New to credit note templates? Read our guide below.
The busy life of a freelancer requires juggling many different responsibilities, sometimes all at once. And when you’re trying to manage and deliver projects, communicate with clients, and issue invoices, mistakes can happen.
After all, you’re only human. That’s where a credit note template comes in handy.
A credit note (sometimes called a ‘credit memorandum’ or ‘credit memo’ for short) is a legal document that gives you the power to cancel an already-issued invoice, in part or in full.
If you accidentally overcharge a client, for example, you can use a credit note to delete the amount without deleting the invoice. This is crucial as, in some countries, deleting an invoice can be deemed unlawful. Businesses are legally required to keep reliable audit trails, and your freelance business is no different.
What is a credit note template?
A template is used to create an edited version of a document that is utilized over and over again.
When making a template, you should produce a master copy using the information that you need every time you use this document. For example, this could include your contact details, company branding, company number, and your terms and conditions.
A credit note template is, therefore, a document that’s pre-saved, ready to use with this important info. It saves you the time and effort of making it from scratch whenever you’re issuing credit to a client.
Instead, you’d simply open the template, make a copy, add the line items for which you’re issuing credit, and then save it with a unique identifier (a Credit Note Number), before sending it to your client.
Why use a credit memo template?
There are some clear reasons why you should use a template to produce a credit note:
- Building a template that can be used over and over saves time and energy;
- It lets you be consistent with your professional tone of voice;
- You can reinforce your professionalism by adding your branding;
- And you can keep track of the credit notes you’ve issued, rather than starting from scratch every time you need to provide one to your clients.
But a credit note is more than simply a piece of business admin.
Firstly, it’s your chance to establish trust, credibility, and transparency with your client. If your product or service doesn’t meet their expectations, you can be on the front foot in terms of offering a refund or money off their next invoice.
That way, you’re more likely to retain them as a client.
And secondly, it shows that you’re paying attention. While mistakes can and do happen when invoices are sent, if you follow it up with a credit note, it proves that you’re working hard to maintain a strong relationship with your client.
Consider the alternative: accidentally charging them the wrong amount and then doing nothing to rectify it — that will only cause conflict and mistrust.
Types of credit note templates
Besides a standard credit note template, there are a few specific kinds of credit note templates:
Sample Credit Note Template
A sample credit note template is the perfect starting point. Customize it to your needs and use it whenever is the case.
Blank Credit Note Template
A blank credit note template is ready to be filled in with your details and can be sent to the client right away.
Simple Credit Note Template
A simple credit note template contains only the essential information. Quickly fill it and send it to your client.
5 common mistakes to avoid while using a credit note template
Using a credit note for invoice errors can certainly be quicker, but there are still some things you need to avoid.
By catching these early, you can fix your template to ensure you’re not making common mistakes. That’s the downside of using a template — if one mistake flies under the radar, you’ll end up repeating it every time you send a new credit note.
Here at Bonsai, we’ve worked with over 150,000 freelancers, many of whom are in the top 1% of their fields when it comes to reputation and earnings.
So we’ve asked them to share their early credit note mistakes, and how to avoid them:
Not referring to the original invoice.
As mentioned previously, a credit note is your opportunity to be completely transparent with your client. To that end, you should always take care to refer back to the original invoice when sending a credit note. This will avoid any confusion on the part of the client. And if the original invoice included VAT, you’ll need to make sure the corresponding credit note also takes VAT into consideration.
Not explaining the reason for the credit note.
Likewise, failing to explain why a credit note is being issued could result in a misunderstanding between you and your client. Use the description to outline the reasons behind the credit note.Remember: When it comes to payment, you need to be crystal clear — no matter if the money is going into or out of your account.
Gaps or repeated credit note numbers.
Your credit notes should include reference numbers which are unique and sequential. These numbers should be produced without any gaps or repetition. Gaps, especially, are troublesome as they could suggest a missing credit note, causing you an admin headache further down the line.And should you ever be audited by your country’s tax authorities, untidy record keeping could come back to haunt you. So, take care to keep everything in order!
Forgetting to include payment terms.
If you’re issuing a refund with your credit note (i.e., your client has paid their invoice, and you later discover that you’ve accidentally overcharged them), then you still need to include your bank account details and payment terms. Why? Well, just as you would expect to be paid within a certain time-frame, your client will expect their refund to be completed by a certain point, too. You should clearly state your terms, and include the account from which you’ll pay the refund to keep everything above board.
