F. CREDIT NOTES
This sections deals, specifically with the issuance of Credit Notes – when should a credit note be issued, if the Credit Note has been issued correctly and that controls and procedures are in place to prevent fraudulent Credit Notes from being raised.
1. If you have made a mistake, and I am talking mainly about financial mistakes that are in favour of your client, this is when a credit note should be raised. If you have raised an invoice incorrectly in your favour, logic must tell you that all you need to do is raise another invoice to cover the shortfall. The problem arises when, for example you have charged the client too much, for whatever reason, and you have already sent the invoice to the client before the error is noticed, this is when a Credit Note needs to be processed. The Credit note should be treated in exactly the same manner that the invoice is raised, but in a negative form, as the amount should be shown as a credit and not a debit. The Credit Note should also have its own unique number (but also be raised in sequence). It would be a good idea to follow the same sort of routine that you do with the invoices, but differentiate between the two by using the prefix CN (Credit Note) before the number or before the personalized number.
In the detail section of the Credit Note, it is important to note the details of the invoice that the CN is pertaining to. To further simplify things, it is easier (in basic bookkeeping terms) to simply undo what is wrong and then re-do the invoice in the manner that it should have been done in the first place, rather than just off-setting the one against the other. So if you raised invoice # IA 1234 dated 23/11/02 in the amount of R14 256.78, plus VAT in the amount of R1 995.95 being a total of R16 252.73 for training of 27 people and it should have been for an amount of R13 761.29, plus VAT in the amount of R1 926.58, being a total of R15 687.87 for training 26 people, the following should be done to reverse what is incorrect (undo what is wrong) – raise a CN say CN 0012 dated 1/12/02 in the amount of R14 256.78, plus VAT in the amount of R1 995.95 being a total of R16 252.73 for training of 27 people, not forgetting to record that the credit note refers to invoice # IA 1234 dated 23/11/02 and also remembering to record the new invoice # IA 1250 dated 1/12/02 being the correction thereof. Once that has been done, the new invoice # 1250 dated 1/12/02 in the amount of R13 761.29 plus Vat in the amount of R1 926.58 being a total of R15 687.87 for training of 26 people. Again refer to the original invoice # and the CN # stating that this is the replacement invoice. In this way everyone knows what is happening!
2. CN’s should also be checked on a regular basis to ensure that they run sequentially. In the event that the invoice format (form) is used as a CN this must be recorded correctly in the register. If CN’s are printed separately as separate forms they must be controlled in exactly the same manner as invoices.
3. A register should be in place in the same way for CN’s as it is for Invoices. You can use the same spread sheet as the invoices, just changing the details to that of CN. If you would like a copy of a Credit Note Schedule, these are available at a cost.
4. When a CN is cancelled, for whatever reason – make sure that it is marked cancelled and that you keep all of the copies. If, for whatever reason, you are being audited by the SARS or even for your own accountant/bookkeeper, you have proof that the CN was in fact cancelled and that you haven’t tried to do anything illegal or fraudulent.
5. Check from time to time that the sequence is correct and that nothing has been missed or lost – it will save you a lot of time when you are sending your documents to the bookkeeper/accountant/auditor. Sign off on the spread sheet when you have checked this – this will show you when last it was done and will also prompt you to do it on a regular basis. Again, prevention is always better than cure!
6. For those of you who are in business units and/or a Franchise type agreement, have copies of your CN’s been forwarded to your Head Office by month end. It may be a good idea, just to send them as and when you raise them – why wait until the end of the month?
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