In everyday business, it is common that issued invoices cannot always remain as they were originally created. The reasons for this can be varied:
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Returns or complaints: Customers return products because they are defective or they do not like them.
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Subsequent price changes: Discounts or special conditions are granted that were not taken into account in the original invoice.
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Incorrect invoicing: Quantities, prices, or tax rates were incorrectly recorded.
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Complete cancellation: An order is revoked or canceled, so the invoice is no longer valid.
To represent such cases correctly and traceably in accounting, correction documents are used. The two most important types are:
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Credit note: A document that reduces the original invoice amount or shows an amount that the company pays back to the customer. In practice, this means: The company’s claim decreases or a liability towards the customer arises.
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Cancellation invoice: A special form of a credit note that completely neutralizes an invoice. It cancels the original invoice in accounting by showing the identical amounts with the opposite sign.
Both credit notes and cancellation invoices are necessary instruments in the ERP context to ensure a correct representation of business transactions and to comply with the legal requirements of accounting.
Xentral supports the creation and management of credit notes and cancellation invoices as standard. The two document types differ in their presentation and handling:
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Credit note: Displayed in Xentral as a document with positive amounts.
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Cancellation invoice: Displayed in Xentral as a document with negative amounts. It is identified by activating the Cancellation invoice option. Here you can also use an alternative document label such as Invoice correction.
Credit notes and cancellation invoices are correctly taken into account in the financial accounting export and are always transferred there as negative amounts, regardless of the representation in the document.
In addition, Xentral offers a variety of functions for creating, editing, and linking credit notes and cancellation invoices with other documents (e.g., invoices). Depending on the initial situation, this can be done directly from an invoice or independently as a new document.
Important
The legally correct designation of credit notes, cancellation invoices, and invoice corrections can vary depending on the country, tax regulations, and individual handling by the tax authorities.
Therefore, coordinate with your tax office or directly with the responsible tax authorities in advance:
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Whether you must show the document as a credit note, cancellation invoice, or invoice correction,
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which designation is legally permissible on your documents, and
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how the documents must be processed in your financial accounting and towards the tax authorities.
Xentral offers you the possibility to create both credit notes and cancellation invoices. The decision of which document type you may legally use, however, lies with you and must be coordinated with your tax advisor.
In Xentral, you can create a credit note or cancellation invoice in various ways. The choice of method depends on whether there is a direct reference to an existing invoice or not.
An invoice can be canceled with a credit note or cancellation invoice. The cancellation of an invoice in accounting is always done with a so-called "counter-document". A credit note is titled as a cancellation invoice in Xentral if the Cancellation invoice option is activated. The amounts in the document then become negative, while they are positive in the credit note.
In Xentral, you have the following options:
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Canceling an invoice: Directly generates a cancellation invoice or credit note by clicking on the X icon.
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Continuing an invoice as a credit note / cancellation invoice: Directly generates a cancellation invoice or credit note (same function, but via the Action menu of the invoice).
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Creating a credit note / cancellation invoice without a preceding invoice: Can also be linked retrospectively with an existing invoice.
Note
Please check whether the created credit note has also been released and has received a sequential number. Only then will the canceled invoice also be exported with a negative amount during the financial accounting export.
You can continue an invoice in the Invoices module as a credit note or cancellation invoice by first canceling it.
To do this, proceed as follows:
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Use the Smart Search to open the Invoice module.
You are in the Overview tab.
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Search for the invoice you want to cancel and click on the X icon at the end of the line.
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Confirm the query that is now displayed, asking whether you really want to cancel the invoice, by clicking on OK.
Xentral now automatically generates and opens a cancellation invoice or credit note that completely neutralizes the original invoice.
As soon as a credit note number has been assigned in Xentral, the document can no longer be deleted. Before sending, you can still:
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Transfer it to another customer if the wrong customer number was stored.
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Change the amount and edit the positions (possibly a 0 EUR credit note, should a number have been assigned here by mistake).
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Create an additional credit note with a minus amount so that both credit notes cancel each other out.
You can also continue an invoice as a credit note or cancellation invoice via the action menu of the invoice.
To do this, proceed as follows:
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Use the Smart Search to open the Invoice module.
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Open the invoice you want to continue as a credit note.
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Select the Continue as credit note/cancellation invoice option from the Action drop-down menu.
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Confirm the query that is now displayed, asking whether you really want to continue the invoice as a credit note, by clicking on OK.
The credit note is created and opened directly. It contains the same positions and amounts as the original invoice, but with the opposite sign (for a cancellation invoice) or as positive amounts (for a credit note).
You can create a credit note or cancellation invoice in the following ways if no preceding invoice exists:
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By clicking on + NEW in the Accounting > Credit notes menu.
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By clicking on Credit note in an opened address in the Sell > Contacts menu.
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Manually by continuing an offer to a sales order, the sales order to a delivery note, generating an invoice, and creating a credit note or cancellation invoice from it.
If you have initially created a credit note independently of a preceding invoice in the Accounting > Credit notes menu, you can link it retrospectively with an invoice. To do this, open the credit note and enter the desired invoice number. Finally, click on Save.
You can also create partial cancellations for invoices via the action menu of an existing invoice.
To do this, proceed as follows:
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Use the Smart Search to open the Invoice module.
