Issue a professional credit note (also called a credit memo) when a customer returns goods, receives damaged items or was overcharged. Link it to the original invoice, list what is credited and download a clean PDF. Everything stays in your browser.
Last updated:
Draft is saved in this browser automatically.
Live preview Updates as you type
Advertisement
Advertisement
How to use the Credit Note Generator
Enter your business details and the customer you are crediting.
Reference the original invoice: its number, date and (optionally) its total.
Choose a reason and how the credit will be settled, such as a refund or account credit.
List the items credited with quantity and unit price, then add tax, refunded shipping or a restocking fee.
Press Download PDF and send the credit note to the customer together with any refund.
When to issue a credit note
Situation
What to credit
Typical settlement
Customer returns unused goods
Returned items, tax on them; minus any restocking fee in your policy
Refund or account credit
Damaged or defective goods
Affected items, tax and usually the shipping
Refund or replacement plus credit
Short shipment
Units invoiced but not delivered
Deduct from the original invoice
Pricing or invoicing error
The difference between the charged and the correct price
Deduct from the invoice or next invoice
Order or service cancelled after invoicing
The full invoiced amount
Cancel the invoice balance or refund
Goodwill gesture
An agreed amount as a single line
Credit on the next invoice
Worked example
A customer returns one tent at $249.00 and three faulty headlamps at $34.95, and was overcharged $18.00 on a rope. Credited items = 249.00 + 3 × 34.95 + 18.00 = $371.85. With 8.81% sales tax, tax = 371.85 × 0.0881 = $32.76, so the total credit is $404.61. If the original invoice was $1,186.40, the balance left to pay after the credit is $781.79.
Credit note checklist
Unique credit note number and date of issue.
Original invoice number and date, so both sides can match the documents.
Seller and customer details, including a tax or VAT ID if your invoices show one.
What is credited and why: item lines, quantities, prices and the reason.
Tax reversed at the same rate charged on the original invoice.
How the credit is settled: refund, account credit or deduction.
Frequently asked questions
What is a credit note?
A credit note (or credit memo) is a document a seller issues to reduce the amount a customer owes on an invoice that has already been sent. It is used when goods are returned, arrive damaged, were short-shipped, or when the customer was overcharged. It works like a negative invoice and always refers to the original invoice.
Is a credit note the same as a refund?
Not exactly. The credit note records that the customer is owed money. The credit can then be settled as a refund to the original payment method, as a credit on the customer's account, or by deducting it from the original or next invoice. The settlement field on the form records which one applies.
Can I just edit or delete the original invoice instead?
In most bookkeeping systems you should not change an invoice once it has been sent. Issuing a separate, numbered credit note keeps a clear audit trail: the original invoice stays as it was and the credit note shows exactly what was reversed and why.
How is the total credit calculated?
Each line is quantity × unit price. Total credit = credited items + tax on those items + shipping refunded − restocking fee. Tax is the item total (plus shipping if you tick Shipping was taxed) × the tax rate. If you enter the original invoice total, the balance after credit is invoice total − total credit.
What is a restocking fee?
A restocking fee is a charge some sellers keep when a customer returns goods that were not faulty, to cover handling and repackaging. It is usually a percentage of the returned item value, commonly between 10% and 25%. It should be disclosed in your return policy before the sale; do not charge one for defective goods.
Should the amounts on a credit note be negative?
Either style is used. This generator shows positive amounts under a clear Credit Note title and a Total credit line, which is easy for customers to read. In accounting software the same document is recorded as a negative sale against the customer's account.
How should credit notes be numbered?
Use their own sequential series, separate from invoices, for example CN-2026-0101, and never reuse a number. The +1 button generates the next number and remembers the counter in your browser.
Are all the tools on FreeToolCabin tested for quality and accuracy?
Yes! Every tool on our site undergoes automated Q/A testing in real browser environments to ensure high precision, correct output, and zero errors. If you happen to spot a bug or have a suggestion, please contact us at [email protected] and our team will review it right away.