Cancellation invoice: What do I need to know?
Cancellation invoice – definition and when it comes into play
An invoice correction can be made in a variety of ways.
But when exactly do you create a credit note and when is the cancellation invoice issued? Do you know the exact use case?
Definition: What is a cancellation invoice?
A cancellation invoice is a document that is created to correct or cancel an already issued invoice. It is used to correct errors in invoices, to map returns or order cancellations and to keep the accounting up to date.
Reversal invoices are necessary to correct the financial transactions between seller and buyer. They enable an accurate mapping of changes in orders, payments or other transactions that occur after an invoice has been issued.
Mandatory information on a cancellation invoice
Zu den Mandatory information that should always be included on your document:
Marking as a cancellation invoice
The name and address of both contracting parties, i.e. the service provider and the service recipient, must be listed.
Tax number and/or VAT identification number also belong on the document.
Cancellation invoice number to refer to the invoice to be corrected.
You should also include the date of issue of the cancellation.
The original description/designation of the goods or service, which was previously invoiced.
State the reason why you are canceling.
Refer to the adjusted amount, broken down according to the various tax rates that have been applied, which you are now correcting with the cancellation invoice.
Legal aspects which you should consider
in relation to the cancellation invoice
- Documentation obligations: Legal requirements demand that cancellation invoices contain certain information, such as a unique cancellation invoice number, the reason for the cancellation and the original and adjusted transaction details.
- Deadlines for cancellations: Observe the legal requirements regarding the deadlines for issuing cancellation invoices, especially when it comes to refunds or the consideration of cancellations.
- Transparency towards customers: Communicate transparently with your customers to give them a clear idea of why a cancellation invoice has been issued and how the refund or correction will be made.
- Retention obligations: Check legal regulations regarding the retention of cancellation invoices that specify a certain retention period for accounting documents.
- Tax effects: Consult your tax advisor if necessary. Obtain advice on the tax implications of cancellation invoices, particularly with regard to VAT or other tax issues.
It is advisable to refer to the specific laws and regulations of the country or region in question to ensure full compliance.
Create cancelations: Quite simply with easybill
Curious? Then simply take a look at the corresponding function in our invoicing software. With our practical templates, you don’t have to think long and hard about what information belongs on a cancellation invoice. Instead, you simply create the document with just two clicks. easybill does most of the work for you, because things have to happen quickly in everyday working life.
Differentiate cancellation invoice from credit note
The terms “cancellation invoice” and “credit note” are sometimes used interchangeably, but there are differences in their use and meaning:
Cancellation invoice:
- A cancellation invoice is created to correct or cancel an invoice that has already been issued.
- It is generally used to correct errors in invoices, e.g. incorrect quantities or prices.
- The cancellation invoice cancels the original invoice and replaces it with the corrected version.
Credit note:
- A credit is a positive adjustment in financial transactions where money is transferred back to the customer’s account or offset as a credit.
- Credit notes are often granted as refunds for returned products, overpayments or as a gesture of goodwill.
- In contrast to a cancellation invoice, a credit note does not correct the original invoice, but a separate transaction is made to return the money.
To summarize: While a cancellation invoice is used to correct errors in invoices that have already been issued, a credit note is an independent transaction that represents a refund or credit note for the customer.
Frequently asked questions
to easybill and cancellation invoices
By definition, a cancellation invoice is an invoice correction if this invoice was issued incorrectly. Often the cancellation invoice is also called a correction invoice.
The cancellation invoice cancels the previously created invoice 100% and must therefore also have the same contents. It must refer exactly to the invoice number and “write off” the value of the invoice with a negative sign.
If the original invoice has already been imported into the recipient’s accounting system and there has also been a delivery of goods and a transfer of funds, a cancellation invoice should no longer be created. In this case, a credit note will be created to reimburse the recipient for the amount of money.
The cancellation invoice is subject to the same retention period as the original invoice. If the original invoice was issued incorrectly and needs to be corrected, a cancellation invoice is created (as a copy of the original invoice) and a completely new invoice for the recipient. The entire process is transferred to the accounting department.
In easybill, this process is purely technically possible. If the cancellation invoice is deleted as a document, the original invoice is active again. However, this procedure is recorded via the activities of the account.
Yes, every easybill package also includes the cancel function. You can convert a completed invoice into a reversal document with a simple click. You can change the name on the document at any time using the layout and document templates.
