A supplier agrees that an invoice was too high and sends a credit note. It reaches the buyer's email, is forwarded to accounts and saved in a shared folder. When the next payment run is prepared, the original invoice still appears at its full value. The supplier is paid too much, and the team only discovers the credit when it reconciles the following statement.
The problem is not that the document was missing. It is that receipt, matching, approval and allocation were treated as separate activities without one owner or visible status. A credit note should remain an open financial action until it changes the correct balance.
Capture the credit note when it arrives
Record the supplier, credit-note number, date, value, tax treatment where relevant, currency, reason and the person who received it. Attach the original document and note how it arrived. If the supplier has not identified the related invoice or order, mark that as an exception rather than guessing.
Use a clear initial status such as received or awaiting match. An email in one person's inbox is not a controlled record, and a file in a folder does not show whether anyone has acted on it.
Match it to the right transaction
Confirm which invoice, order, return or pricing adjustment the credit relates to. Compare supplier details, references, amounts and dates. A credit may cover one invoice, several invoices or only part of a line, so record the intended allocation explicitly.
If the matching invoice has not yet been received, link the credit to the expected transaction and keep it visible. If the invoice has already been paid, route the item for refund or future-account treatment according to the agreed supplier process.
Check the commercial reason
A credit note should agree with what the business expected. Confirm the returned goods, cancelled service, agreed discount, duplicate charge, quantity difference or pricing correction with the relevant buyer or manager. Keep the supporting correspondence or return evidence with the record.
Do not assume that every supplier credit is automatically correct. An unexpected amount, unfamiliar reference or duplicate document should be queried before it changes the account.
Give approval a visible owner
Define who can approve the credit and what evidence they need. The approver should be able to see the original invoice, the reason, the supporting transaction and the proposed allocation. Record the decision, date and any conditions.
A forwarded email saying “please sort” is not an approval trail. If the value or reason falls outside the normal process, send it to the correct authority and keep the status open.
Reflect the credit before payment selection
Once approved, update the supplier position so the outstanding balance reflects the credit. Mark the linked invoice or supplier account clearly and record who completed the allocation. The payment reviewer should see the net position without having to search email or calculate it from separate documents.
Add a specific check for open or recently approved credits before the payment list is finalised. This is especially important when documents arrive close to the cut-off or when one team approves purchases and another releases payments.
A practical example
A facilities company receives an invoice for 100 replacement units, but only 90 were delivered. The buyer reports the shortage and the supplier emails a credit for the missing ten units. The buyer forwards it to an accounts mailbox without including the invoice number.
Accounts saves the attachment but cannot match it immediately. Because there is no exception status or follow-up owner, the credit disappears from the payment review. The full invoice is selected and paid.
With a controlled handover, accounts records the credit as awaiting match and assigns a task to the buyer. The buyer confirms the order, delivery record and invoice. Accounts links the documents, obtains approval and allocates the credit before the payment run. The reviewer sees the reduced balance and the evidence supporting it.
If the invoice had already been paid, the same record would remain open with a named owner until the supplier confirmed a refund or an agreed future allocation. The credit would not be treated as complete merely because it had been captured.
Use statuses that describe the real position
A practical status path could include: received, awaiting match, awaiting evidence, awaiting approval, approved, allocated, refund requested and closed. Define what must be present before each move.
Review open credits by age, supplier, value, owner and payment date. Items approaching a payment cut-off need immediate attention. Repeated unmatched credits may reveal weak purchase references, delivery controls or supplier communication.
Close the loop with reconciliation
Compare the final allocation with the supplier statement and internal balance. Confirm that the credit was used once, against the intended transaction, and that no unresolved difference remains. If a refund is due, record the expected date and reconcile the receipt when it arrives.
MT Accounts focuses on accounts and daily financial workflows. Explore MT Accounts or talk to our team to discuss your requirements and confirm the capabilities available.
A credit note is complete when the document, approval, allocation, payment position and supplier balance all tell the same story.