Settle a partial vendor payment that has multiple discount periods

This article walks you through a scenario where multiple partial payments are made to a vendor that offers multiple cash discounts.

Vendor 3054 offers Fabrikam a cash discount of 2 percent if an invoice is paid in five days and a cash discount of 1 percent if the invoice is paid in 14 days.

Invoice

On June 28, April creates an invoice for 1,000.00 for vendor 3054. April can view this transaction on the Vendor transactions page.

The following cash discount dates and amounts are available for this invoice.

Payment on July 2

On July 2, April wants to pay 300.00 against this invoice, and creates a one-off payment by using the Payment journal page in Accounts payable. April adds a line for vendor 3054 and enters a payment amount of 300.00. April then opens the Settle transactions page, to mark the invoice that will be settled. April updates the value in the Amount to settle field to 300.00 and notices that the value in the Cash discount amount to take field is changed to 6.12. Because this payment is made in the first discount period, a discount of 2 percent is taken.

Discount information appears at the bottom of the Settle open transactions page.

Because a cash discount is available, April wants to change the payment amount so that the total settled amount is 300.00 for both the payment and the cash discount. April changes the value in the Amount to settle field to 294.00 and notices that the value in the Cash discount amount to take field is changed to 6.00.

Discount information appears at the bottom of the Settle open transactions page.

April posts the payment. On the Vendor transactions page, April sees that 300.00 has been applied to the invoice. This amount includes a discount of 6.00. Therefore, the remaining balance is 700.00.

Payment on July 8

On July 8, April makes an additional payment against the invoice. To enter the amount, April opens the Settle transactions page and then clicks the Cash discount tab. April sees the dates and amounts for the two cash discounts that are available. Because this payment is made in the second discount period, a discount of 1 percent, or 5.00, is available. This amount is calculated as half the 1-percent discount on 1,000.00, or half of 10.00.

April decides to pay 495.00 and take the 5.00 cash discount. Therefore, the total amount that is settled is 500.00.

Discount information appears at the bottom of the Settle open transactions page.

On the Vendor transactions page, April sees that the new balance is 200.00.

Payment on July 20

On July 20, April creates a final payment for 200.00. No discount is taken, because the payment is made after both discount periods. The balance for the invoice is 0.00.