We are independent & ad-supported. We may earn a commission for purchases made through our links.

Advertiser Disclosure

Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.

How We Make Money

We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently from our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is a Credit Note?

Malcolm Tatum
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Also known as a credit memorandum or a credit memo, a credit note is a document that is issued by a vendor or supplier to a customer. The document is typically used to provide some sort of discount off the pricing normally extended to the customer, either by authorizing a cash rebate to that client or subtracting the discounted amount from the balance due on transactions that have not yet been invoiced to the client. The discount may be in the form of a percentage off those charges or an actual dollar amount, depending on the policies and procedures of the entity that is issuing the credit memo.

A credit note is sometimes used as an internal document to process discounts extended to a client as part of a promotional campaign. For example, the vendor may extend run a promotion that provides specific clients with a 5% discount on the next three orders placed. As those orders are placed, a credit note is generated for each of those orders, reflecting the standard pricing applied to the items ordered. The total amount due on the order is then reduced by the 5%, with both the original and the adjusted totals appearing on the order invoice. Typically, the reason for the credit is also documented on both the note and the invoice. This approach allows the customer to see how much was actually saved on that particular order.

There are situations in which a credit note is used to compensate clients for some sort of inconvenience incurred while using the services of a given company. For example, a teleconference company may choose to issue a credit note on the invoice for a specific conference call when the quality of that teleconference is impaired by factors that originated with the company providing the service. In this scenario, the conference provider will issue a credit note or memo that effectively writes off a portion or even all of the charges associated with the call. An invoice for the call is still printed, but reflects both the original charges and the amount of the credit, along with the adjusted balance due. Here, the goal is attempt to repair the damage done by the inferior service received by the client, motivating the customer to give the teleconference provider another try.

Use of a credit note is also important to the internal accounting process. By documenting any discounts that are issued for any purpose, it is possible for companies to determine how much revenue is lost each period as the result of those credits. This can be especially important since companies can track not only the totals but also the reasons for the credits. Should an analysis of the credit note activity for a period indicate that a recurring service error accounts for a significant amount of the credits issued, steps can be taken to correct the matter, ultimately saving the business a considerable amount of money.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum , Writer
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.

Related Articles

Discussion Comments

By anon157725 — On Mar 04, 2011

Good explanation I have now found from this article.

There are some situations where a credit memo can be raised or need to be raised:

1. When seller received a specific number of order from a customer, seller can raise credit memo.

2. A seller can raise when he deliver inferior goods/services.

3. To find out the revenue a seller lost for the credit memos for future analysis. --Biplab S.

Malcolm Tatum

Malcolm Tatum


Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.