Debit Note Definition- Why You Should Care

By Nicholas Barone
Published: 11/24/21
definition backgroundDebit Note Definition- Why You Should Care

If you work in the B2B world, this concept is nothing new to you, however there might be some things that you didn’t know about debit notes. So let’s take a look at them!

Debit Note Definition

Even though you might already be very familiar with the concept, let’s just run through it one more time.

A debit note, or memo, is a physical or electronic document used to remind a buyer of money they owe. Or in certain cases it could be a document used by the buyer when they return goods they bought with loans.

Debit notes are used most commonly in B2B transactions because sometimes one company receives a product or service before paying, ergo the need for a system of reminders.

How it Works

As we explained in our other articles about credit notes (link) and cash receipts (link), these kinds of concepts are very linked with accounting. In the case of debit notes, when company A sends company B a product with credit extended, they send an accompanying debit note saying their account has been debited. Keep in mind this isn’t an invoice, and so even if real goods are being exchanged, no money is being exchanged until the invoice is issued.

As we said before, debit notes aren’t invoices, therefore most of the time payment isn’t required right away.

Examples

We already covered it, but the main example is when one company sells something to another. The company purchasing the item or service is given an extension of credit, meaning the selling company trusts them to pay the amount they owe a bit later. So along with the product or service, they send a debit note detailing the amount owed, and maybe even when the amount is due and how to pay it. But a debit note isn’t an invoice, meaning there could be a link to the invoice on the debit note, if it’s online.

What this means in accounting terms is that the debits and credits are plugged into an accounting system in order to track the transaction. Then those credits and debits are changed after the transaction has been resolved.

Debit Notes- Make Sure You Get Paid

As we already said, think of debit notes as a friendly reminder to pay what you owe. This concept along with credit notes and cash receipts, make up the base of any commercial business.

If you want to get a better overall sense of all these concepts you can read our articles about credit notes and cash receipts here.

Transparency is an essential value for Appvizer. As a media, we strive to provide readers with useful quality content while allowing Appvizer to earn revenue from this content. Thus, we invite you to discover our compensation system.   Learn more
Definition backgroundA simple definition of what you should know about pay in slip
Definition
last month
A simple definition of what you should know about pay in slip
Bank deposits is a job in itself and pay in slip is even more difficult. This article is for you as it has the solution you need to know how, when and what to do with a pay in slip. You won't need to ask the bank teller.
Template backgroundA free cash flow statement template Excel to download
Template
last month
A free cash flow statement template Excel to download
You're eager to know what a cash flow statement template Excel is and how to use one, then you've found the right article. Plus, you've lucked out as we've decided to include a free template for you to download.
Definition backgroundHow to control over fixed assets? [Guide and tips]
Definition
last month
How to control over fixed assets? [Guide and tips]
Good control over fixed assets can significantly improve the profitability of the business. Discover what control over fixed assets is, their importance, key internal risks, and how to control it in this article.
Definition backgroundInternal vs External Audit- Difference and Specificities
Definition
last month
Internal vs External Audit- Differences and Specificities
Is something wrong in your business, but you're not quite sure what it is? Looking to do an audit, but you're not sure which one to do? Read our article on the differences between internal and external audits to find out.
Definition backgroundBookkeeping Tasks to Run Your Small Business
Definition
last month
Bookkeeping Tasks to Run Your Small Business
Is your business a bit disorganized? Do you sometimes miss pay dates? Better organize your business by applying a couple of these basic bookkeeping tasks.
Definition backgroundTypes of Inventory in Accounting and How They Work
Definition
last month
Types of Inventory in Accounting and How They Work
Inventory can be seem like a daunting task, knowing the difference between the types of inventory can be valuable for any business that has stock. Find out what they are and how they can help your business.
Definition backgroundWork in Progress Inventory- Manage the Middle
Definition
last month
Work in Progress Inventory - Manage the Middle
Do you deal with a lot of inventory? Does it some times feel a bit too overwhelming? Well we've got you covered, this article covers one of the most important inventory phases, Work in Progress, click here!