CenterPoint® Fund Accounting - Understanding Payment Terms and Discounts

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Payment Terms Video - Duration: 9 min 49 sec

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Payment terms are used on vendor and customer invoices to calculate due dates and early payment discounts. When an invoice is entered, the due date and early payment discount due date will automatically calculate based on the invoice date and payment terms used in the transaction. The due date will then be displayed on aging reports and can be used to select A/P invoices to be paid.

When early payment discounts are used, the discount will be calculated automatically when a payment is entered that meets the date criteria of the discount.

Step 1: Create a Payment Term (Option A and B)

Option A: Create a Payment Term Due in a Number of Days (Net Terms)

Option B: Create a Payment Term Due on a Certain Day

Step 2: Assign to Customers or Vendors (optional step)

Step 3: Using Payment Terms when Invoicing

Step 1: Create Payment Terms

Payment terms can be set up to calculate the due date two different ways; by the number of days until due or due on a specific day of the month. If a payment term is set to Prepaid Invoices, a due date is not calculated; it will require the invoice be paid in full at the time it was entered. An unlimited number of payment terms can be created.

Option A: Create a Payment Term Due in a Number of Days (Net Terms)

  1. On the Setup menu, point to Names, and then click Payment Terms.
  2. Click New.

  1. In the Abbreviation box, enter up to ten characters of optional information that you can easily identify the payment term by. For example, N30 for Net 30 or 10 for Net 10.
  2. In the Name box, enter up to 30 characters of required information that describes the payment term.
  3. Select Number of Days Until Due (Net Terms) to indicate that the due date will be a number of days past the invoice date.
  4. In the Number of Days box, enter the number of days until an invoice is due.
  5. In the Rate box, enter the percentage that should be used to calculate the discount if the invoice is paid within the days specified in the Number of Days or Day of Month box depending on the Early Payment Discount option you choose below. If discounts are not used, this field can be skipped.
  6. If the early pay discount is offered for a specific number of days, select Number of Days Until Discount Expires and enter the Number of Days.
  7. If the early pay discount is offered until a specific day of the month, select Discount Expires on Day of Month, enter the Day of the Month, and in the Minimum Days Before Due Date box, specify if the due date calculated is during the current month or the next month. Normally the same number entered in Day of Month will be entered in Minimum Days Before Due Date. This will force the system to always calculate a due date in the following month. Example: If the Day of Month is set to 27 and an invoice is entered with an invoice date of 2/15, the due date will be 2/27 UNLESS 27 has been entered in the Minimum Days Before Due Date. If 27 was entered in that field, then it will be due 3/27.
  8. To add notes to this payment term, click Additional Notes, enter the notes, and then click OK.
Note: To add a time stamp to a note added or edited on the Additional Notes screen, click Stamp. If you are adding/editing a stamp in a database without security, the stamp will display "Edited on (current date and time)". If you are adding/editing a stamp in a database with security, the stamp will display "Edited by (username) on (current date and time)".
  1. Click Save to save the payment term and return to the List tab, or click Close to save the payment term and close the Payment Terms screen.

Option B: Create a Payment Term Due on a Certain Day

  1. Follow steps 1-4 from Option A.

  1. Select Due on Day of Month to indicate that the due date will be a number of days past the invoice date.
  2. In the Day of Month box, enter the day of the month an invoice is due.
  3. The Minimum Days Before Due Date allows you to specify if the due date calculated is during the current month or the next month. Normally the same number entered in Day of Month will be entered in Minimum Days Before Due Date. This will force the system to always calculate a due date in the following month. Example: If the Day of Month is set to 27 and an invoice is entered with an invoice date of 2/15, the due date will be 2/27 UNLESS 27 has been entered in the Minimum Days Before Due Date. If 27 was entered in that field, then it will be due 3/27.
  4. In the Rate box, enter the percentage that should be used to calculate the discount if the invoice is paid within the days specified in the Number of Days or Day of Month box depending on the Early Payment Discount option you choose below. If discounts are not used, this field can be skipped.
  5. If the early pay discount is offered for a specific number of days, select Number of Days Until Discount Expires and enter the Number of Days.
  6. If the early pay discount is offered until a specific day of the month, select Discount Expires on Day of Month, enter the Day of the Month, and in the Minimum Days Before Due Date box, specify if the due date calculated is during the current month or the next month. Normally the same number entered in Day of Month will be entered in Minimum Days Before Due Date. This will force the system to always calculate a due date in the following month. Example: If the Day of Month is set to 27 and an invoice is entered with an invoice date of 2/15, the due date will be 2/27 UNLESS 27 has been entered in the Minimum Days Before Due Date. If 27 was entered in that field, then it will be due 3/27.
  7. To add notes to this payment term, click Additional Notes, enter the notes, and then click OK.
  8. Click Save to save the payment term and return to the List tab, or click Close to save the payment term and close the Payment Terms screen.

Step 2: Assign Terms to Customers and Vendors

A default payment term can be assigned to each vendor and customer. Once assigned, each invoice entered for that vendor or customer will use the assigned terms code by default.

  1. Select Setup > Names > Names.
  2. Select the customer or vendor and click Edit.
  1. Click on the appropriate Detail button.
  2. In the Payment Terms field, select the terms this customer or vendor will most commonly use. Click OK to return to the main Names screen.
  3. Click Save. Repeat these steps for each vendor or customer that should have a default terms code assigned.

Step 3: Using Payment Terms when Invoicing

When entering invoices for vendors or customers you can supply payment terms that will automatically calculated a due date for the invoice. If default payment terms were assigned to the vendor or customer, their invoices will automatically default to using those terms. The default payment terms can be overwritten during invoicing. The terms and due dates can also be included on the printed A/R invoice.

If the payment terms assigned to an invoice includes discounts for early payments and a payment is entered that meets the requirements of an early payment discount; the discount will be calculated and deducted automatically.

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