Payment Terms Code

The payment terms code is a two-digit code that indicates cash discount and due date information.  Its decoded value specifies the cash discount percentage, the number of days that the cash discount applies, the number of days until payment is due, and whether the cash discount and due dates are calculated based on the document date or end of the current month.

Payment terms codes are also used to generate a series of installment payments for an invoice.  Although payment term information is stored on Reference File categories 323 and 347, they can only be maintained through the Payment Terms Maintenance conversation in Accounts Receivable (this allows for greater validation). 

If you choose to define installments for a payment term, you can not enter data for the fields that determine discounts and discount due dates.  Please see Generating Installments in the key concept section of the Accounts Receivable User Manual for more information on maintaining payment terms and installments.

Establishing a Payment Terms Code

At sales order entry time, the Sales Order Header file record is formatted using the payment terms code from the Customer Master file.  These terms are then displayed to the operator on the Sales Order Maintenance Header screen.  At quote order entry time, the Quote Order Header file record is formatted using the terms code from the Customer Master file.  These terms are then displayed to the operator on the Quote Order Maintenance Header screen.

The operator may override or update payment terms on all header screens except when entering credit memos, in Sales Order Inquiry, and in Quote Order Inquiry.  The terms may be overridden at any time until shipping and billing occurs.  Payment terms are printed on the sales order, quote order, and invoice.

Example (without installments):        Payment terms  =  02.000% 010 030

If the invoice is paid within 10 days from the invoice date, the customer may subtract from the invoice 2 percent of the amount subject to cash discount.  The invoice is due 30 days after the invoice date.

The subject-to-cash discount amount is equal to the total of the extended prices for those inventory item lines coded as being subject-to-cash discount.  The discount amount, therefore, specifically excludes tax, freight, and handling charges.

The cash discount amount and subject-to-cash discount amount are reported on the sales order and invoice for the customer and passed to the Accounts Receivable application through the open item records created during billing.

In the Open Order Shipping and Billing and Postbilling and Debit/Credit Memo Entry conversations, the invoice due date and the due date for applying the cash discount are determined by the payment terms code.  The dates appear on the header screen.

Cash discount handling occurs in all conversations except when a credit memo is being processed.  In credit memo entry, the terms will appear on the header and on the memo itself, but the discount amount and subject-to fields will be set to zero.

Once an invoice with installments is created in Order Processing, the installments may only be reviewed through Accounts Receivable conversations.  See the Accounts Receivable manual for more information.

Considerations

Each customer payment terms code is stored on the Reference File; however, payment terms may only be maintained through the Payment Terms Maintenance conversation.  Payment terms without installments contain discount percentages and number-of-days fields.  The number-of-days fields are added to the invoice date or current period-end date to obtain the discount and invoice due dates.  Each payment terms code also contains a flag which ensures that the proper dates are added.

If the customer's allow discount flag is "no," then the subject-to-cash discount amount will be zero, regardless of the payment terms code description and the discount flag for the line part.

If installments are defined for a payment terms code, discount information is not defined.  Instead, you define a series of installment payments with payment type, number of days between due dates, and percentage of the total invoice to be paid by each installment.