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Open the invoice you want to partially cancel.
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Select the Create as a partial cancellation option from the Action drop-down menu.
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Confirm the query that is now displayed, asking whether you really want to partially cancel the invoice, by clicking on OK.
A new menu opens.
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In the Cancel field, enter the number of products you want to cancel.
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Click on Generate partial cancellation.
The selected products are transferred to a credit note. The original invoice remains, but with a reduced amount and a new status PARTIALLY CANCELED. The newly created credit note is opened directly.
You can only cancel credit notes as long as they are listed in the In progress tab of the Accounting > Credit notes menu, meaning they are still in draft mode.
To "cancel" credit notes that have already been created, there are the following two options:
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If the credit note created by mistake completely cancels the invoice (over the entire amount), the documents balance each other out in accounting. If the invoice should not have been canceled at all, you can issue a new invoice to the customer for the same amount. The old invoice and the incorrect credit note then cancel each other out. The new invoice receives the OPEN status.
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Alternatively, you can continue the invoice a second time as a credit note and put a minus sign in front of the amounts (negative credit note). The original (accidentally created) credit note is then balanced out again by the negative amounts of the negative credit note, so that there is still an open claim against the customer in the amount of the original invoice.
Just as for invoices, it is possible to process credit note documents using bulk processing. In addition, various filter options are available to sort and select your credit notes in Xentral. You can find the available filters as well as the bulk processing functions in the Accounting > Credit notes menu.
The following table explains the available filter options for credit notes in more detail.
Filter |
Description |
|---|---|
All outstanding credits |
All credit notes that do not have an incoming payment that balances them out, as well as all credit notes that do not have an entry in the date field (completed on). |
All of today’s credits |
All credit notes where the current date is stored as the creation date. |
All credit notes that have not been completed |
Credit notes where there is no entry in the date field (completed on). |
+ image::images/credit-note-filter-possibilities.png[credit-note-filter-possibilities.png]
The following table explains the available bulk processing functions for credit notes in more detail.
Function |
Description |
|---|---|
Mark as done |
This option inserts the current date into the completed on date field. This signals that the credit note has been paid out. |
Refund payment |
This option creates a payment in payment transactions to settle the credit note. The stored payment method of the credit note is automatically used. |
Remove done mark |
Removes the entry in the completed on date field in the credit note. |
Send by email |
Sends the credit note to the email address stored in the credit note. |
Mark credit note as sent |
Changes the status of the credit note to SENT. |
Collective PDF |
Creates a collective PDF of the selected credit notes with the corresponding credit note documents. |
Prints the selected credit notes on the printer you select from the Printer drop-down menu. |
+ image::images/credit-note-bulk-processing.png[credit-note-bulk-processing.png]
In the Not shipped tab of the Accounting > Credit notes menu, you will find an overview of all credit notes that have not yet been sent.
In the In progress tab of the Accounting > Credit notes menu, you will find an overview of all credit notes that are currently in progress.
As a practical example, we have created an invoice and a credit note in Xentral independently of each other. The amount of the invoice is higher than the amount of the credit note.
First, open the desired credit note in the Accounting > Credit notes menu and enter the associated invoice number in the Invoice field. Then click on Save.
The amount of the credit note is then listed in the protocol of the invoice and the invoice balance is adjusted accordingly. The credit note is therefore offset against the invoice.
Open the invoice to view the offsetting. In the Protocol tab of the invoice, the credit note is now listed in the Receipt of payment section with the corresponding amount of €12.08. The balance of the invoice has been adjusted accordingly and is now €0.00.
Then open the credit note again in the Accounting > Credit notes menu and set the credit note to the COMPLETED status. Transfer the refund amount of €12.08 to the customer.
If you want to balance credit notes via incoming payments with the Direct debit payment method, you must set the credit note to the COMPLETED or PAID status. Otherwise, the credit note can be paid out again via incoming payments.
To change the status of a credit note, select it in the credit note overview in the Accounting > Credit notes menu, select the mark as completed option in the bulk processing at the bottom, and then click on execute.
The status of the credit note now changes and the credit note can no longer be loaded into payment transactions.
Important
Once the credit note is loaded into payment transactions, it will not disappear by changing the status and must be removed manually by clicking on the X icon.
The traffic light in a credit note does not display whether the credit note is paid. Instead, it displays whether a payment has been created in payment transactions for the credit note and how far this process is.
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"Open" traffic light: The traffic light is set to OPEN if no payment transaction exists for the credit note, i.e., no payment_transaction_id is available. This happens, for example, if no refund or collection was created via payment transactions or if the credit note is only linked to an outgoing payment. In this case, the traffic light usually remains unchanged. The payment status of the credit note is then decisive.
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Traffic light displays payment transaction status: As soon as a payment is created for the credit note in payment transactions (e.g., by clicking on Load credit notes or Refund payment or for refunds/collections via PayPal, Mollie, or direct debit), a payment_transaction_id is created. From this moment on, the traffic light displays the respective status of the payment transaction process, i.e., how far the refund/collection is.
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"Completed" traffic light: A credit note only reaches the final traffic light status if (a) a payment transaction exists and (b) it has gone through the process completely and has been completed. Without a completed payment transaction payment, the traffic light cannot change to the final status.