Issuing credit notes for bills is easy to do in Xero. In this tutorial, we will create a credit note for an unpaid bill in Xero’s demo company and check to see whether the bill has been marked as paid.
Purchases Section in Xero
To get to the right place in Xero, go to Business → Purchases overview from the main menu:
Next, click on the Awaiting Payment section to see all the bills that have been created but not paid:
How to Create a Credit Note for a Bill in Xero
Let’s create a credit note for the first bill on the list. Click anywhere on the Heritage Trust row to open the bill:
Next, click on the Bill Options button on the top right-hand side of the screen and choose Add Credit Note from the list:
The credit note should automatically populate based on the original bill. You can change any of the setting you like but for this exercise we will leave them as they are:
Once you have created your credit note, you will be able to Save or Approve it. What you do depends on how you run your business. If your billing process requires you to save credit notes as drafts for someone else to approve, click on Save → Save as Draft on the bottom left-hand side of the screen:
If you do not need anyone else to approve credit notes, you can go ahead approve them yourself by clicking on the Approve button at the bottom right-hand side of the screen:
We will approve this credit note ourselves. When you are ready, go ahead and click on Approve.
You should now see that the amount due on the bill has reduced by the amount of the credit note. In this case, the credit note is for the full amount of the bill so the amount due is now nil:
That’s all you have to do to create a credit note for a bill in Xero. If you click on the Paid tab of the main Bills screen you should see the bill and credit note listed with nothing owing on the bill: