If you've created a credit note for a client or they have payments that have not been allocated to an invoice, you can apply the credit or payment to any approved, unpaid invoices.
When a payment or credit is available, a line below the invoice totals section on the invoice will indicate that the customer has unallocated payments or credits available. To apply the credit to the invoice follow these steps:
On the invoice click the "Invoice Options" in the upper right corner and click the "Apply Credit" option or below the totals, click the "Apply to Invoice" link.
On the "Allocate Credit & Payments" form enter the amount of money you want to allocate to the invoice from the customer's unallocated credits or payments.
Submit the form.