What are credits and refunds?

Credit

Why create a Credit?

• You would usually create credit for the same or lower amount than a invoice, and then refund the money your customer, or sometimes apply it as part of a payment towards an invoice.
• You can create an invoice in case of returns, incomplete, damaged, or incorrect goods, errors or allowances, if the customer overpaid or was over-charged.
• You can use a credit to correct an invoice that has already been sent to your customer. If you have already sent an invoice to a customer but now need to provide a credit for that invoice, you would send them a credit. You can think of a credit note as a "negative invoice." 
• A credit will reduce the balance that a customer may owe from other invoices. 

What does a Credit contain?

• A credit lists the items, quantities and set prices you billed your customer for, but the customer returned or did not receive. 
• Usually you would refer to the original Invoice in the credit and sometimes you would state the reason for issuing the credit, in the Note section.

Refund

• A refund indicates that money was reimbursed to the customer.
• This will increase the customer's balance.