Xero Invoices – How to Create a Credit Note

Issuing sales invoice credit notes to clients is easy to do in Xero. In this tutorial, we will create and send a credit note for an invoice in Xero’s demo company.

To get to the right place in Xero, go to Business → Sales overview from the main menu.

Now click on the Awaiting Payment section to see all the sales invoices that have been created but are still awaiting payment from the customers.

Let’s create a credit note for the first sales invoice on the list. Click anywhere on the row of the first invoice to Bayside Club to open the invoice.

Next, click on the Invoice Options button on the top right-hand side of the screen and choose Add Credit Note from the list.

The credit note should automatically populate based on the original sales invoice. You can change any of the setting you like but for this exercise we will leave them as they are.

Once you have created your credit note, you will be able to Save or Approve it. What you do depends on how you run your business. If your invoicing process requires you to save credit notes as drafts for someone else to approve, click on Save → Save as Draft on the bottom left-hand side of the screen.

If you do not need anyone else to approve credit notes, you can go ahead approve them yourself by clicking on the Approve button at the bottom right-hand side of the screen.

We will approve this credit note ourselves. When you are ready, go ahead and click on Approve.

You should now see that the amount due on the invoice has reduced by the amount of the credit note. In this case, the credit note is for the full amount of the sales invoice so the amount due is now nil.

If you like, you can now email the updated invoice to your client. To do this, click on the Email button at the top of the credit note.

A pop-up box will appear showing you the details and settings of the email to your client. When you are happy with everything, click on the Send button.

That’s all you need to do to create a credit note for a sales invoice in Xero and send it to the client. To check that the credit note exists and the original invoice has a nil balance, navigate back to the main Invoices screen. Here, we can see from the top two rows that we have successfully created a credit note, reduced the amount owing on the invoice to nil, and emailed the updated invoice to the client.

Disclaimer: Our articles and videos are here to inform you and the information provided does not constitute financial, taxation, legal, business or other professional advice and should not be relied upon as such. See our full disclaimer here.

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