How do I invoice clients and issue credit notes in the US?

Understanding invoices and credit notes in the US

Invoicing in the United States is less about following a single national “invoice law” and more about following good business practice, meeting tax and recordkeeping expectations, and aligning with whatever you and your client agreed in your contract. That’s good news: you have flexibility. It also means you need a clear, consistent process so clients understand what they’re paying, when they’re paying, and what happens if something changes.

This guide walks you through how to invoice clients and how to issue credit notes in the US—step by step, in plain language. It covers what to include on invoices, when to send them, how to handle sales tax, common payment terms, how credit notes work, and how to keep your records tidy. The goal is simple: get paid faster, reduce disputes, and keep clean books. If you use invoice24, you can do all of this in one place: create invoices, send them, track payments, issue credit notes, and keep a clear audit trail.

What an invoice is (and what it isn’t)

An invoice is a request for payment that documents what you provided (products or services), how much it costs, and how and when the client should pay. It’s a commercial document used for communication and recordkeeping. For many businesses, invoices are also a key input to accounting and tax reporting.

An invoice is not necessarily a contract by itself. Your contract (or written agreement, statement of work, engagement letter, or accepted estimate) is what establishes the terms—scope, rates, deliverables, deadlines, payment terms, and policies. The invoice should match that agreement. When invoices and contracts align, clients rarely argue. When they don’t, disputes become more likely.

In the US, invoices are used across B2B and B2C settings. Some businesses invoice after work is complete, others bill upfront, and many use progress billing. There’s no one-size-fits-all—just a set of practices that make invoicing smoother and more professional.

What is a credit note (credit memo) and why it matters

A credit note—often called a credit memo in the US—is a document that reduces the amount a client owes you. It’s used when you need to correct an invoice, refund part of a charge, apply a discount after the fact, handle returns, or acknowledge that you delivered less than planned. Think of it as the opposite of an invoice: instead of “please pay this amount,” it says “we’re reducing what you owe by this amount.”

Credit notes matter because they create a clean paper trail. If you simply “cross out” an invoice or silently adjust numbers, your accounting becomes confusing and it’s harder to prove what happened later. A proper credit note keeps your records consistent: the original invoice remains intact, and the credit note explains the change. This helps with client trust, bookkeeping accuracy, and (when relevant) sales tax adjustments.

Invoice24 makes this easy by linking credit notes to the original invoices, maintaining clear numbering, and allowing you to apply credits to open balances or reflect refunds cleanly.

Before you invoice: set up a simple billing system

The easiest invoicing experience starts before the first invoice is ever sent. A small amount of setup reduces late payments and avoids confusion.

1) Confirm your client’s billing details

Collect the correct legal name, billing address, and the email address that handles accounts payable. In larger companies, your day-to-day contact may not be the person who pays. If you can, get:

• Billing contact name and email
• Company legal name and address
• Purchase order (PO) requirements, if any
• Vendor onboarding forms or W-9 request, if they require it

2) Agree on payment terms in writing

Common terms include due on receipt, Net 7, Net 15, Net 30, or milestone-based payments. For ongoing services, monthly invoicing is standard. Put the terms into your contract and repeat them on your invoice. Clarity is not pushy; it’s professional.

3) Define your late fee and collections policy

Decide what happens if payment is late: do you charge a late fee, pause work, or require payment upfront for future work? Your policy should match your industry and comfort level. Include it in your contract and reference it on invoices. Even if you never apply it, having a policy encourages timely payment.

4) Decide how you’ll accept payment

US clients often pay by ACH bank transfer, credit card, check, or wire for larger sums. The easier you make it, the faster you get paid. If you accept cards, consider passing on processing fees only if your client agrees and it’s permitted in your state and contract. Many businesses prefer ACH because it’s low-cost and reliable.

5) Choose an invoicing cadence

Pick a schedule your clients can expect. Examples:

• Projects: invoice upfront deposit + milestones + final invoice
• Retainers: invoice monthly in advance
• Hourly services: invoice weekly or biweekly to keep amounts manageable
• Product sales: invoice at shipment or delivery, or as per purchase order terms

What to include on a US invoice

A great invoice answers every question an accounts payable team might ask without needing to email you back. That means it should be complete, consistent, and easy to read.

