A payment discount or early payment discount on a Payable is used as an incentive to pay an outstanding invoice or Accounts Payable earlier than the agreed upon due date. Typically, the discount is expressed as a percentage of the total amount that is due or as a specific amount that will be deducted from the total amount.
Accounting Seed supports the following types of discounts when used in conjunction with the Pay/Pay Batch button:
Important: Currently, when you create a Cash Disbursement and then reverse apply it to a Payable, the ability to include a discount amount is not supported.
- Payment terms entered on an Account record – you can enter the number of days a payable is due to be paid in the Payable Days Due field. For example, your vendor might expect to be paid in 25 days. Some vendors may offer a discount if you pay earlier than the due date. This information is captured in the Payable Discount % and Payable Discount Days Due fields. For example, your vendor might give you a 2% discount if you pay within 5 days of them issuing you the invoice/payable. When the discount fields are set up on the Account, and a Payable is created for that Account, this discount information is inherited by the Payable.
When you access the Payable, even if the Payment is eligible for a discount, it will not automatically display in the Discount Amount field. This field will display with $0.00 because it is the act of paying the Payable that triggers the discount calculation. However, if the current date is within the Payable Discount Days Due of the Issue Date on the Payable, then once you click the Pay button (for a single payment or the Pay Batch button on the list view) to display the intermediate screen, a message will display at the top of the screen to indicate that the discount amount has been calculated, along with the amount shown in the Discount Amount field. It can be adjusted, if necessary. Additionally, when the Payable is actually paid, the Discount Amount field on the Payable will be updated with the actual amount of the discount that was taken. That way, the Discount Amount in this field on the Payable can be used to calculate the net amount.
- Discount amount manually added to a Payable – if you want to include a discount on a Payable for a Contact or Employee (or even a Vendor who does not have discount information completed on the Account record), it can be manually added. Simply click the Pencil icon to edit the Discount Amount field on the Payable, and then add the amount. After saving and posting, click the Pay button to view the added Discount Amount on the Payment intermediate screen.
When the Payment is completed, a Cash Disbursement is created, which will include the discount amount with the appropriate GL Account. In the sample screen below the GL Account for the discount amount is 5040-Vendor Payment Discounts.
Note: Click here to view the above image in full screen.
From the Payables list view, when you click the Pay Batch button to access the intermediate screen, if discounts have been applied, they will display in the Discount Amount column. The Aggregate by Payee checkbox defaults to selected in the Pay Batch intermediate screen, which results in amounts in the Discount Amount column to display as un-editable. If you want to edit an amount(s) in the Discount Amount column, de-select the Aggregate by Payee checkbox.
- Discounts cannot be more than the amount that is due.
- If the Payable Discount Days Due has passed, then the discount amount will not display in the Payment intermediate screen.
- When a discount is applied, the payment must be for the full amount.
Enter Payment Terms on an Account Record
- Navigate to Accounting Home and click the Setup tab. Then, under the Master menu, click Accounts.
- Select a list view (other than the Recently Viewed list view).
- Select an Account record.
- Click Edit to edit the Account information.
- Complete the following fields.
- Payable Days Due
- Payable Discount Days Due
- Payable Discount %.
- Click Save.
Note: When you create a Payable and click the Pay button, the appropriate discount percentage will automatically be calculated in the Payment intermediate screen if the payment is made within the Payable Discount Days Due.
Note: Remember that if the Vendor does not have discount information completed on the Account record, you can manually add a Discount Amount in this field on the Payable screen. This is also the way to manually add a discount for a Contact or Employee. Then, that added Discount Amount will display on the Payment intermediate screen when you click the Pay button.