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Creating Credit Notes

This article will help you understand the functionality of Credit Notes and its inter-dependency with invoices and payments.

Rashmi Kashyap

8 Nov, 2023 - Updated 1 year ago

Introduction to Credit Notes

A credit note is an amount that must be paid back to the customer as credits on the invoice or as refunds.
Situations, when the customer will be given credits, are:

If there was a delay in the delivery of the product
If the wrong product was shipped
If there was an error in invoice pricing
If the customer returns the product
If the product was defective

When do Credit Notes come in the post-sales journey?

When the customer returns a product after it has been delivered or if there is a pricing error in the invoice, then monetary credit will be allocated to the customer’s account.

Feature Availability and Limits

	Sales Starter	Sales Professional	Sales Enterprise	One Professional	One Enterprise
Feature Availability
Credit Notes			✓		✓
Taxes and Discount Availability
Group Taxes			✓		✓
Individual Taxes			✓		✓
Group Discount			✓		✓
Individual Discount			✓		✓

Did you Know?
The modules- Credit Notes, Delivery Notes, Receipt Notes, and Bills are a part of the Inventory Add-On Extension. You have to install this extension by going to Settings> Extension Store to use these modules.

Benefits of Using Credit Notes

Prevents the creation of negative invoices.
Create a credit note with a click from an invoice.
Apply credit towards partially paid or unpaid invoices, or create a refund payment.
Credit notes can be applied to multiple invoices.
Set up approval on credit notes to ensure that they are only extended after the supervisor’s approval.

Credit Notes List View

List view sorts and lists all the CNs based on the last modified CN.

Columns in the List view

The columns that are visible by default in the List View are :

Name- Displays the name of the CN.
Status- Displays the current status of the credit note.
Applied Credits- Displays the credit amount that is applied to the invoice.
Refund- Displays the credit amount that is paid back to the customer.
Available Credits- Displays the total amount left after all the credits are applied.

List View Actions for Credit Notes

You can perform many quick actions such as Comment, Export, Print, Email, etc. on the credit notes in the list view.
To learn more about List View actions in Vtiger CRM, click here.

Credit Notes Summary View

The Summary View is the view that appears when you click a particular record from the List View. The Summary View displays a collection of all the key information of the record.
Summary View can be divided into four sections. Each section has a particular functionality.

Summary View Actions
- Follow: You can follow any CN record to get updates on all the activities performed on that record.
- Tags: You can add tag names to the record to identify the record easily.
- Print: You can print the CN or save it as a PDF for future reference.
- Duplicate: You can duplicate the current record and have all the details reflected in a new record.
- Delete: You can delete a record by clicking this button.
Credit Note Document: The generated Credit Note along with the template will be displayed here.
Widgets
- Activity-All the activities made on the credit note are displayed here. Here you can add comments related to the credit note.
- Analytics-You can view all the metrics related to the credit note in the form of charts, mini lists, etc. You can also create new ones here.
- Sales Ops- All the related invoices will be displayed here.
- Payments- All the related payment records will be displayed here.
- Settings- You can change the template of the CN here.
Details View: You can view and edit all the information about the CN record by clicking the Deep Dive button in the Summary View of the record.

How to Create a Credit Note

Listed below are the ways you can create a CN.

From Credit Notes’ List View

You can use the +Add Credit Note button to create a new CN. You can find it in the top right corner of the credit notes’ List View.
Follow the steps below to create a CN:

Log in to the CRM
Click the Menu icon.
Go to the Inventory tab.
Select the Invoices module.
Go to Order Fulfillment > Invoices. The Invoices List View opens.
Click Add Invoice.
Enter or select information for the following sections:
1. Invoice Details
2. Address Details
3. Terms & Conditions
4. Item Details
5. Description Details
Click Save to create the CN.

This newly created CN will be linked and will be visible in the Summary View of the invoices’ record.

Credit Note Configuration

You can configure Taxes, Tax regions, Shipping Charges (if any), and Terms and Conditions from the
Settings > Inventory Management section. These actions are limited to the Admin role.
Refer to the Tax Management article to learn how to set up Taxes and other Settings.