Core invoice fields

Include the following on every invoice:

• Your business name (and “doing business as” name if applicable)
• Your address and contact information (email and/or phone)
• Your client’s billing name and address
• Invoice number (unique and sequential)
• Invoice date (the date you issue it)
• Due date (based on your terms)
• Line items describing products/services
• Quantity/hours, rate, and line totals
• Subtotal, taxes (if applicable), discounts, and total due
• Payment instructions (how to pay, where to send ACH/check, etc.)

Helpful “extra” fields that reduce delays

These aren’t always required, but they often speed up approval:

• Purchase order number (if the client uses POs)
• Project name, job number, or reference code
• Service period (for recurring billing, e.g., “Services for January 2026”)
• Your tax ID information when needed for vendor files (commonly handled separately, but sometimes requested)
• Notes section with brief payment terms

Writing good line-item descriptions

Vague descriptions like “Consulting” or “Work performed” can slow down payment because they invite follow-up questions. Use line items that are specific enough for the client to recognize value and verify against the agreement. Examples:

• “Website copywriting: Home page + About page (per SOW dated Jan 10)”
• “Design retainer – February 2026 (up to 20 hours)”
• “Software subscription: invoice24 Pro plan – annual renewal”
• “Electrical materials: conduit and fittings – per quote #Q-1042”

If you bill hourly, you can include a brief summary on the invoice and attach a detailed timesheet if the client expects it. The key is consistency: whatever you promised in the contract is what should appear on the invoice.

Invoice numbering and recordkeeping best practices

Invoice numbers should be unique and ideally sequential. Many businesses use a simple format like 1001, 1002, 1003. Others add prefixes such as “INV-2026-0001” to make searching easier. The specific format matters less than consistency and uniqueness.

Why be careful with numbering? Because invoices are part of your financial record. If you ever need to reconcile payments, explain income, or track corrections, a clear numbering system saves hours of headaches.

Invoice24 can automatically generate invoice numbers and keep them consistent, so you don’t accidentally reuse a number or skip around in ways that confuse your records.

When to send invoices: timing strategies that improve cash flow

Invoicing timing can be the difference between “paid in a week” and “paid in two months.” Here are proven timing strategies used by successful US freelancers and small businesses.

Invoice as soon as you’re allowed to

If your agreement says “bill at milestone completion,” invoice immediately when the milestone is done—same day if possible. If you wait until the end of the month out of habit, you add unnecessary delay.

Use deposits for projects

Deposits reduce risk and help you avoid financing a client’s project with your own time. Common deposit structures include 30%–50% upfront with the remainder at milestones or delivery. When you take a deposit, make sure your invoice clearly states what it is (e.g., “Deposit for project X”) and whether it’s refundable or non-refundable based on your contract.

Progress billing for long projects

If a project runs for months, break payments into milestones (design approval, development start, beta delivery, final delivery) or time-based billing (monthly). Clients are more likely to pay smaller amounts consistently than one large invoice at the end, and you reduce risk if priorities change.

Recurring invoices for ongoing work

For retainers and subscriptions, recurring invoices are ideal. Sending them on the same day each month creates a predictable routine for the client’s accounts payable process. Consistency can be a competitive advantage because it makes you easy to work with.

How payment terms work in the US

Payment terms communicate when the invoice is due. Here are common terms and what they mean:

• Due on receipt: payment is expected immediately (often within a few days in practice)
• Net 7 / Net 15 / Net 30: payment is due 7, 15, or 30 days after the invoice date
• EOM (end of month): due at the end of the invoice month
• 2/10 Net 30: client gets a 2% discount if paid within 10 days, otherwise due in 30 days

For small clients, Net 7 or Net 15 can work well. Larger companies often push for Net 30 or longer, but you can still negotiate by offering early-pay discounts or by requiring a deposit. Whatever you choose, put the due date plainly on the invoice, not just “Net 30.” A due date is harder to ignore.

Sales tax and invoices: what you should know

Sales tax in the US is primarily state-based (and sometimes local), and whether you need to charge it depends on what you sell, where your client is located, where you have tax obligations, and whether the transaction is taxable. This can get complex quickly, especially if you sell goods or certain digital products across state lines.

As a general rule, you should only charge sales tax when you are required to do so. Overcharging tax can create customer issues and may be hard to unwind later. Undercharging can create tax liability for you. If you’re unsure, it’s worth getting advice from a tax professional familiar with your state and business model.

