AI work that misses the promise: the invoice state decides the remedy
When AI work misses the promise, whether the invoice is open or paid changes which remedies you can choose.
Key points
- Decide when you judge, then the amount
- Then look: is the invoice open or paid?
- Open: reduce. Paid: choose one of three
- Tie the credit to the line item
Overview diagram in preparation
Contents
Decide when you judge before you decide the amount
A&A perspective
A remedy here means returning part of the amount you invoiced when a delivery did not reach the level you promised.
A&A perspective
When you rebuild how your company works around AI, part of what reaches the customer is decided by a model's output. The output changes from run to run, so some runs do not reach the level you promised.
A&A perspective
What you decide on such a run is not how to apologise. It is which part of the invoiced amount goes back, and in what form.
Hypothetical example
Suppose you invoice at month end for contract work, and a delivery in the middle of the month fails the customer's check, the acceptance step. Saying "I will take it off the next one" on the spot still leaves the amount undecided.
A&A perspective
That answer leaves three things open: how much comes off, which line item it comes off, and when you process it.
A&A perspective
Automate & Augment (A&A), the company writing this article, rebuilds how small companies work around AI. A&A holds that what you decide first in a remedy is not a cap on the amount but the point in time at which you call the delivery a miss.
A&A perspective
The amount changes with every case. The timing, once decided, carries to the next case. The one worth deciding first is the timing.
A&A perspective
There are two reasons the timing comes first. One is that the forms you can choose differ before and after the invoice is paid. The other is that whether you can undo it differs too.
A&A perspective
The first thing to check is whether the acceptance deadline can sit before the date you issue the invoice. If it can, the remedy is only a reduction of the amount due.
A&A perspective
A&A treats this as a question about the delivery flow, not about contract wording. If the acceptance deadline falls after the invoice date, the order of those two dates is what to fix first.
A&A perspective
While the cases are few, talking it through each time is a reasonable view. A&A sees the cost arriving from the second case onward, because how you handled the first one becomes the standard for the second.
After you judge, look at the invoice state first
A&A perspective
When you decide a remedy, the first thing to look at is the invoice state. There are two: open and paid.
A&A perspective
Open means an issued invoice that has not been paid yet. Paid means that payment has arrived.
Hypothetical example
Suppose a customer is invoiced at month end and pays on the tenth of the next month. From month end to the tenth the invoice is open; from the eleventh it is paid. For the same defect, which side of that line you notice it on changes what you are left with.
From the sources
Stripe, a company that provides payment and billing infrastructure, publishes a document on the credit note, the document that lowers the amount of an invoice. It defines a credit note as a document that decreases the amount of an open or paid invoice, and says it does not void and replace the original invoice.
From the sources
The same document says what happens after you issue one depends on the invoice state. Issue it on an open invoice and the amount due goes down. Issue it on a paid invoice and you credit the customer's account balance or give them a refund outside that system. The dashboard steps in the same document list three choices: a refund to the customer's card, a credit to their balance, and a refund outside the system.
A&A perspective
This article calls the last of those three, a refund outside the billing system, an outside settlement.
From the sources
Whether you can void it also depends on the state. You can void a credit note only if it is on an open invoice, the same document says. Voiding reverses the adjustment and increases the amount due on the invoice by that amount, it adds.
A&A perspective
A&A reads this as the window in which you can still redo the work. For what happens after the invoice is paid, the source does not describe a path back.
A&A perspective
So the same phrase, "we will make it up to you," leaves you with a different number of options depending on whether the invoice has been paid.
| Form on a paid invoice | Where it goes back | Undo path |
|---|---|---|
| Refund to the card | the payment method | not stated in the source |
| Credit to the customer balance | the next invoice | offset by a reversing entry |
| Outside the billing system | cash and the like | not stated in the source |
Open means reduce; paid means choose
A&A perspective
On an open invoice there is one thing to do. You reduce the amount due.
From the sources
Returning the full amount changes the invoice state, though. If a credit note reduces the balance of an open invoice to 0, the invoice status changes to paid, the same document says.
From the sources
On a paid invoice there are three choices: a refund to the customer's card, a credit carried to the customer balance, and an outside settlement. The document gives cash as an example of the outside case.
From the sources
There is also a ceiling. The sum of all credit notes issued for an invoice cannot exceed the total amount of that invoice, the same document says.
A&A perspective
How your revenue reads changes with it, so this is worth knowing in advance. A remedy can only be built inside the amount you invoiced.
From the sources
What a carried credit does is in another document from the same company. Movements in the customer balance stay as individual records. An adjustment is either a credit, meaning you owe them money, or a debit, meaning they owe you money, and those adjustments sum up to a balance you can apply to future invoices, it says.
