Credit Notes in Karbon Billing enable you to manage billing adjustments efficiently. You can create a credit note from a sent invoice to either write off the balance or return the work and time to unbilled. Additionally, the credit can be applied as a payment to other invoices.
Credit Note Features
Single Credit Note per Invoice: You can only create a single credit note from an invoice, not multiple credit notes for the same invoice.
Ad hoc invoices: You can only create credit from an ad hoc invoice.
Recurring fixed fee invoices: You cannot create credit from a recurring invoice, including those generated from a Billing Plan or an Engagement.
Partial Credit: You can choose which lines from the source invoice you want to credit. If the credit is partial, the WIP credited will be written-off; you will not have the choice to return the WIP to unbilled.
Approval Options: When creating a credit note, you can either return work-in-progress (WIP) to unbilled or write it off. This decision impacts WIP and realization reporting.
Posting the Credit Note: Once approved, the credit note can be posted, impacting your client’s balance and statement. A client statement can then be sent to reflect the credit.
Applying the Credit: After posting, you can apply the credit note to an invoice awaiting payment. A banner on the invoice page will suggest applying the credit.
Viewing Applied Credit: When the credit is applied, it will be visible on the invoice's Payments tab alongside other payments. If the credit is applied to the wrong invoice, it can be removed from this tab.
Permissions Required
"Billing Access" is required to draft, adjust, approve, apply (to an invoice), or remove (from an invoice) credit notes.
"Billing Access" and "Send or Export Invoices or Billing Runs" are required to post a credit note (this is when the credit note becomes official and impacts the client's balance).
Most users who are working with billing will already have Billing Access. However, to post a credit note, they may also need the Send or Export Invoices or Billing Runs permission.
Steps to Create a Credit Note
Navigate to the Invoices Page
Open the main menu.
Go to Billing.
Select Invoices.
Locate the Sent Invoice
Find the invoice for which you need to create a credit note.
Open the Options Menu
Click the three-dot menu (...) in the upper left corner of the invoice page.
Select 'Create Credit Note'
From the dropdown menu, choose Create Credit Note.
Choose an Action
Decide whether to:
Write off the amount: Remove the balance from the invoice.
Return the work and time to unbilled: Adjust the invoice by returning the billed work and time to the unbilled section for further action.
Apply the Credit (Optional)
Once the credit note is created, you can apply the credit to other invoices as a payment.
Posting the Credit Note
After approval, the credit note will be posted, impacting your client’s balance and statement. Ensure to send the updated client statement that reflects the credit.
When posted, you can apply the credit note to an invoice awaiting payment. Applied credits will be visible on the Payments tab of the invoice.
For invoices sent with a due date of today or in the past, if the client has saved payment details there is a very brief window (approximately five minutes) to apply the credit note after sending the invoice and before the payment starts processing. Act quickly in these cases to ensure the payment reflects the applied credit.
Applying a Credit Note
After posting, the credit note becomes available to apply to invoices awaiting payment.
Navigate to and open the invoice you want to apply the credit to.
A banner will appear on the invoice page suggesting you apply the credit.
Click Apply Credit.
Select the credit note you wish to apply to this invoice.
Once applied, the credit will be visible on the invoice's Payments tab alongside other payments. If you need to remove it, you can do so from this tab.
Voiding a Credit Note
Void a previously issued credit note to reverse any mistakes made on any issued credit notes, like accidentally giving a credit note to the wrong client.
You can void an issued credit note by selecting the Void option from its three dot setting.