How to display tax on an invoice

If tax applies, show it clearly as a separate line or lines:

• Subtotal
• Sales tax (rate and amount)
• Total

Clients like transparency. If you operate in multiple jurisdictions, you may need to show the correct rate for a specific location. Invoice24 can help you apply tax settings consistently per client or per item so the invoice always calculates totals correctly.

Tax-exempt clients and resale certificates

Some clients may be tax-exempt (for example, certain nonprofits, resellers, or government entities). If a client claims exemption, you typically need documentation (such as an exemption certificate) and you should keep it on file. Your invoice can note “Tax exempt” where appropriate and omit the tax line when valid.

Creating and sending an invoice step by step

Let’s break invoicing into a practical workflow you can repeat every time.

Step 1: Confirm what you’re billing for

Check your contract or accepted quote. Confirm the scope delivered and ensure any change orders or extras are documented. If you’re billing hourly, confirm your hours and ensure they align with what the client expects. If you’re billing a retainer, confirm the service period.

Step 2: Build the invoice with clear line items

Add line items with descriptions, quantities, and rates. Avoid bundling everything into one line unless your agreement is a fixed-price project where that’s expected. If your client requires a PO number, add it prominently.

Step 3: Add payment terms and due date

Make the due date obvious. Include brief terms in the notes section such as “Payment due within 15 days” and your preferred payment methods. Redundancy helps.

Step 4: Review for accuracy

Before sending, double-check:

• Client name and billing address
• Invoice date and due date
• Correct amounts and tax calculations
• Your payment details (bank info, mailing address, etc.)
• Any required references (PO number, project code)

Step 5: Send the invoice and keep a record

Email is the most common method for US clients, and many accounts payable teams prefer PDFs. Some clients also want invoices uploaded to a portal. Whatever method you use, keep a record of when it was sent and to whom. Invoice24 helps by tracking delivery, maintaining a timeline, and storing all invoices in one searchable place.

How to follow up on unpaid invoices professionally

Late payments happen, but they don’t have to derail your relationship or your cash flow. The secret is a consistent follow-up process that’s polite, direct, and timely.

Follow-up schedule you can copy

• 3–5 days before due date: friendly reminder (optional but effective for new clients)
• 1 day after due date: simple “just checking in” reminder with invoice attached
• 7 days after due date: firmer reminder asking for payment date
• 14+ days after due date: escalate based on your policy (late fee, pause work, call accounts payable)

Keep follow-ups short and easy to act on

Include the invoice number, total, due date, and a direct payment link or payment instructions. Attach the invoice again. Many late payments are caused by lost emails, internal approvals, or minor confusion—not malicious intent.

What to do if the client disputes the invoice

Stay calm and treat it like a process issue. Ask what specific line item they question, reference the agreement, and offer a quick call if needed. If the dispute is valid—maybe you billed the wrong rate or included an item that was removed—resolve it cleanly with a credit note rather than editing the original invoice in a way that muddles the record.

Issuing credit notes in the US: common situations

Credit notes are used in several common scenarios. Here are the most frequent ones and how to handle them smoothly.

1) Correcting an error on an invoice

If you accidentally billed the wrong quantity, rate, or item, you should issue a credit note to reduce the amount appropriately. Depending on the situation, you may then issue a new corrected invoice or a supplemental invoice. The cleanest approach depends on whether the client has already processed the original invoice.

For example:

• If the client hasn’t paid yet: issue a credit note for the incorrect portion and re-issue the corrected invoice, or issue a replacement invoice if your system supports it cleanly.
• If the client already paid: issue a credit note and either refund the difference or apply it to the next invoice.

2) Applying a discount after invoicing

Sometimes you agree to a goodwill discount, a promotional discount, or an early-payment discount after the invoice is sent. A credit note documents the discount and reduces the amount due without rewriting history.

3) Returns and refunds for products

If a client returns goods or you refund part of a product purchase, you use a credit note to reflect the reduction. If sales tax was charged, you may also need to adjust the tax portion on the credit note to mirror the original tax charged for the returned items.

4) Partial cancellation of a project or scope reduction

If a project is paused or reduced, you may need to credit unused prepaid amounts or remove unperformed work. Credit notes keep this fair and transparent. If your contract includes cancellation fees, those can be invoiced separately, while the unused portion is credited.

5) Overpayment

If the client paid more than the invoice total, you can issue a credit note for the overpaid amount. Then you can either refund it or leave it as a credit balance to apply to future invoices—depending on what the client prefers.

What to include on a credit note (credit memo)

A credit note should be as clear as an invoice, with its own unique identifier and a direct link to the original invoice it affects.

