Language:


Entering an Invoice - Settlement Discount Examples

You can offer a settlement discount to a Customer to encourage them to pay an Invoice by a specified date. Follow these steps:
  1. Create a record in the Payment Terms setting containing the details of the settlement discount. Enter the discount percentage in the Settl. Discount % field and the number of days for which the settlement discount offer is valid in the Settl. Disc Days field:

    The Type should be "Normal", and you should also specify the number of Net Days to allow Due Dates to be calculated.

    If you need to configure a two-stage Settlement Discount, use the Settl. Discount % 2 and Settl. Disc Days 2 fields as well. For example, you may need to offer a 10% Discount for payment within 10 days and a 5% Discount for payment within the following 20 days. If so, use the Settl. Discount % and Settl. Disc. Days fields for the first stage (10% Discount for payment within 10 days), and the Settl. Discount % 2 and Settl. Disc. Days 2 fields for the second stage (5% Discount for payment within the following 20 days). Settl. Disc. Days 2 counts from the Invoice Date, so in this example it should be 30.

  2. Specify Settlement Discount Accounts on the 'Sales' card of the Account Usage S/L setting. If necessary, you can enter different Accounts to be used depending on the VAT Zone of the Customer:

    The value of the settlement discount will be debited to the Settlement Discount Account when the Customer pays the Invoice.

  3. Enter the Invoice in the usual way.

    The settlement discount will be calculated using the formula:

    TOTAL x Settlement Discount %
    The settlement discount will not be shown in the Invoice record itself. In order to have settlement discount information printed on Invoice documentation, include the following fields in your Form Template designs as appropriate:

    Field in Form TemplatePrints
    Discounted VATVAT - VAT on Settlement Discount (i.e. the VAT total of the Invoice - the VAT element in the Settlement Discount) (will print the VAT total in Invoices with no Settlement Discount). You should only use this field if you have specified a Settl. Discount VAT Account (steps 7 and 8 below)
    If Settlement DiscountIf an Invoice qualifies for a Settlement Discount, this field will print the phrase that you enter as the Field Argument
    If Settlement Discount 2If an Invoice qualifies for a second Settlement Discount, this field will print the phrase that you enter as the Field Argument
    Settlement DiscountSettlement Discount amount
    Settlement Discount DatePrints the date on which the Settlement Discount expires
    Settlement Discount in Base 1Settlement Discount amount, converted to Base Currency 1
    Settlement Discount in Base 2Settlement Discount amount, converted to Base Currency 2
    Settlement Discount TotalTOTAL - Settlement Discount amount
    Settlement Discount 2 Second Settlement Discount amount
    Settlement Discount 2 Date Prints the date on which the second Settlement Discount expires
    Settlement Discount 2 in Base 1Second Settlement Discount amount, converted to Base Currency 1
    Settlement Discount 2 in Base 2Second Settlement Discount amount, converted to Base Currency 2
    Settlement Discount 2 TotalTOTAL - second Settlement Discount amount
    To Pay after Settlement DiscountTOTAL - Settlement Discount amount
    To Pay after Settlement Discount in Base 1TOTAL - Settlement Discount amount, converted to Base Currency 1
    To Pay after Settlement Discount in Base 2TOTAL - Settlement Discount amount, converted to Base Currency 2
    To Pay after Half Settlement DiscountTOTAL - (Settlement Discount amount / 2)
    Total VAT of Settlement Discount VAT on Settlement Discount (i.e. the VAT element in the Settlement Discount) (will be empty in Invoices with no Settlement Discount). You should only use this field if you have specified a Settl. Discount VAT Account (steps 7 and 8 below)

  4. Mark the Invoice as OK and save. The settlement discount will not affect the postings in the Nominal Ledger.

  5. When you receive payment from the Customer, create a new record in the Receipt register. When you specify the Invoice Number, an extra row containing the settlement discount will be added to the Receipt automatically, providing the Transaction Date is on or before the Discount Date. The Received and Bank Amount will be changed to the outstanding amount less the settlement discount:

    The Receipt register is described in more detail here.

  6. Mark the Receipt as OK and save. In the resulting Nominal Ledger Transaction, the settlement discount will be debited to the Settlement Discount Account that you specified in step 2:

  7. In some countries, the posting of the settlement discount from the Receipt should include a VAT element. If you need such a posting, specify a Settl. Discount VAT Account on the 'VAT / Tax' card of the Account Usage S/L setting:

  8. The existence of a Settl. Discount VAT Account means that the settlement discount less VAT will be debited to the Settlement Discount Account that you specified in step 2, and the VAT element will be debited to the Settlement Discount VAT Account:

    The VAT element will be calculated using the following formula (with example figures in brackets):
    Settlement Discount (10.00) * Invoice VAT Total (16.67)
    Invoice Total (including VAT) (100.00)
    The VAT total in this equation will be taken from the VAT field in the footer of the Invoice being paid.
  9. The settlement discount in step 3 was calculated by applying the settlement discount percentage to the Invoice TOTAL, as follows:
    total ro