Not making it clear that it’s a credit note (and not an invoice).
Finally, you need to make sure that you clearly state that the document is a credit note, and not an invoice. Failing to do so can result in a serious misunderstanding on the part of your client, where it appears as though you’re demanding payment instead of resolving a mistake.
You’ll find a lot of the best practices mentioned in these tips built into our freelance tool, Bonsai. It costs $19 per month and used by 150,000 freelancers. Give it a try with a 14 day free trial.
What should a good credit note include?
(whether you use our template or not)
Now that you know some of the benefits of using a template, and some of the most common mistakes you need to avoid, let’s take a look at the key elements of a credit note template.
To begin, the template will require sections that will remain the same, including:
- Your company name, number, and address
- Your company branding
- Your payment terms and bank account details
- Your VAT registration details, if your business is registered
Next, you need to include sections for the information that you’ll change with every credit memo that you issue. This ensures that your format will remain consistent, even if the info changes.
Typically, you’ll add the following information as you flesh out your credit note:
- Date of credit note issue
- Credit note number
- Customer reference number (such as an invoice number or purchase order)
- Customer’s information including name and contact details
- Description of why the credit note is being issued and the goods or services it relates to
- Total amount to be credited
When to use a credit note template?
You would typically use a credit note template when there’s been an error with an invoice that you’ve already sent. This could be a case of accidentally overcharging a client, applying a discount incorrectly, or when a client wishes to change their original order.
You may also need to issue a credit note if your service does not live up to your client’s expectations, or if you’re unable to deliver a project milestone after receiving a deposit.
Essentially, a credit note should be used whenever an invoice needs to be changed.
Usually, a credit note is linked to an existing invoice. However, it can also be issued independent of an invoice, to be used against another invoice in the future. In this scenario, it’s similar to a money-off voucher for your client — a good way to retain customers and reward loyalty.
What happens if you don’t use a credit memo template?
No matter what you do as a freelancer, you’ll quickly learn that it’s always a good idea to get everything in writing. And that includes client refunds or offers of credit.
If you verbally agree to money off their next invoice and you fail to follow up with the appropriate action and documentation, your client will feel misled. This level of miscommunication may irreparably damage your relationship and harm your reputation.
On the other hand, if you do follow through with your offer of credit, but you don’t document it correctly, it could cause all sorts of accounting problems further down the line.
In short, you need to use a credit note to remain organised and on top of your freelance finances whenever you need to cancel or amend an invoice.
Credit note vs debit note: What’s the difference?
Now that you understand what a credit note template is and why you might use one, there’s another important document that you should know about that follows along the same lines. In fact, you may have already heard of it. It’s called a ‘debit note’.So, what’s the difference between a credit note and a debit note?
A debit note — also known as a debit memo — is similar to a credit note, but it’s sent from your client to your business to request that you return funds they’ve already paid. Your client may choose to issue a debit note if they’re not satisfied that your service has matched your proposal, or if they wish to cancel a project for which they’ve paid a deposit before the project starts. A debit note is essentially a formal request from a buyer to a seller asking for a credit note.
Advantages of credit note templates
There are a number of clear advantages to using a credit note template. For example:
- Templates offer consistency. By using a template, you can produce a number of credit notes in quick succession, and edit each for a specific client and/or invoice.
- They help free up your time — time that can be better spent on other important freelance tasks.
- You won’t miss any important info, like your payment terms or Credit Note Numbers that might come back to haunt you. If it’s in the template, you’ll fill it in.
- You can use a template to reinforce your brand. From the colors you choose to your logo, font, and tone of voice, you can position yourself however you want.
- A clear and easy to understand credit note template also sends out a positive message about you as a freelancer. It demonstrates that you’re professional, reliable, and won’t let mistakes slide.
- Finally, using a template becomes a repeatable process. And it’s one you can tweak and enhance with each one you create.
Disadvantages of credit note templates
However, there are some downsides to using a credit note template, too. For example:
- Choosing the wrong template could result in you repeating the same mistakes time and again.
- A poorly designed credit memo template may be misinterpreted and could place a strain on your client relationship. And if you continue to use the wrong template, you could waste countless hours clarifying things with confused clients.
