Errors in invoices are usually discovered during invoice verification by accounting or procurement, for example, when the billed quantity doesn’t match the delivery note. In such cases, a correction is necessary to ensure the documents are accurate for both accounting and tax purposes.
What Is an Invoice Correction?
An invoice correction is the formal adjustment of an invoice that has already been issued. It becomes necessary as soon as an error is identified during invoice receipt – whether it’s the billing address, the amount, the quantity, or the service date. The original invoice is not simply deleted but replaced by a cancellation invoice or a corrected follow-up invoice issued by the original sender.
Common Reasons for Invoice Corrections:
- Incorrect items or quantities
- Pricing errors
- Incomplete or incorrect customer details
- Missing Invoice number
- Wrong delivery or service date
Corrections must be traceable and properly documented, both for internal accounting and for tax compliance.
Who Is Allowed to Issue Invoice Corrections?
Invoice errors are almost always first noticed by the recipient typically in accounting or procurement. A price that’s too high? A quantity that doesn’t match the delivery? A service date that doesn’t align with the actual delivery? These discrepancies are quickly spotted when comparing the invoice with the delivery note or purchase order.
Corrections Are Requested by the Invoice Recipient
Even if the error is obvious, the recipient cannot correct the invoice themselves. Only the original issuer – the supplier or service provider – is authorized to cancel and reissue the invoice. This is a legal and tax requirement.
How to properly request an invoice correction
As the invoice recipient, you should:
- Report the error to the supplier in writing
- Request a cancellation invoice and a corrected reissue
- Do not book or pay the incorrect invoice until a corrected version is available
Practical example:
A supplier invoices 50 units, but only 5 were delivered. The accounting department spots the discrepancy when comparing the invoice with the delivery note. The supplier must now issue a cancellation invoice and send a new, corrected invoice. Only then can the invoice be approved and properly booked.
When is an invoice correction not possible?
Not every invoice error can be corrected retroactively. In certain cases, a correction is no longer permitted or not practical and alternative solutions are required.
The invoice has already been booked and paid
If the invoice has already been fully processed, booked, paid, and claimed for tax purposes a later correction is often not feasible. Changing it would disrupt the accounting flow and may pose tax risks.
Solution: Request a credit note
In such cases, a credit note can help offset the error. It documents the discrepancy and provides a clean accounting solution, for example, in cases of overcharged quantities or retroactive discounts.
Service canceled – invoice must be withdrawn
A service provider issues an invoice for a scheduled training session. Shortly before the date, the event is canceled. Since the service was not provided, a simple correction won’t suffice. The issuer must create a cancellation invoice that fully reverses the original invoice.
Solution: Cancellation instead of correction
A service provider issues an invoice for a scheduled training session. Shortly before the date, the event is canceled. Since the service was not provided, a simple correction won’t suffice. The issuer must create a cancellation invoice that fully reverses the original invoice.
Why?
Because the original invoice refers to a service that never took place. A partial adjustment would distort the accounting process and could lead to tax issues.
Definition: Invoice withdrawal
Invoice withdrawal refers to the process of fully reversing an issued invoice because it is invalid or no longer applicable. This is typically done via a cancellation invoice, which neutralizes the original document—either by using negative amounts or resetting the total to zero.
Common reasons for invoice withdrawal:
- The underlying service was not provided
- The delivery was canceled
- The invoice was issued by mistake
Important:
Invoice withdrawal is not a correction of individual line items. It’s a complete reversal of the original billing document.
Invoice correction: What must be included in a cancellation invoice?
The cancellation invoice is the key document for formally withdrawing a faulty invoice. It doesn’t simply replace the original—it documents its full reversal in a way that’s traceable for accounting and tax purposes.
To be legally valid and accepted by tax authorities, a cancellation invoice must include specific mandatory details.
required elements
- Label as “Cancellation Invoice”
→ Clearly indicates that the document serves as a withdrawal - Reference to the original invoice
→ Include invoice number, issue date, and customer number if applicable - Negative amounts or zeroing out
→ Original line items are either shown with negative values or neutralized with a total of zero - All mandatory invoice details as per §14 UStG
→ Including:- Full name and address of supplier and recipient
- Tax number or VAT ID
- Date of service or delivery
- Quantity and type of goods or services
- Net amount and tax amount
Why is this important?
Only if all formal requirements are met can the cancellation invoice be processed correctly and claimed for tax purposes. Missing details or unclear references to the original invoice may lead to issues with input tax deduction or during audits.
Tip for practice:
Document the cancellation clearly and completely, ideally with a short note explaining the reason (e.g. “delivery shortfall” or “service canceled”). This ensures internal traceability.