Accounts Payable can handle discounts for the early payment of invoices. The amount of discount and the time over which it can be taken are specified when an invoice is entered through the Invoices option, or the Purchase Invoices option in Purchase Order Processing. Settlement discount is deducted automatically from an individual invoice if discount was entered in the Invoices option and payment is made on or before the last date on which discount is available.
When a payment is entered through the Cash option, it calculates whether the discount is still applicable by checking the discount date against the date of the cash batch. If the last date on which discount may be taken has passed, the amount can be still deducted from the invoice if allowed by the supplier. Conversely, the discount can be disregarded if the supplier has withdrawn the settlement discount terms, even though the last date may not have been reached yet.
If payment is made by remittance advice, discount is only taken if the payment is made within the period specified.
If invoices are settled by remittance advice and the supplier changes the settlement discount terms after the invoice has been posted to the Accounts Payable, the discount figure and date may be amended through the option Change Open Item Status. The Remittance Advice/Generate Payments from List options will automatically settle the invoice in accordance with the new terms.
Settlement discount is posted to the Open Item file as a closed item, identified by the invoice or cash number with the suffix /D.
Note: Only the first 8 characters can be entered for the cash item number, i.e. the '/D' will overwrite the last 2 characters if all 10 are used. It is therefore advisable to amend the field on the form to 8 characters to avoid incorrect numbering. This also applies to Accounts Receivable cash items.
If Accounts Payable is fully integrated with the General Ledger, the total discount for the batch is posted to the General Ledger posting code for settlement discount. This account must be defined using Control Account maintenance.