Tax regions: Taxes can be set based on a region. Regions are set up in the Tax Settings screen.
Currency: It is the same as the currency defined in the Deal. Credit Note’s Line item currency is the same as the record-level currency.
Tax mode:
1. Group Taxes: If there are multiple products/services in the inventory, group taxes help in populating tax rates according to specific tax calculations.
2. Individual Taxes: You can enable this option while creating a credit note. You can apply taxes for individual items in a Credit Note by clicking the Configure button in the credit note.
3. Note: The default Tax mode is set based on the option set in the Tax Management page by the administrator. This can be overridden on a credit note level from the credit note Configuration pop-up.
Price Books: Price Books allows you to define different prices for products and services.
1. The prices of the items can vary at times depending on the customers and their needs. When a Pricebook is selected or changed, the system updates the unit prices of all line items based on the selected Price Book.
2. To learn more about Price Books, click here.
Discounts
1. Group Discounts: Similar to Group Taxes, Group Discounts are applied to Products (or) Services on the credit note level.
2. Individual Discounts: Contrary to group discounts, Vtiger CRM provides an option to apply Discounts on an individual item based on its List Price.
Shipping Charges: Shipping Charges are the additional amount charged by the company’s sales team for shipping the product to the customer.
Adjustments: This option allows you to round off the total amount to the next value or the previous value based on the decimal number.

Note: You can customize and add or remove fields by going to Module Layouts and Fields under Settings.

Adding Line Item Records

You can add new Line Item records like a new product/service or a new section in the existing CN by editing the Item Details block.

How to add a new Product or Service

Follow these steps to add a product/service:

Click the Menu icon.
Go to the Inventory tab.
Go to Order Fulfillment > Credit Notes. The Credit Notes List View opens.
Click +Add Credit Note. The Creating Credit Note window opens.
Enter or select information for the following:
1. Credit Note Details
2. Item Details
3. Terms & Conditions
  1. The newly created CN will be available in the List View
Open the recently created CN.
Click the Details View icon in the Summary View.
Go to the Item Details block.
Click Add row.
Select the Product or Service.

Refer to the Credit Note configuration section in this document to understand Tax management, Price books, etc.

How to add a new Section

Follow these steps to add a section:

Log in to the CRM.
Click the Menu icon.
Go to the Inventory tab.
Go to Order Fulfillment > Credit Notes. The Credit Notes List View opens.
Select the Credit Note you want to edit. The Summary View opens.
Click the Details icon in the Summary View.
Go to the Item Details block.
Click Add Section.

Note:

Invoices and Credit Notes are matched based on the organization they are linked to.
You can also create a credit note directly from invoices and apply the credit amount. To learn more about this, click here.

How to Apply Credit Amount on Invoices

Credit notes are of little use if they are not linked to invoices. If a customer has 2 or more invoices linked, you can use credits to all the invoices, partially or fully against the open invoices.
Follow these steps to apply the credit amount to an invoice:

You need to first Create a Credit Note to apply the credit amount.

Log in to the CRM.
Click the Menu icon.
Go to the Inventory tab.
Go to Order Fulfillment > Invoices. The Invoices List View opens.
Open the invoice record to which you want to apply the credit amount.
In the Summary View, click the Apply Credits button. A list of all the credit notes applicable to the current invoice will be displayed.
Select the credit note from which you want to apply the credit amount.
Enter the amount you want to apply to the invoice in the Amount to Credit field.
Click Apply. The credits will be applied to the invoice and the credit note will be linked to the invoice.

The credit note will be visible in the Sales Ops widget in the Invoices’ Summary View.

Note:

The status of the credit note will be changed to ‘Partially redeemed’ or ‘Fully redeemed’ based on the credit amount you have applied to invoices. You can see the status in the Credit Notes’ List View.
A user without edit permission cannot apply credits.
A Credit Note is marked as closed if all the credits are applied to invoices.
After applying the credits on an invoice, the following fields will be updated:
1. Applied Credits and Available credits fields in the credit note.
2. The Balance field in an invoice record.

How to Apply Refunds on Invoices

You can refund your customer from the credit note, provided no open invoices exist.
Follow these steps to provide a refund:

Log in to the CRM.
Click the Main Menu icon.
Go to the Inventory tab.
Go to Order Fulfillment > Credit Notes. The Credit Notes List View opens.
Open any CN record.
Click the Refund button on the top right corner of the Summary View.
Enter the amount you want to provide as a refund.
Enter the necessary details.
Click Save to finish the refund process.
Click Save and Continue to provide more information.

