Construction Financial Glossary

Credit Notes Definition

A credit note is a financial document issued by a contractor or Supplier to correct an invoicing error, refund a Client, or adjust previously billed amounts. It serves as a formal acknowledgment of a reduction in the amount due.

Why Credit Notes Are Important

In construction, credit notes help resolve disputes, correct overcharges, and maintain accurate financial records. They are commonly issued when an invoice contains an error, materials are returned, or a change order reduces the contract value.

How to Properly Issue a Credit Note

    1. Clearly reference the original invoice and specify the reason for the adjustment
    2. Ensure all relevant parties, including accounting teams, receive the updated records
    3. Maintain transparency with project owners and subcontractors to prevent payment delays


Related Terms: Invoice Adjustments, Accounts Receivable, Change Order, Final Account

FAQs

Can credit notes be applied to future invoices?

A: Yes, credit notes can be used to offset future payments if both parties agree.

How do credit notes differ from refunds?

A: A credit note reduces a future payment, while a refund returns money already paid.

Upload your project budget and follow the financial progress in real-time

No credit card required. No sales or IT support needed.