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Cancellation Invoice Instead of Credit Note: The Correct Approach for a Faulty Invoice
If you want to revoke or correct an invoice, in the past this was done with a credit note. The correct approach today is the cancellation invoice. This is due to the new legal regulation (in Germany*), which states that credit notes should only be used for "actual credit notes" and not for the "neutralization" of invoices.
"Actual credit notes" are, for example, commission payments. Here, a credit note is a document that represents a money transfer where the recipient of the money does not issue a claim to the debtor, but the debtor proactively initiates a payment. The amount here is a positive figure.
English image not yet available...What the neutralization of an invoice looked like in the past and what it looks like today:
In the past
The invoice to be corrected was filed under "cancelled" in accounting and a credit note was created. The credit note contained exactly the same items as the invoice and also the exact same positive sum. The title "Credit Note" was meaningful and there was usually a note that the sum would be paid out. This credit note was sent to the person who had already received the faulty invoice.
After that, a new invoice was created. This was given the next number in the invoice number sequence.
Today
For the invoice to be corrected, you create a cancellation invoice.
The Cancellation Invoice
- contains exactly the same items as the invoice and also the same sum - but this is negative.
- has the same service period as the invoice
- receives a new, unique invoice number
- refers to the original invoice (invoice number, date)
- should use the correct terminology. The options here are "Invoice Correction", "Correction Invoice" or "Cancellation Invoice" (not "Credit Note").
This creates the counterpart to the invoice and "negates" the invoice. This cancellation invoice is sent to the invoice recipient. The sender wants to settle a negative sum with the cancellation invoice - which colloquially corresponds to a credit note. As a rule, the recipient has not yet paid the incorrect invoice at this point.
After that, a new invoice is created with a new invoice number and the invoice recipient only pays this.
In accounting, the cancellation invoice is then offset against the preceding invoice.
In MOCO, a cancellation invoice can be correctly created at the top right of the invoice via the cancellation action ("thumbs-down icon") with one click. Here, the next invoice number is automatically assigned.
If an invoice created in MOCO is faulty, it can be easily edited and saved again, provided it has not yet been delivered.
* Note:
Legally, a cancellation invoice has been prescribed in Germany since 2013 - in Switzerland, the cancellation invoice is also a correct approach, but not strictly required.
* Note:
Legally, a cancellation invoice has been prescribed in Germany since 2013 - in Switzerland, the cancellation invoice is also a correct approach, but not strictly required.
