Understanding credit note reasons and allocation in Lago

A credit note in Lago corrects a finalized invoice without altering the original document, but the reasons and structure differ from what some guides describe. There is no "Correction" versus "Credit for future invoices" type choice, and the reasons "Correction of error" and "Sales allowance" do not exist in the product. The real flow is: pick a reason, select which fees to credit, then allocate the credited total across up to three destinations at once.

How credit notes work

A credit note is a separate record attached to an invoice. Issuing one never rewrites the invoice's fees or totals. Credit notes apply to finalized invoices and are a premium feature.

Creating one in the UI follows three steps. First you choose a reason. The reason dropdown offers exactly six options: duplicate charge, fraudulent charge, cancellation, order change, unsatisfactory product, and other. Second you select the fees and amounts to credit under "items to credit." Third you allocate the credited total across one or more destinations. The reason is independent of where the money goes.

The three allocation destinations

The credited amount can go to any combination of three places in a single credit note:

• Offset invoice reduces this invoice's amount due. This is the destination used when crediting against an unpaid or partially paid balance.

• Refund returns money to the customer.

• Credit on customer wallet adds prepaid credit for future invoices.

What to expect with partial payments

When an invoice is partially paid, a credit note allocated to "offset invoice" reduces the remaining amount due rather than the total. For a 100 invoice with 10 already paid, the amount due is 90. Applying a 15 offset credit note brings the amount due to 75. Offsets and payments are tracked in separate fields, so an offset does not appear as a payment in the invoice's payment history.

This article reflects guidance drawn from customer case resolutions. It is not officially supported documentation and may not apply to all situations.