Invoice cancellation made easy: a guide

Errors in invoices are not uncommon, whether due to a misplaced decimal point or an incorrect address. If you discover the error before the invoice has been sent, it can be easily corrected. It becomes more complicated if the invoice has already been received and paid by the customer. In such cases, it is necessary to cancel the original invoice. This article shows you how to correctly create a cancellation invoice and what to look out for.

What you should bear in mind when creating an invoice

Once a service has been provided or a product delivered, it's time to write an invoice. By law, you have a maximum of six months to do this (in accordance with Section 14 (2) sentence 2 UStG). The legislator has also laid down precise requirements for the design of invoices, as set out in Section 14 (4) UStG.

The following mandatory information must not be missing on your invoice:

• Full name and address of the invoicing party
• Full name and address of the invoice recipient
• Date of issue of the invoice
• Consecutive invoice number
• Tax number or VAT identification number
• Quantity and type of product or service
• Date of delivery or service
• Net amount, broken down by tax rates and tax exemptions
• Sales tax shown
• Any bonuses, rebates or discounts
• Reference to VAT exemption when applying the small business regulation

Typical errors in invoicing

Incorrect invoices can be caused by various errors, such as

• Incorrect invoice amounts
• Duplicate invoice numbers
• Incorrect recipient addresses
• Incorrect VAT calculations
• Forgotten references to tax exemption for small businesses
• Missing tax numbers
• Omitted time of delivery or service

Procedure for incorrect information on the invoice

In the case of an unpaid invoice, a simple correction is sufficient. However, if the invoice has already been posted, it must be canceled and reissued.

Good to know: Minor typing errors do not normally require correction, unless they relate to important mandatory details such as the invoice total.

Correct cancellation of invoices

Canceling an invoice is an important process in accounting that requires special attention. This is especially true if an invoice is already with the customer or has even already been paid. Here are the steps you should follow for a correct cancellation:

1. checking the invoice payment: first, you should determine whether the invoice has already been paid by the customer.

2. create a cancelation invoice: A cancelation invoice cancels the original invoice. It must contain all the mandatory details of the original invoice, including the original invoice number & date. In addition, it must have a new, unique invoice number & show the invoice amount as a negative amount.

3. communication with the customer: It is important that you inform the customer of the cancellation & the reasons for it. Clear & transparent communication can help to avoid misunderstandings & maintain trust.

4. consider tax aspects: A cancellation invoice must meet the requirements of the tax office. Make sure that the cancellation is recorded correctly in your accounting system to avoid problems with VAT accounting.

5. creation of a new, corrected invoice: Once the cancellation invoice has been created and booked, you should issue a new, corrected invoice. This should contain all the correct details and be treated as a separate invoice.

6. documentation and archiving: All three documents - the original invoice, the reversal invoice and the corrected invoice - must be carefully documented and archived.

Modern accounting software such as sevDesk can greatly simplify the process of correcting and canceling invoices. Such programs often offer automated functions for the creation of cancellation invoices, which post everything correctly for tax purposes in the background and thus avoid errors.

Conclusion

Mistakes can happen when writing invoices. The important thing is that you react to them correctly: it is crucial to either correct them or cancel the invoice, depending on whether the amount has already been paid or not. Professional invoicing programs such as sevDesk support you in the correct creation and cancellation of invoices, making bookkeeping much easier. Benefit now from a 50% discount on all 12 and 24-month tariffs at sevDesk with the code STARTBASE50.