What is the difference between credit notes and excess payments?
In general a credit note is created when a customer returns a good or downgrades to a lower plan. It is nothing but the amount that a merchant holds as a credit or liability to the customer.
A credit note is redeemed for any create/update/renewal of offline/online subscriptions. Since Credit Note holds an amount which a customer has already paid and hence already been recorded in the revenue for the merchant, hence further redemption of credit note will not count for the revenue. Credit Notes are always given first preference while making payment, as credits are always preferred to be redeemed first.
Credit Notes are created on the following instances:
- Merchant manually creates a Credit Note for the Customer.
- When the customer downgrades to a lower plan subscription.
- When the customer switches to a new plan, credit note for the existing subscription plan is created and adjusted instantaneously after which the stored credits and payment is applied(if any).
Again here, the amount that is paid by the customer in excess is Excess Payment.
It can also be told as the amount that is taken as the initial installment. This could also be a lump sum amount which can be redeemed in the due course of subscription for further invoices payment. The amount can also be extra payment that is made for a particular invoice. It is stored as unused credits for the particular customer which is used for next offline invoices upon update/create/renewal.
Excess payment is counted as income for the customer and hence accounted in the revenue for the organization as and when the payment is redeemed.
If both the settings are enabled and if the customer has Credit Note, Excess Payments and has some balance Invoice amount also, then the priority order goes as
- Credit Note
- Excess Payment
- Customer Payment
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