Automatic Creation of Draft Credit Notes When Applying Change Requests

When a change request is applied, Billing Central creates a draft credit note automatically if your edits result in the customer being entitled to a refund. This happens if you:

• Create a change request and edit a contract line item so that it ends earlier than the date it has been billed to and is worth less than was billed. See Early Termination of Contracts and Contract Line Items.
• End a contract when your org is configured to end contracts via change requests, and the new contract end date is earlier than the date one or more contract line items have been billed to. See Ending Contracts via Change Requests.

When the change request is applied to the active contract, Billing Central calculates the credit amount for any contract line item that has been billed beyond its new end date. If any contract line items require crediting, Billing Central creates a draft billing document of type "Credit Note" with a separate document line item for each contract line item billing period being credited.

For further preliminary information, see Automatic Creation of Draft Credit Notes - Important Information.

Note:

You can turn off this automatic creation of draft credit notes by selecting Disable Automatic Credit Note Creation in the Billing Central Settings custom setting.

The Credit Note Billing Document

When Billing Central creates a credit note automatically, the billing document's Document Date field defaults to today. The Document Due Date field also defaults to today regardless of whether or not credit terms are set, as explained in Using Billing Documents with Foundations Credit Terms. Other fields are copied from the related contract (including Company, Account, and Analysis Mappings) and from the contract's account (including Billing Address and Shipping Address). The billing document's status is "Draft". A lookup links the billing document to the related contract.

For each document line item on the credit note:

• Start of Period and End of Period indicate the date range that the credit applies to.
• Product or Service, and Quantity, are copied from the related contract line item.
• Unit Price = the calculated credit amount divided by Quantity
• Net Value = Unit Price x Quantity
• A lookup links the document line item to the related contract line item.

If Unit Price x Quantity does not equal the calculated credit amount (because of decimal precision), Net Value Override is set to the calculated credit amount.

You must review the billing document before completing it. Check the calculated credit amounts, and calculate tax if required. If you want to credit tax, but tax rates have changed since the contract line item was billed, edit the billing document's Document Date field to be the tax point date. Do not edit the Tax Point Date field on the billing document because this field is not in use.

Note:

You cannot apply another change request while the credit note's status is "Draft". You must complete or discard the credit note before attempting to apply another change request to the contract.

How the Credit Amount Is Calculated

A contract line item is credited for the amount that has already been billed beyond its new end date, minus any credits that already exist during that period. Billing Central uses the complete billing document line items linked to the contract line item to determine how much has already been billed.

For example, a customer might have been billed for a service for a full calendar year but decides to cancel the service three months before it is due to end. Using a change request, you edit that contract line item to bring its end date forward by three months. When you apply the change request, Billing Central calculates the line's credit amount as the amount the customer has already been billed for the last three months of the year. If the final month was already credited, Billing Central deducts that amount so that the customer is not credited twice for the same period.

If the contract uses proration and the contract line item's new end date falls partway through a period, the credit amount is prorated according to the contract's proration policy.

Notes:

A One-off line is only credited if its new end date is earlier than its start date, causing the whole line to be canceled. For more information, see Canceled Contract Line Items.

Recurring Variable lines are never credited. You cannot move the end date of a Recurring Variable line to be earlier than its usage records.

Example

A three year contract ends on December 31 2024. It comprises four contract line items. Note each line's Start Date and Billed To date in the table below.

Billing Type	Start Date	End Date	Billed To	New End Date
Recurring Fixed	January 1, 2022	December 31, 2024	January 2, 2023	December 15, 2022
One-off	January 1, 2022	December 31, 2024	December 31, 2024	December 15, 2022
Recurring Variable	January 1, 2022	December 31, 2024	May 2, 2022	December 15, 2022
Recurring Fixed	January 1, 2023	December 31, 2024	December 31, 2023	December 15, 2022

If you create a change request and move the end date of all four lines to December 15 2022, or you end the contract via a change request and set its end date to December 15 2022, when the change request is applied:

• The first Recurring Fixed line is credited for December 16 2022 - January 2 2023.
• The One-off line is not credited because the new end date is later than its start date, therefore the one-off charge still applies.
• Recurring Variable lines are never credited. In this example, the Recurring Variable line has not been billed beyond the new end date. You cannot move the end date of a Recurring Variable line to be earlier than its usage records.
• The second Recurring Fixed line is credited for January 1, 2023 - December 31 2023. This line is canceled because its start date is after the new end date.