Credit note essentials

Include:

• Your business name and contact information
• Client name and billing address
• Credit note number (unique, ideally sequential)
• Credit note date
• Reference to the original invoice number
• Reason for the credit (brief, factual description)
• Line items being credited (quantities, rates, amounts)
• Subtotal, tax adjustments (if applicable), and total credit amount

Keep the reason factual

A reason like “Pricing correction for line item 2” or “Return of 3 units of SKU 104” is ideal. Avoid emotional or overly detailed explanations. You want a clear record, not a negotiation transcript.

How to issue a credit note step by step

Here’s a repeatable workflow for issuing credit notes that keeps your books clean.

Step 1: Decide whether you need a credit note or a refund

A credit note reduces what the client owes, but it doesn’t automatically move money. If the client hasn’t paid yet, the credit note simply reduces the balance. If they have paid, you typically decide whether to refund the amount or leave it as a credit to apply later. Many B2B clients prefer credits applied to future invoices; many consumers prefer refunds.

Step 2: Reference the original invoice

Always connect the credit to the original invoice. This is crucial for clarity and audit trails. It also helps the client’s accounts payable team match documents quickly.

Step 3: Add the credited items and amounts

Credit notes can be full or partial:

• Full credit: credits the entire invoice amount (often used to cancel an invoice)
• Partial credit: credits one or more lines or a portion of the total

If the original invoice included tax, credit the tax proportionally based on what’s being returned or reduced.

Step 4: Send the credit note promptly

Clients appreciate fast corrections. Send the credit note to the same billing contact who received the invoice, and include a short message explaining what changed and how it affects the balance. Attach the credit note as a PDF if that’s your standard format.

Step 5: Apply the credit correctly

In your invoicing system, mark whether the credit is:

• Applied to an open invoice balance (reducing what’s owed)
• Held as a client credit to be applied later
• Refunded (and when/how the refund was issued)

Invoice24 is designed to manage these outcomes cleanly so you can see exactly what happened at a glance.

Credit notes vs. editing invoices: why the paper trail matters

It can be tempting to simply edit an invoice after you’ve sent it. In real life, that often causes confusion: the client may have already saved the original PDF, entered it into their accounting system, or started an approval workflow. If you change it silently, now there are multiple “versions” floating around.

Issuing a credit note avoids this. It preserves the original invoice and documents the adjustment separately. When you need a pristine trail—especially for tax, bookkeeping, or corporate procurement—credit notes are the standard, professional way to do it.

Handling sales tax adjustments on credit notes

If you charged sales tax on the original invoice and later issue a credit, you typically need to adjust the tax portion too. That means the credit note should show the tax being reduced in proportion to the credited items, using the same rate(s) as the original invoice.

For example, if you sold a taxable item for $100 with $8 of sales tax and the client returns half, your credit note might include a $50 credit plus a $4 sales tax credit (depending on the applicable rules and how the transaction was structured). Keeping tax adjustments aligned with the original transaction helps ensure your records reflect the correct taxable sales and tax collected.

If you operate in multiple tax jurisdictions or sell mixed taxable and non-taxable items, it’s worth setting up your items and tax rules carefully so credits calculate correctly every time. A consistent setup in invoice24 reduces manual errors when issuing credits.

Refunds: when you should refund vs. leave as a credit

Whether you refund or leave a credit depends on your business model and what you agreed to with the client.

When refunds are common

Refunds are often expected in consumer settings, for subscription cancellations with refund policies, or when the client explicitly requests money back. Refunds can also be appropriate when a client relationship ends and there won’t be future invoices to apply credits against.

When credits are common

Credits are common in B2B relationships where work is ongoing. A credit can be applied to the next invoice, saving both sides administrative effort. Some clients may require a credit note even if you refund, because they need documentation for their accounts payable records.

Be explicit in your communication

When you issue a credit note, state clearly whether it will be applied to a future invoice or refunded, and when. Clarity prevents misunderstandings and reduces follow-up emails.

Common invoicing mistakes (and how to avoid them)

Even experienced businesses run into invoicing issues. Here are the mistakes that most often lead to delayed payments, disputes, or messy bookkeeping—plus how to prevent them.

Using unclear descriptions

Fix: use specific line items tied to a project name, service period, or scope reference.

Missing PO numbers or required references

Fix: ask the client about PO requirements upfront and include the number prominently on every invoice.

