🔄 What Does “Adjust Credit Against Invoice” Mean?
When a Credit Note has a remaining cash balance — meaning the credit has not yet been fully applied to the parent Invoice or refunded — you can direct that balance towards reducing the outstanding amount on any other open Invoice for the same client. This is called adjusting (or applying) credit against an invoice.
This is the preferred alternative to a cash refund when the client has other invoices that are still outstanding. Instead of returning money, you simply knock off what the client owes on another Invoice.
📍 Screen: Billing → Credit Note. The Apply to Invoice button (and the floating action menu) are only visible when the Credit Note has a positive remaining cash balance and has not been cancelled.
✅ When Is the “Apply to Invoice” Option Available?
The Apply to Invoice button and menu item only appear when all of the following are true:
- The Credit Note is Active (not cancelled).
- The Credit Note has a positive remaining cash balance (i.e., some credit has not yet been applied or refunded).
- You have Update permission on the Credit Note module.
- There is at least one open Invoice for the same client (with an outstanding amount).
💡 What is the “remaining cash balance”? The system tracks two deduction buckets on every Credit Note: Applied Amount (credit already directed at invoices) and Refunded Amount (cash already returned to the client). What remains after both deductions is the cash balance available to apply or refund. Both figures are visible on the Details tab of the Credit Note aside.
🖊️ How to Apply Credit — Two Paths
Option 1 — From the Credit Note Details Tab (Aside)
📍 Screen: Billing → Credit Note → click on the Credit Note row to open the aside → the Details tab is active by default.
- Go to Billing → Credit Note.
- Click the Credit Note you want to apply.
- On the Details tab, verify the Applied Amount and Refunded Amount fields to confirm there is a remaining balance to use.
- Click the Apply to Invoice button in the aside header (top-right, next to the Edit button).
- The Adjust Invoice dialog opens.
- Select an Invoice Number from the dropdown. The dropdown lists only open invoices for the same client that have a positive outstanding amount.
- Click OK.
The dialog closes and the aside refreshes. The Applied Invoices table at the bottom of the Details tab now shows the newly added entry.
Option 2 — From the Credit Note List View (Floating Action Menu)
📍 Screen: Billing → Credit Note — the main list grid, without opening the aside.
- Go to Billing → Credit Note.
- Find the desired Credit Note row in the grid.
- Click the ⋮ (dots-vertical) action button on that row. A small floating menu appears.
- Select Apply to Invoice. (This option only appears in the floating menu if the Credit Note is eligible — Active and with a remaining balance.)
- In the Adjust Invoice dialog, select the Invoice Number from the dropdown.
- Click OK.
💡 If the Apply to Invoice option does not appear in the floating menu, the Credit Note either has no remaining cash balance or has been cancelled.
📋 The “Adjust Invoice” Dialog — Field Reference
📍 Screen: The Adjust Invoice modal dialog — opens after clicking Apply to Invoice from either path above.
| Field | Description |
|---|---|
| Invoice Number (required) | Dropdown listing all open Invoices for the same client that still have an outstanding balance. Only one Invoice can be selected per application. If the dropdown is empty, the client has no open Invoices. |
| Close button | Dismisses the dialog without making any changes. |
| OK button | Confirms the adjustment. The system applies the credit and closes the dialog. |
🔍 What the System Updates Automatically
As soon as you click OK, the following happen without any further action on your part:
- The selected Invoice’s outstanding balance decreases by the applied amount (the system applies the lesser of the Credit Note’s remaining cash balance and the Invoice’s outstanding — the outstanding never goes negative).
- The Invoice’s payment status is recalculated — it may move to PART or PAID depending on how much is still owed.
- The Credit Note’s Applied Amount increases and the remaining cash balance decreases accordingly.
- The new application is added to the Applied Invoices table on the Credit Note’s Details tab, showing the date, Invoice Number, and Amount Applied.
- Client and Project Statements update to reflect the new outstanding figures.
⚠️ OVERPAID status is not triggered by applying credit. The Invoice’s payment status only reaches OVERPAID when real cash received exceeds the Invoice value. Applying a Credit Note — even if it fully covers the outstanding — does not flip the Invoice to OVERPAID.
📌 Rules and Constraints
- Same client only. You can only apply a Credit Note to Invoices belonging to the same client. Cross-client adjustment is not permitted.
- Amount is capped automatically. The system applies the lower of (a) the Credit Note’s remaining cash balance and (b) the selected Invoice’s outstanding amount. You do not enter a custom amount — the system handles it.
- One Invoice per application. Each time you click Apply to Invoice, you select one Invoice. To apply across multiple Invoices, repeat the process for each.
- A Credit Note can be spread across multiple Invoices — as long as the total applied amount does not exceed the Credit Note’s original cash balance.
- Once fully applied, the option disappears. When the Credit Note’s remaining balance reaches zero, the Apply to Invoice button and floating menu option no longer appear.
- Applied credit cannot be reversed. Once credit has been applied to an Invoice, there is no undo button. If the situation changes (for example, the Invoice is later cancelled), you must issue a new Credit Note to restore the credit.
📊 Viewing Applied Invoices History
📍 Screen: Billing → Credit Note → click the Credit Note → Details tab → scroll to the Applied Invoices section at the bottom of the view.
Every credit application is recorded in the Applied Invoices table on the Credit Note’s Details tab. The table shows:
| Column | Description |
|---|---|
| Date | The date the credit was applied (dd-MMM-yyyy). |
| Invoice Number | The Invoice the credit was applied to. |
| Amount Applied | The amount directed at that Invoice from this Credit Note. |
You can also see the cumulative totals at a glance in the Credit Note header fields: Applied Amount (total directed to invoices) and Refunded Amount (total returned as cash).
✅ Real-World Example
You have issued a Credit Note of ₹10,000 for Client A.
- Client A has Invoice 1 with ₹4,000 outstanding and Invoice 2 with ₹9,000 outstanding.
- You click Apply to Invoice, select Invoice 1, and click OK.
- The system applies ₹4,000 (Invoice 1’s full outstanding). Invoice 1 is now PAID. The Credit Note’s remaining balance is ₹6,000.
- You repeat — click Apply to Invoice again, select Invoice 2, and click OK.
- The system applies ₹6,000 (all that remains on the Credit Note) against Invoice 2’s ₹9,000 outstanding. Invoice 2 moves to PART (₹3,000 still owed).
- The Credit Note’s remaining balance is now ₹0 — the Apply to Invoice option no longer appears.
⚠️ If Invoice 2 is later cancelled, the ₹6,000 credit already applied to it does not automatically return to the Credit Note. You must issue a new Credit Note if you need to apply that amount elsewhere.
💡 Tips
- Check the Applied Amount and Refunded Amount fields on the Credit Note Details tab before applying — they tell you exactly how much is still available.
- If the client has multiple open Invoices, prioritise applying credit to the oldest or highest-priority invoice first.
- If the credit should go back to the client in cash rather than reducing an invoice, use the Refund tab instead. See the Refund Client Guide.
- To understand how the parent Credit Note was created, see the Credit Note Guide.
- To cancel a Credit Note, see the Cancel Credit Note Guide.