Bookkeeping

Refunding a paid invoice, in full or in part

A customer has paid and now some or all of the money goes back. How to record it properly: a credit note against the invoice, the tax that comes back with it, returning the money, and the records to keep.

10 Nov 2026 · 6 min read

The invoice stays paid and unchanged. A credit note takes back the returned part, and the refund is recorded against it.

Sofie sells handmade lamps from her studio in Antwerp. A hotel buys four for €1,210 including VAT, pays straight away, and a week later sends one back because it does not fit the room. She is happy to refund €302.50. The question is how to do it so that her books, the hotel's books and her VAT return all agree. Editing the paid invoice down to three lamps would be the wrong way. The invoice was right when she issued it. Something changed afterwards, and that change needs its own document.

The rule: leave the invoice alone

A paid invoice is a closed record. The customer has booked it, perhaps claimed the VAT on it, and matched it to their payment. Changing it now would make your copy and theirs disagree. Instead, issue a credit note that points back to the invoice and takes off the amount being returned, with its tax. Then send the money back. The general rules for credit notes are in our guide to fixing a wrong invoice with a credit note.

Which document for which case

Why the money goes back	What to issue
Goods returned	Credit note for the returned items, then refund
Work not done, or not up to standard	Credit note for the part that is not being charged, then refund
A discount agreed after payment	Credit note for the discount, then refund or credit
The whole sale is called off	Credit note for the full invoice, then refund
Paid twice, or paid too much	No credit note: the invoice was right. Return the extra and keep a note

Step by step

Agree the amount. In writing: which items or which part of the work, and whether delivery or other costs come back too.
Issue a credit note against the invoice, with its own number, the reason and the net, tax and total being returned.
Send the money back, ideally the same way it came: to the same bank account, card or payment service.
Record the refund against the credit note: the date, the amount, how it was sent and any reference.
Tell the customer, with both numbers and the amount, so they can match it.

The tax comes back too

If you charged VAT, GST or sales tax, the credit note reverses the tax on the refunded part, at the rate on the original invoice. In the example, the lamp was €250 plus 21% VAT, so the credit note returns €250 and €52.50 of VAT. You report the lower tax in the period of the credit note, and a registered customer reduces the tax they claimed back. Some countries set a time limit for issuing credit notes that reduce tax, so do not leave it for months. Check your tax office's rules.

Refund, or credit for next time?

With a regular customer you can agree to keep the amount as credit against their next invoice instead of sending money back. That is fine if they agree to it in writing, and the credit note records it the same way. For a one-off customer, or anyone who asks for the money, refund it.

Fees on payment services

If the customer paid by card or through a payment service, the original processing fee is often not returned to you when you refund. That is a cost of the sale, not something to deduct from the customer's refund, unless your terms said so. For returns you can plan for, check the service's refund terms.

Paid twice is not a refund of the sale

If a customer paid the same invoice twice, the invoice was correct and the sale did not change, so there is nothing to credit. Return the extra payment, or with their agreement keep it against the next invoice, and keep a note of what happened alongside the bank record.

What to tell the customer

“Hi Pieter, the returned lamp arrived today, thank you. Credit note CN/2026/0004 for €302.50 against invoice OG/2026/0109 is attached, and the refund went to your account today by bank transfer. It should show within two working days.”

If their payment was short because they deducted the refund themselves before paying, see why a client paid less. For a dispute that ends in a refund, when a customer disputes an invoice covers the steps before this one.

In Openn InvoiceOpen the paid invoice and choose Credit note. The draft has the invoice's lines: keep only what you are taking back, pick the reason, such as Goods returned or Deficiency in service, and issue it. It cannot be more than the invoice, less any credit notes already given. Because the invoice was paid, the credit note shows the amount to refund. When you have sent the money, choose Record refund on the credit note, enter the amount, pick how it was refunded (bank, UPI, cash, cheque, card or other) and add a reference. It then shows what was refunded and when. Openn Invoice does not move money: you send the refund from your own bank or payment service.

The short version

Never edit a paid invoice. Issue a credit note against it for the amount going back.
The credit note returns the tax on that amount, at the original rate.
Send the money back the way it came, then record the refund against the credit note.
Credit for the next invoice instead of a refund is fine if the customer agrees.
A double payment needs no credit note. Return the extra and keep a note.