Creating Terms of Payment
Terms are used to specify when payment is due on customer invoices and vendor bills. Define the specific requirements of a term of payment by creating a term record. You can create different payment terms for different customers or vendors.
Go to Setup > Accounting > Accounting list > New.
On the Add to Accounting List page, select Term.
To create an Installment term
We can create installments for our Vendors/Customer who pay for items over time using installment-based payments. The Installments feature is part of the term record. When the Installment box on the term record is checked, installment-specific fields appear. Fields that are not installments-specific appear, but are not available for editing.
On the term record, check the Installment box.
Note
After you check the Installment box, new fields appear. Any non-installment fields are unavailable.
In the Terms field, enter the installment terms. For example, Three Month Term.
In the Days Till Net Due field, enter the number of days after the Bill date that the payment is due. For payments due upon receipt, enter 0.
From the list, select a recurrence frequency. Options are:
- Annually
- Daily
- Monthly
- Weekly
in the Recurrence Count field, enter the number of recurring payments. For example, 3.
To split the payments into equal amounts, check the Split Evenly box. If you do not want the payments split evenly, clear the box. A list of installment lines appears that enables you to enter the amount of payment for each installment.
To include the total tax amount with the first installment, check the Pay Tax Upfront box.
Note
If the Pay Tax Upfront box is checked, any shipping fees are split across the installments. However, the total of any shipping taxes is included in the first installment.
Click Save.
Any fields that are not supported by installments are unavailable after the Installment box is checked. Specifically, discounts are not supported.
After saving the installment term, we can add it to the Purchase order. On a Purchase Order, installment details are available for viewing only. Installments cannot be edited on a purchase order. Any editing must be done on the Bill.
To add an installment term to a purchase order, click the Billing subtab, and then select your term from the Terms list. When the purchase order is fulfilled and then billed, the installment terms appear on an vendor bill.
To see installment information, click the Billing subtab on the Vendor Bill. If creating a standalone Bill, select a term from the Terms list. You have the option to override the installments. To make changes, check the Override Installments box to make changes. If you override any installments, you must ensure that the total adds up to the total amount of the Bill.
On the Bill, the header-level due date always indicates the next installment due date. In edit mode, the header-level due date cannot be changed. However, when in edit more, unpaid installments can be changed on the Bill. Paid installments cannot be edited. On the sales order, installments are only shown in view mode and cannot be edited.
When you accept payments, the status of the payment changes. If a we pays more than the amount due for an installment, the overage amount is applied to the next installment. When the overage amount does not completely cover the amount due for an installment, the status for that installment is partially paid. The same is true for the aging balance. The aging balance shows a late installment as past due, not the entire balance.
When an installment is unpaid after the due date, only the late installment is marked as past due, not the entire Bill.
To create a standard term record:
On the Term page, select Standard. Enter a name for the term in the Terms field. For example, you can name a term Net 30. In the Days Till Net Due field, enter the number of days until the net amount of the bill becomes due. In the % Discount field, enter the percentage discount if the bill is paid early. In the Days Till Discount Expires field, enter the number of days the early payment discount is available. For example, if the early payment discount is available for 15 days after the bill is issued, enter 15 in this field>>Click Save.
To create a date driven term record
On the Term page, select Date Driven. Date driven terms are used when payment is due on a particular calendar date; for example, the 15th of the month. Enter a name for the term in the Terms field. In the Day of Month Net Due field, enter the day of the month when the net amount of the Bill is due. If you enter a date that does not exist in the month the transaction is due, the last day of the month becomes the due date. In the Due Next Month If Within Days field, enter the number of days before the due date during which issued Bill will be carried forward to the next month. Use this field to ensure that vendors are always given a minimum number of days to pay after they are Billed.
For example, if Bill are due on the 30th of each month and you enter 5 in this field, then Bill issued between the 25th and 30th are due for payment by the 30th of the following month. In the % Discount field, enter the percentage discount if the Bill is paid early. If you offer a discount for early payment, enter the last day of the month the early payment discount is available in the Day Discount Expires field. For example, if the early payment discount is available through the 20th of each month, enter 20 in this field. Check the Preferred box if you want to use this term for customers/ Vendors by default>>Click Save.
Now this term can be used on customer records, vendor bills and other transactions.
You can create several term records to apply the appropriate terms to individual customers, vendor bills and other transactions. Standard terms include the following:
- 1% 10 Net 30
- 2% 10 Net 30
- Due on receipt
- Net 15
- Net 30
- Net 60
You can apply the terms to Invoices/Bills by choosing a term on individual or by setting default terms on customer and vendor records.