A payment record will be created and linked to a credit note. It will be available in the Payments widget in the Summary View of the DN record.

Note:

The payments module must be installed before you process a refund. Go to Settings > Extension Store to install the payments' extension.
You can also refund the credits from the Payment module > Payment to Customer.
If you have refunded partially, the available credits are reduced from the Credit Note.
If you have refunded fully, the Credit Note record is closed.
To learn more about Payments, click here.

Deleting a Credit Note

You can delete a record only if all the available credits are unused. If there are any invoice or payment records linked to CN, you need first to unlink them, and then perform the deletion action.

Follow these steps to delete a record:

Log in to the CRM.
Click the Menu icon.
Go to the Inventory tab.
Go to Order Fulfillment > Credit Notes. The Credit Notes List View opens.
Open any CN record.
Click the More button.
Click the Delete icon.

Note: If any invoice or payment record is unlinked from a Credit Note, it will revert the applied credits.

Actions Possible on a Credit Note

You can perform the following actions on the Credit Note:

Share
Export
Print
Change the template of a credit note

Share a credit note

You can share a credit note with a customer by sending a link to the credit note or by sending the credit note itself as an attachment.

As a link - Follow these steps to share the credit note as a link:

Log in to the CRM.
Click the Menu icon.
Go to the Inventory tab.
Go to Order Fulfillment > Credit Notes. The Credit Notes List View opens.
Open any credit note record. The Summary View opens.
Click More.
Click Share as link. A mail compose window opens with the credit note link.
Enter the recipient's details and click Send.

As an attachment - Follow these steps to share the credit note as an attachment:

Log in to the CRM.
Click the Menu icon.
Go to the Inventory tab.
Go to Order Fulfillment > Credit Notes. The Credit Notes List View opens.
Open any credit note record. The Summary View opens.
Click More.
Click Share as attachment. A mail compose window opens with the credit note attachment.
Enter the recipient's details and click Send.

Export

Follow these steps to export a credit note:

Log in to the CRM.
Click the Menu icon.
Go to the Inventory tab.
Go to Order Fulfillment > Credit Notes. The Credit Notes List View opens.
In the List View, hover over a record to display the radio button on the left side.
Click the radio button.
Click the Export button.
Select any one of the following options:
1. Export Selected Records - This option will export only the selected record.
2. Export data on the current page - This option will export the records from the current page.
3. Export all data - This option will export all the data in all the pages of the Exports module.

The exported record will be saved on your local system.

Print

Follow these steps to print a credit note :

Log in to the CRM.
Click the Menu icon.
Go to the Inventory tab.
Go to Order Fulfillment > Credit Notes. The Credit Notes List View opens.
Open a CN you want to print. The Summary View opens.
Click the More button.
Click the Print button.
You can perform any of the below options:
1. Edit & Export - You can edit the credit note and export the Credit note to your local system.
2. Email with PDF - You can email the credit note record as a PDF to the contact.
3. Print - You can print the credit note and keep a hard copy.
4. Save as PDF - You can save the credit note as a PDF on your local system.

Change the template of the Credit Note

You can change the template of a Credit Note from the Print Credit Note screen and the Settings widget.

From the Print Credit Note screen
This is a temporary change only until the credit note is printed. Follow these steps to change the template of a credit note:

Click the Menu icon.
Go to the Inventory tab.
Go to Order Fulfillment > Credit Notes. The Credit Notes List View opens.
Open any Credit note. The Summary View opens.
Click the More button.
Click the Print button.
Select the template you want from the list of all templates.
Perform any of the below options:
1. Edit & Export- You can edit and export the credit note to your local system.
2. Email with PDF- You can email the credit note record as a PDF to the contact.
3. Print- You can print the credit note and keep a hard copy.
4. Save as PDF- You can save the credit note as a PDF on your local system.

From the settings widget
This is a permanent change and will be applied to the credit note immediately. Follow these steps to change the template of the credit note from the settings widget:

Log in to the CRM.
Click the Menu icon.
Go to the Inventory tab.
Go to Order Fulfillment > Credit Notes. The Credit Notes List View opens.
Open any Credit note. The Summary View opens.
Go to the Settings Widget.
Click the Template applied drop-down.
Select the template of your choice.