Credit Memos

A credit memo reduces what a client owes you without changing an invoice that’s already been sent. Use one when you’ve agreed to a fee concession, a client disputes some hours, you billed something by mistake, or you’re writing off a balance you won’t collect.

Once an invoice is sent it can’t be edited, and once it’s paid it can’t be voided. A credit memo is the proper way to correct it after the fact: it’s its own document, with its own number and PDF, and it keeps a running balance of credit the client can still use.

Before you start: Credit memos show financial information, so you’ll only see them if your role allows it. See Roles and access.

Where credit memos live

Credit memos belong to a client. Open the client and go to the Credits tab to see every credit memo for that client, create a new one, and see the client’s Available Credit: the total they can still draw on.

What a credit memo contains

• The client it’s for, and optionally the project it relates to (leave it blank for a credit that isn’t tied to one project)
• An optional credit memo number, a credit date, and a reason
• One or more line items, laid out just like invoice lines, which add up to the total credit
• Optional notes

Reasons

The reason tells your firm what kind of credit it is:

Reason	Meaning
Billing Error	A correction. The work is still owed and will be billed again correctly.
Fee Adjustment	A reduction you’ve agreed to.
Discount	A goodwill or negotiated discount.
Bad Debt	A balance you’ve given up collecting.
Other	Anything else.

Credit memo statuses

1. Draft: being prepared. You can still edit it, and it can’t be used yet.
2. Open: issued to the client, and none of it has been used.
3. Partial: some of the credit has been used, and some is left.
4. Closed: all of the credit has been used.
5. Void: cancelled; it no longer counts for anything.

Use Issue Credit to move a draft to Open. An open credit that hasn’t been used yet can be Rescinded back to Draft to edit it, or Voided. Once any of it has been applied or refunded, it can no longer be rescinded or voided. Partial and Closed are set for you as the credit is used.

Using a credit

There are two ways to use a credit’s remaining balance, and you can mix them:

• Apply it to an invoice. This takes the amount off one of the same client’s sent invoices, with no money changing hands. A credit tied to a project can only be applied to that project’s invoices; a credit for the client as a whole can be applied to any of them. The invoice shows the credit alongside its payments, and it moves to Partial or Paid the same way a payment would. A credit can be spread across several invoices, one application at a time.
• Refund it. If the client would rather have the money back, record a refund: the amount, date, method (check, wire and so on) and an optional reference.

You can undo either one. Removing an application puts the amount back on both the invoice and the credit; removing a refund puts it back on the credit.

On the invoice

An invoice with credits applied shows Credited next to Amount Paid, and its Balance is what’s left after both. A Credits tab lists each credit applied to it; the arrow at the end of a row opens that credit memo.

If the client has unused credit that could go toward it, a sent invoice with a balance tells you so (“ABC Corp. has $1,500.00 in available credit”) with an arrow that opens the client, whose Credits tab lists them, so no one records a full payment while credit sits unused. A credit tied to a different project isn’t counted, since it can’t be applied to this invoice.

Downloading a PDF

Every credit memo can be downloaded as a PDF to send to your client, using the Download PDF button on its details page. It shows your firm’s details, the client, the credit number, date and reason, the itemized lines, and what’s been applied, refunded and remains.

Related pages

• Issue and apply a credit memo
• Invoices
• Clients
• Vendor Credits: the same idea for credit a consultant, vendor or contractor gives you
• I can’t edit an invoice or bill