Accounting
Invoice numbering, credit notes and sales returns: doing it properly
Set up invoice numbering, credit notes and returns the right way: unbroken sequences, linked adjustments and clean VAT records for Bangladeshi businesses.
Few things look as small and cause as much trouble as invoice numbers. Two invoices with the same number, a gap nobody can explain, a returned shipment handled by editing the original invoice, a customer deduction with no paperwork: each of these turns into a month-end argument, a VAT query or a customer dispute months later.
This article sets out simple rules for numbering invoices, issuing credit notes and handling returns so that your sales records, your customer statements and your VAT records all tell the same story.
Rule 1: one unbroken sequence per document type
Each type of document, such as sales invoice, credit note, debit note and delivery challan, gets its own number series that increases without repeats. Numbers should be assigned by the system at the moment the document is finalised, not typed by hand. Hand-typed numbers produce duplicates; shared numbering books between branches produce gaps.
- Use a clear format, for example a prefix, a year or branch code, and a running number
- If you run several branches or warehouses, give each its own prefix so staff in different places cannot collide
- Decide whether the sequence restarts each financial year (July to June) and apply the rule consistently
- Never reuse a number, even for a document that was created by mistake
Rule 2: void, do not delete
Mistakes happen: wrong customer, wrong price, a duplicate entry. What matters is how you correct them. A document that has been issued to a customer should be cancelled or voided so that it stays in the sequence with a status and a reason, rather than being deleted. A gap with a record explaining it is fine. A gap with no record invites the question of what was hidden.
Draft documents that were never issued are a different matter. They can be discarded, which is why a clear difference between draft and issued status helps. Numbers are assigned only on issue, so drafts do not leave gaps.
Rule 3: correct with a credit note, not by editing
Once an invoice has reached the customer, it should not change. If the price was wrong, the quantity was short or goods were returned, issue a credit note that references the original invoice and states what is being adjusted and why. If the invoice undercharged, issue a debit note or an additional invoice. The original stays as it was, the adjustment sits beside it, and the customer's statement shows both.
| Situation | Correct document | Effect |
|---|---|---|
| Goods returned in full or part | Credit note referencing the invoice, plus stock receipt for returned goods | Reduces the receivable and sales; restores stock if goods are resaleable |
| Price or discount agreed after invoicing | Credit note for the difference | Reduces receivable and sales; no stock effect |
| Quantity short delivered | Credit note, or a revised delivery record, for the shortfall | Reduces receivable and sales |
| Undercharge discovered | Debit note or supplementary invoice | Increases receivable and sales |
| Whole invoice raised in error | Void it if not yet delivered or accepted, otherwise credit note in full | Removes the sale |
Sales returns: three things happen at once
A return is not one entry. It is three, and they must stay consistent:
- 1Money: the customer's balance is reduced by the credit note, or refunded if they already paid.
- 2Stock: the returned goods come back into inventory, in good or damaged condition, at the original cost, not at the selling price.
- 3Tax: the VAT on the original sale is adjusted through the proper VAT credit note documentation, tied to the original challan.
If the credit note is posted but the stock receipt is not, your books show lower sales and your stock record is short, so the next count reveals an unexplained loss. If the stock is received but no credit note issued, the customer is still billed for goods they returned.
VAT consequences
For VAT-registered businesses, a credit note reduces your output VAT only if it is properly documented and linked to the original supply. A credit note with no reference to the original challan is hard to defend. The conditions for adjusting output VAT, including the time limit for doing so and the documents you must issue, are set by NBR rules.
Customer deductions and short payments
Large customers often pay less than the invoice and deduct something: a rebate, a quality claim, a charge for late delivery. Do not let the deduction sit as a mystery balance on the account. Ask for the supporting debit advice, accept or dispute it, and if you accept it, raise a credit note so that the books and the customer's statement agree.
A short audit you can run monthly
- List invoice numbers in order and look for gaps and duplicates
- Check that every voided number has a reason and an authoriser
- Check every credit note references an invoice and has a reason code
- Compare returned goods quantities on credit notes with stock receipts
- Compare total credit notes for the month with VAT adjustments on the return
In eSolverBooks, credit notes are their own documents in the sales section, linked back to the invoice they adjust. Whatever tool you use, the principle is the same: never edit history, always add a document that explains the change.