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This text refers to program version 8.0  

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 Template	Prints
   Discounted VAT	VAT - 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 Discount	If an Invoice qualifies for a Settlement Discount, this field will print the phrase that you enter as the Field Argument
   If Settlement Discount 2	If an Invoice qualifies for a second Settlement Discount, this field will print the phrase that you enter as the Field Argument
   Settlement Discount	Settlement Discount amount
   Settlement Discount Date	Prints the date on which the Settlement Discount expires
   Settlement Discount in Base 1	Settlement Discount amount, converted to Base Currency 1
   Settlement Discount in Base 2	Settlement Discount amount, converted to Base Currency 2
   Settlement Discount Total	TOTAL - 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 1	Second Settlement Discount amount, converted to Base Currency 1
   Settlement Discount 2 in Base 2	Second Settlement Discount amount, converted to Base Currency 2
   Settlement Discount 2 Total	TOTAL - second Settlement Discount amount
   To Pay after Settlement Discount	TOTAL - Settlement Discount amount
   To Pay after Settlement Discount in Base 1	TOTAL - Settlement Discount amount, converted to Base Currency 1
   To Pay after Settlement Discount in Base 2	TOTAL - Settlement Discount amount, converted to Base Currency 2
   To Pay after Half Settlement Discount	TOTAL - (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 row Amounts (83.33) + VAT (16.67) = TOTAL (100.00)
   

   TOTAL (100.00) * Sett. Discount (10%) = 10.00

   In some countries (e.g. the UK prior to April 2015), settlement discounts do not include VAT. VAT is therefore calculated on the total of the row Amounts after subtracting the settlement discounts, as follows:
   

   total row Amounts (83.33) - Sett. Discount (10%) = 75.00
   

   75.00 * VAT (20%) = 15.00
   

   total row Amounts (83.33) + VAT (15.00) = TOTAL (98.33)

   If you need to issue Invoices with settlement discounts calculated in this way, you should tick the Exclude VAT on Settl. Discount option on the 'VAT / Tax' card of the Account Usage S/L setting in the Sales Ledger:
   

   

   You should also remove any Settl. Discount VAT Account from the Account Usage S/L setting so that there is no VAT element in the posting of settlement discount from a Receipt (as described in steps 7 and 8 above).
   

10. Illustrated below is an Invoice with a settlement discount calculated as described in the previous step:
    

    

11. When you receive payment from the Customer, the settlement discount will be deducted as already described in step 5:
    

    

12. In the Nominal Ledger Transaction resulting from the Receipt, the settlement discount will be debited to the Settlement Discount Account, again as already described. There will be no VAT element as the Settl. Discount VAT Account field in the Account Usage S/L setting should be empty:
    

    

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The Invoice register in Standard ERP:

• Introduction
  

• Entering an Invoice
  

• Entering an Invoice - Examples, including:
  
  • Settlement Discount Examples
  
  
• Controlling Prices in Invoices
  

• Inspecting Invoices, Marking as OK and Posting to the Nominal Ledger
  

• Nominal Ledger Transactions from Invoices
  

• Error Messages
  

• Printing Invoices
  

• Accruals in the Sales Ledger
  

• Cash Notes in the Sales Ledger
  

• Credit Notes
  

• Operations menu
  

• Create menu
  

• Row menu

Go back to:

• Home page for Sales Ledger manual
  

• Home page for Standard ERP manual

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