How refunds become credit notes

When you refund an invoiced order in Shopify, Invoice Inn issues a credit note for the refunded amount, linked to the invoice it corrects. The invoice itself is never changed. This needs Automatically handle order changes to be on; without it the order waits under Needs action with the credit note ready to create in one click.

Turn it on

Open Automations and expand Invoice generation.
Tick Automatically handle order changes.
Click Save.

What gets a credit note

Invoice Inn acts each time Shopify records a refund on an order that has an invoice. It compares what the documents already cover with the order’s current total and issues the document that closes the gap:

A full refund gets a credit note for the whole invoice.
A partial refund gets a credit note for the refunded lines and amount only, shipping included if you refunded it.
A cancelled order that you refund gets its credit note like any other refund.
A refund made before the invoice existed depends on your trigger. With When the order is paid, the invoice bills the full order and a credit note for the refund follows in the same moment. With When the order is fulfilled, the invoice bills only what remains after the refund and no credit note is needed.
An order fully refunded before any invoice gets nothing. There is nothing left to bill, so neither document is created.

The credit note is created when the refund is recorded, so refund in Shopify first and let the document follow. Removing items from an order without refunding them leaves the order under Needs action until the refund is made or you create the credit note yourself from the row’s documents menu.

How this shows on your documents

The credit note appears on the Documents page under Credit notes, with its own number from the credit note series (the CR- prefix by default), the same customer and order as the invoice, and the refunded lines with negative totals. Below the lines it carries the note “In reference to invoice No. … dated …”, naming the invoice it corrects. The VAT on each line is the rate the invoice charged, so the refund reduces the same tax it was collected under.

Good to know

Skip rules do not apply here. Once an order has an invoice, its refunds are always handled, tag or no tag.
A credit note counts toward your monthly document limit like an invoice does.
The customer receives the credit note by email when Email delivery is on and Credit notes is ticked under What to send.
If you deleted the order’s invoice, no credit note is created. Deleting the invoice removes its credit notes too, and the order is left alone from then on.