Not showing a due date

Fix: always include an explicit due date, not just “Net 30.”

Inconsistent numbering

Fix: use automatic sequential numbering and avoid reusing numbers.

Waiting too long to invoice

Fix: invoice immediately when a milestone is complete or on a consistent recurring schedule.

Editing invoices after sending them

Fix: use credit notes to correct or reduce charges and keep the original invoice intact.

Not offering easy ways to pay

Fix: provide simple payment methods (ACH, card, etc.) and include clear instructions or links.

Example scenarios: invoicing and credit notes in real life

Sometimes the easiest way to understand credits is to see them in context. Here are realistic scenarios and how a clean process would work.

Scenario A: You billed the wrong hourly rate

You invoiced 10 hours at $150/hour ($1,500) but the agreed rate is $140/hour ($1,400). You should issue a credit note for $100 (and any related tax adjustments if applicable), referencing the original invoice. Then the client either pays the corrected balance or you apply the credit if they already paid.

Scenario B: Client returns part of a product order

You billed for 20 units but the client returns 5 due to damage. Issue a credit note for 5 units at the invoiced price, and adjust sales tax for those units if tax was charged. If the client already paid, refund or apply credit depending on your policy and agreement.

Scenario C: You offered a goodwill discount

A project ran late due to your schedule and you agree to a $250 reduction. Issue a credit note labeled “Goodwill discount,” tied to the project invoice. This is cleaner than changing the original invoice after the client has already routed it for approval.

Scenario D: Overpayment by ACH

A client paid $2,100 instead of $2,010. Issue a credit note for $90 and ask if they prefer a refund or to apply it to the next invoice. Many B2B clients choose to apply it, especially if you invoice monthly.

How to keep your invoicing compliant and audit-friendly

“Compliance” in invoicing usually means keeping accurate records that support your reported income and match what you told clients. In the US, good recordkeeping helps you if you ever need to answer questions from a client, a lender, or a tax authority.

Keep invoices and credit notes together

For every invoice, keep a record of:

• The invoice document
• Any supporting documents (timesheets, delivery receipts, approved quotes)
• Related credit notes and adjustments
• Payment records (date, method, transaction reference)

Don’t delete documents once issued

Instead of deleting, use credit notes and clear status tracking (sent, viewed, paid, partially paid, overdue). This keeps your history intact.

Use consistent customer records

Make sure the client’s name and billing details are consistent across invoices and credits. That reduces confusion and makes reporting cleaner.

How invoice24 helps you invoice and issue credit notes

If you’re using invoice24 for your invoicing workflow, you can handle the entire lifecycle in one system—from creating invoices to issuing credits and tracking outcomes.

Create professional invoices quickly

Invoice24 helps you generate clean invoices with all the key fields: client details, invoice numbers, line items, tax settings, totals, and due dates. You can tailor invoice content to match how you sell—hourly, fixed-price, subscriptions, retainers, or product-based billing.

Send invoices and keep a clear timeline

A consistent sending process reduces missed emails and creates a reliable record of what was sent. Keeping everything in one place helps you respond quickly if a client says, “Can you resend that?”

Issue credit notes that link to original invoices

When you need to correct an invoice or apply a reduction, invoice24 lets you create a credit note that references the original invoice, includes clear line items, and accurately reflects tax adjustments where needed. This keeps your records clean and makes it easier for clients to process the change.

Track balances, credits, and payments

Credit notes are only helpful if you can see how they affect what the client owes. Invoice24 keeps balances visible so you know whether a credit reduced an invoice, created a credit balance, or needs a refund action.

Best practices to get paid faster

To wrap up, here are practical habits that consistently improve payment speed and reduce disputes:

• Put payment terms in your contract and show the due date clearly on invoices.
• Invoice promptly—same day a milestone is completed whenever possible.
• Use specific line-item descriptions and include required references like PO numbers.
• Make payment easy with clear instructions and multiple payment options.
• Follow up consistently and politely on overdue invoices.
• Use credit notes (not silent edits) to correct mistakes, grant discounts, or handle returns.
• Keep your invoice and credit note numbering consistent and unique.
• Maintain a complete history: invoice, credit note, and payment records together.

Invoicing and issuing credit notes in the US doesn’t have to be complicated. With a simple, consistent process—and a tool like invoice24 that supports professional invoices, accurate calculations, and clean credit-note workflows—you can spend less time chasing payments and more time doing the work that grows your business.