to Write a Credit Invoice

• Include all the information you would include on a normal invoice
• Keep it simple, don’t include too much detail
• Include the customer’s name, address and contact details
• Include the invoice number and date of issue (and your company stamp)
• Include the agreed amount payable for goods or services rendered, along with any discounts given to customers who pay within a certain period of time.

If applicable: Include payment terms such as net 30 days from shipment or due after delivery

When Can You Expect to Receive a Credit Invoice?

• When you receive a payment from a customer. 

Whether or not you’re expecting to get paid, receiving an invoice from your customer can help make sure that they pay their bills on time. 

• When you send an invoice to a customer and want them to pay immediately (if possible). 

For example, if one of your clients needs something by Friday in order for it to be included in their promotional materials for next week’s trade show, then sending them an invoice will ensure that they don’t forget about it!

• When making payments toward outstanding balances at banks or other financial institutions where credit invoices are issued as proof of debt service rendered by both parties involved within said transaction(s).

Conclusion

Credit invoices are important to follow legal compliance and help you avoid getting penalized by tax authorities. If you do not send a credit invoice, the recipient may be able to claim the goods or services as a gift, which will lower the value of your taxable income. Credit invoices are also useful for providing written evidence for your business tax returns when it comes time to file them with HMRC.