A&A perspective
This article calls one of those records an entry.
From the sources
The entries behind that balance can only have their description or metadata updated after creation, and cannot be deleted, the same document says. You can only undo a transaction by creating a corresponding, reversing transaction, it adds.
A&A perspective
A&A reads the difference as whether a per-customer history remains. A carried credit stays in the customer balance history. A card refund and an outside settlement do not build up there.
A&A perspective
Which of these constraints applies to your own business is worth separating out. Once an invoice is paid, reducing the amount due is no longer available. That the forms you can choose depend on the timing of the judgment holds as well. Neither depends on how you issue invoices.
A&A perspective
That voiding works only while the invoice is open, and that the sum cannot exceed the invoice total, are constraints of using Stripe's payment and billing system. If you invoice by bank transfer and issue the invoice yourself, they do not carry over as they are.
A&A perspective
How refunds, discounts and carried credits are treated in accounting and tax varies by country and by the shape of the business. Bookkeeping entries and tax rates belong to a tax professional.
Tie each credit to a line item
A&A perspective
Once the amount is decided, the next thing to write down is which line item the credit is against.
From the sources
The same document recommends discounting invoice line items when possible, since it associates each credit with a line item. Adding a custom discount line item can make reporting and tracking difficult, because the credit is not associated with a real invoice line item, it says.
From the sources
How you write the first one constrains the second. You cannot combine discount types on an invoice line item, the same document says. The two ways to discount are by amount and by quantity, and if you discount a line item by quantity, a future credit note can only discount that line item by quantity.
From the sources
A carried credit stays on the history side. Because the invoice balance is computed from an immutable list of debit and credit transactions, it provides an audit trail of transactions for the customer, the other document from the same company says.
A&A perspective
A&A treats what you build here as a single table. The rows are the invoice states, open and paid. The columns are four: the forms you can choose, whether you can undo it, how it stays in the record, and the deadline for the judgment.
A&A perspective
For the card refund and the outside settlement, the sources do not describe a path back. Rather than leave those cells blank, write "not stated in the source." For the carried credit, write that a reversing entry can offset it.
A&A perspective
This table does not go into the contract. It is your own note, so that the second case does not need a fresh decision. Whether you show it to customers is a separate choice you can make later.
Hypothetical example
Suppose that for month-end contract work you put the acceptance deadline three days before the invoice date. With that order, a failing run is handled while the invoice is still open, and a mistake in how you wrote it can be voided.
A&A perspective
Because the model's output changes from run to run, a run that misses is not a one-off. From the second case on, the table decides it. How strongly the customer argues, and how awkward you feel, fit in none of the columns.
A&A perspective
With that one table, customers stop being handled differently from one another, and what you credited and by how much stops disappearing from the record.
In summary
A&A perspective
Expect runs where the AI output misses the promise, and decide when you judge before you decide a cap on the amount.
A&A perspective
Once you judge, look first at whether the invoice is open or paid.
A&A perspective
Open: reduce the amount due. Paid: choose one of a refund, a carried credit or an outside settlement.
A&A perspective
Tie the credit to the line item, and let how you wrote the first case set the second.
Expect runs where the AI output misses the promise, and decide when you judge before you decide a cap on the amount. Once you judge, look first at whether the invoice is open or paid. Open: reduce the amount due. Paid: choose one of a refund, a carried credit or an outside settlement. Tie the credit to the line item, and let how you wrote the first case set the second.
FAQ
Do I need to set a cap on the remedy amount first?
What comes before the amount is the timing of the judgment. A ceiling already exists in the system: the sum of all credit notes issued for an invoice cannot exceed the total amount of that invoice, the source says.
Between a refund and a credit carried to the next invoice, which is easier to correct later?
The carried credit leaves more room. Entries in the customer balance cannot be deleted, but you can undo one by creating a corresponding, reversing transaction, the source says. For undoing a card refund, the source does not describe a path. Neither is as reversible as reducing the amount due on an open invoice.
What happens to the invoice if I credit the whole amount?
If a credit note reduces the balance of an open invoice to 0, the invoice status changes to paid even though no payment arrived, the source says. It then sits among your paid invoices without the money, so how your revenue reads changes.
Sources & editorial note
Primary pages read for this article. Publication dates below belong to the sources; access dates record our research.
- Issue credit notes
Stripe · no publication or update date stated on the page (checked 2026-10-26)
Accessed 2026-10-26 - Customer credit balance
Stripe · no publication or update date stated on the page (checked 2026-10-26)
Accessed 2026-10-26