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14.23. Issue and Apply Credit Notes for MSP Client Billing
Create AlgaPSA credit notes for refunds and billing adjustments, apply client credit to open invoices, and export credit notes to QuickBooks Online as credit memos.
A credit note records that your MSP owes a client value back. The reason might be an over-charge, a goodwill adjustment, a returned product, or a corrected invoice. In AlgaPSA a finalized credit note does two things. It documents the adjustment, and it adds to the client's available credit balance. You can then apply that balance against open or future invoices. When QuickBooks Online is connected, credit notes export as QuickBooks credit memos, so the adjustment shows up in your books.
This guide covers how you create credit notes, how client credit is applied, and how both reach QuickBooks. You will find the credit-related views under Billing, alongside invoices and client billing settings.
Where client credit comes from
AlgaPSA tracks a running credit balance for each client. Credit is created in two ways.
| Source | How it works |
|---|---|
| Credit note | A finalized invoice with a negative total becomes a credit note. AlgaPSA tags it as a credit note, gives it a CM- number, and adds its value to the client's credit balance. |
| Prepayment invoice | A prepayment invoice collects money in advance and holds it as credit until it is applied to real charges. See Generating invoices for the prepayment flow. |
Both raise the client's available credit. The difference is direction. A credit note is value you are giving back. A prepayment is money the client paid ahead.
Create a credit note
You create a credit note the same way as a manual invoice, but with negative amounts, so the total comes out below zero.
- Go to Billing > Invoicing and start a Manual invoice for the client.
- Add lines that describe the adjustment, using negative amounts. For example, a
-$150.00line credits a service that was over-billed. - Confirm the invoice total is negative.
- Finalize the invoice.
When you finalize, AlgaPSA fixes the document's identity. Because the total is negative, AlgaPSA records it as a credit note, assigns the next CM- number from the credit-note sequence, and adds its value to the client's credit balance. AlgaPSA sets this identity once, at finalize time, so the later steps can rely on it. Those steps are credit application, QuickBooks export, and void handling.
Note: The invoice total decides the credit-note identity, not a separate document type. A finalized invoice with a negative total is a credit note. A finalized invoice with a positive total is a standard invoice.
Apply credit to an invoice
You can apply available client credit to reduce what a client owes on an invoice.
- Automatically at finalization. When you finalize a standard invoice for a client who has available credit, AlgaPSA applies that credit toward the invoice and reduces the amount due. An invoice that credit partly covers shows a partially applied status.
- Credit history. AlgaPSA tracks each client's credit activity: credits earned, credits applied, current balance, and expiration. So you can see how a balance was built up and drawn down.
When credit is applied, the amount due drops accordingly, and AlgaPSA records the application against both the credit note and the target invoice.
Credit notes and QuickBooks Online
When QuickBooks Online is connected (see Connect QuickBooks Online), credit notes take part in the two-way sync.
| Event in AlgaPSA | What happens in QuickBooks |
|---|---|
| You finalize a credit note | AlgaPSA exports it as a QuickBooks credit memo for the matching customer. |
| You apply client credit to an invoice | AlgaPSA applies the credit memo against the linked invoice in QuickBooks, so the customer balance matches. |
| You void a credit note | The void propagates to the QuickBooks credit memo. |
Credit notes appear in the Finalized invoices list with their own CM- numbers and the same QuickBooks sync-status column as standard invoices. So you can confirm a credit memo exported correctly. If a credit application cannot be completed in QuickBooks, the sync raises a Credit application keeps failing in accounting exception. See Keep AlgaPSA and QuickBooks Online in Sync for how to resolve exceptions.
Best practices
- Describe the reason for the adjustment on the credit note's lines. The description carries through to QuickBooks and to the client's records.
- Apply existing credit before you collect new payment, so a client is not asked to pay an amount their credit already covers.
- Review each client's credit history before you issue a new credit note, so you do not duplicate an adjustment.
- When QuickBooks is connected, confirm the credit note reached QuickBooks as a credit memo (the sync-status column on the Finalized list) before you treat the adjustment as closed.
Related topics
- How Accounting Works in AlgaPSA — how credit notes fit alongside invoices, payments, and your books.
- Generating invoices — manual, automatic, and prepayment invoices.
- Review, finalize, and manage invoices — the draft and finalized lifecycle.
- Keep AlgaPSA and QuickBooks Online in Sync — how credit memos and their applications sync.