What are credit notes for?

If you owe your customer money, you'll need to keep a record of that in your books. There are many cases where you might owe your customer money. For example:

• A customer has overpaid you
• You've agreed to reward a customer as part of a loyalty program you have
• A customer wants to return a purchase and is asking for either a refund or credit for future purchases.

In such situations, you will issue a credit note to your customer.