We’re back with the second part of Nancy Matis’ guest post on credit notes. Enjoy!
Example of a credit note for a translation project.
5. When to issue a credit note
You need to create a credit note when you have sent an invoice to the client that can no longer be changed. If the invoice has not yet been registered in the client’s and subcontractor’s accounts, it will still be possible to amend it without having to create a credit note. However, once the invoice is formerly registered in any of the parties’ accounts, the only official method of cancelling it (or part of it) is to issue a credit note.
Another way of avoiding a credit note is to credit the amount in question on the next invoice. In this case, the subcontractor submits an invoice for the new jobs delivered and adds a line with a negative amount, which is the amount to be credited to the client. Obviously, this procedure will not apply when the problem concerns incorrect official information on invoices.
Occasionally, clients will request a credit note even if the subcontractor has not sent his invoice yet. This could happen when a client is checking a translation and considers that the level is not up to the quotation amount agreed upon beforehand. In this case, if the translator or the translation company accepts the quality problem, they will not need to actually generate a credit note as they will simply reduce the amount of the next invoice.
6. How to settle credit notes
There are two ways to credit clients the amounts due:
- You pay the client the amount specified on the credit note.
- The client deducts the credit note amount from his next payment.
Let’s suppose that after sending several invoices for a total amount of 4,000 euros, you issue a credit note of 600 euros. The client will only pay 3,400 euros on the due date. This exempts you from a payment, but forces you to perform some extra calculations.
7. How to avoid having to issue credit notes
When they are linked to quality problems reported by the client, this is not always easy. Ensuring you conform to all the clients’ requirements and don’t make any indisputable mistakes is obviously a must. Still, some clients might continue to ask for credit notes simply arguing that they do not like your translation style. In this case, it is probably preferable to stop working for them.
It goes without saying that you should double-check which official information needs to appear on the invoices. However, sometimes, the requester might not even know himself and provide you with the wrong information.
If possible, when the data that needs amending is the name of a contact person or a PO number on an invoice, find out from the client whether it is really necessary to issue a credit note and a new invoice. Sometimes clients might agree to correct such data internally to avoid extra paperwork.
Provided the compulsory legal information is present, you can normally prepare your invoices the way you want. Most subcontractors do not like to be told how to format them. On the other hand, many clients have specific rules and preferences and might block or delay the payment of some invoices by arguing that you failed to comply with their internal accounting policy. It might, therefore, be preferable to adhere to their guidelines to receive payment as soon as possible.
Unfortunately, in most cases, registering credit notes and potential new invoices will indeed delay the payment process, as issuing credit notes is time-consuming. First, you have to find out why they are required and discuss this with your client. You then have to create the credit notes, submit new invoices and record both. Next, you have to pay them or track the payment of the reduced invoices. Finally, your accountant has to enter all this extra data in the financial system and monitor the accuracy of the final account.
All this costs money. Not only for the subcontractor, but also the client. That’s why clients and translation agencies should, ideally, refrain from asking for credit notes unless they are an absolute necessity, and they should definitely remain an exception rather than the norm.
Thanks, once again, Nancy, for such a great content contribution! 🙂
Now, do you have any questions left about credit notes after reading such a thorough post?
About the author
Nancy Matis is the author of the book “How to manage your translation projects”, originally published in French and recently translated by her partner company in the UK. Nancy has been involved in the translation business for around 20 years, working as a translator, reviser, technical specialist, project manager and teacher, among other roles. She currently manages her own company based in Belgium, specialising in localisation, translation project management, consulting and training. She teaches at numerous universities across Europe and has published several articles about translation project management. During these past few years, she has also been involved in some European projects, designing and evaluating training materials for future translators and project managers.