The Cash discount field represents the discount that will be applied during the vendor payment if it is paid before the due date; it has the flexibility to assign the next cash discount. In order to create the cash discount record, navigate to Accounts payable | Payment setup | Cash discounts, as shown in the following screenshot. The Setup fast tab identifies the discount percentage, number of months, and number of days. It is important to assign the main account for the vendor discount, in order to apply the discounted amount to a particular main account:
Assuming that an invoice has been posted on January 1, the cash discount is 4% if the invoice is paid within 10 days and the terms of payment is net 20 days.
To navigate to the vendor invoice, go to Accounts payable | Invoices | Invoice journal, as shown in the following screenshot; the cash discount date is January 11 and its amount is -40.00:
When we go on to create a payment transaction and settle it against the posted invoice on January 10, as shown in the following screenshot, the payment amount is 960 (1,000 – 40 = 960). To access the payment amount, navigate to Accounts payable | Payments | Payment journal | Lines | Settle transactions:
In order to apply the cash discount, the user should choose Always or Normal under USE CASH DISCOUNT:
- Normal: The cash discount is used only if the invoice is settled by the date that is defined for the cash discount.
- Always: The last available cash discount is used if the invoice is settled after the cash discount date. If the invoice is settled by the date that is defined for the cash discount, the cash discount amount is the same as if you select Normal.
- Never: No cash discount is applied even if the invoice is settled on or before the discount date.
In the following screenshot, we changed the payment day to January 19 and the cash discount goes to the next cash discount code, that is, 2% for 30 days:
In this section, we explored vendor master data, purchasing demographics, and vendor sales tax treatment, in addition to withholding tax. Then, we explored price and discount options, in addition to alternatives for payments, terms of payment, and methods of payment.