- Templates can appear unoriginal and outdated to savvy clients who now expect a streamlined workflow. They don’t want to search their bloated inboxes for documents — instead, they’re looking for a software solution that can be accessed from anywhere, at any time.
- And finally, many credit memo templates can be difficult to edit. If you try to add a new section — or move or remove an existing one — you could mess up the entire design. This makes templates restrictive when you’re trying to grow and improve as a freelancer.
Why are Bonsai’s automatically generated credit note templates better?
Once you’ve mastered the art of creating a credit memo template, the next step is to join the top 1% in using a dedicated online system.
This will do all the heavy lifting for you, including adding and removing sections with a click, sending client reminders, and tracking when the document is opened.
And if you’re looking for a winning freelancing suite for professional-looking credit notes (and more), you’ve found it! Bonsai offers a 14-day free trial.
There are a number of things worth highlighting with Bonsai's credit notes:
- The company logo and banner image, which establishes professionalism and trust, and reinforces the company’s branding.
- The business name and address (FROM) and the client’s name and address (TO).
- The date the credit note was issued, and when payment can be expected — making it clear to the client.
- A clear, scannable structure, detailing why the credit note has been sent.
- A breakdown of each line item.
- An easy-to-understand summary.
Why is this better? It’s easy to read and looks professional. But that’s not all. As soon as your client opens it, you’ll be notified. No need for time-consuming email correspondence.
How to create credit templates using Bonsai?
Super simple. Bonsai makes creating, saving and sending credit note templates easy. Here’s how:
Create an account
First, set up a Bonsai account. The only information you need to enter is your name and email address.
Once you’ve signed up, you’ll arrive at this screen:
Click on "Send an invoice"
Simply click on “Send an invoice” from the options in your freelance workspace, and you’ll be able to create your new credit note template.
Click “CREATE INVOICE”
Next, select the client you wish to send the credit note to, the project it relates to, and then click “CREATE INVOICE”.
Create your ‘Credit Note’
The invoice template will open, and you can then build your credit note. First, you can add a logo and banner to show off your brand to the client. You can then update the title to reflect that this is a credit note (and not an invoice).
Complete credit note details
Enter the reason why you’re issuing the credit note and the amounts associated:
Use “NOTES” to highlight that this is a credit note
Use the NOTES section to request that the amount listed be deducted from the next payment. Include a customer reference number:
Send your credit note
Finally, once ready, you can send the credit note and track it in your dashboard to see if it’s been opened:
Using Bonsai is effortless and intuitive. Let us make your life easier while you focus on the work that you love.
Sign up for your free trial and build your first credit note template today.
Bonsai vs generic credit note templates
There’s no denying that it’s free to search for and download a credit note template, customize it with your branding, fill it out, and send it. But it’s also incredibly time-consuming.
Instead, use a freelance product suite like Bonsai to handle your all-important admin tasks in a matter of minutes.
We’ve worked with over 150,000 freelancers since we first launched, and we’ve discovered that they all agree on one thing: messing around with templates is a sure-fire way to waste precious time.
So, if you’re serious about your freelance or consulting business, it’s time to take your admin to the next level.
Here’s what you get for spending $19 / month on Bonsai:
Create, customize and send great-looking credit note templates in a matter of minutes.
Add your logo and branding, and impress clients with a streamlined software solution.
Add, move, or remove sections in seconds.
Get notified when clients view your credit memo.
Optimize automatic reminders by choosing the right time to email each client.
At Bonsai, we recommend ALL freelancers to protect their time like it’s the most important thing in the world. Otherwise, it’ll consume you.
Becoming one of the top 1% of freelancers means taking on a number of different roles and responsibilities. But it also means finding ways to work smarter — not harder.
Being your own credit control department on top of everything else you do might seem like a burden, but the truth is, it’s just another task you can delegate to technology.
Don’t let those important admin jobs dominate your day and steal time from your more enjoyable creative work.
Use a streamlined, cloud-based freelance product suite to claw back that time and put it to good use (i.e., getting paid for amazing freelance work).
And if you do encounter the odd oversight where an invoice is concerned, you now know you can send a quick and professional-looking credit note to fix it.
So, now that we’ve covered what credit notes are, why they matter, and how Bonsai can help you create them with only a few clicks, we’ve only got one question left:
Are you ready for your 14-day free trial?