Set up early payment discounts on Accounts Payable

Topic overview

After setting the option for advances on Accounts Payable, you can set up early payment discounts for suppliers. The discount only applies if the bill is paid in full prior to the early payment discount date.

Note: Early payment discounts, or any discount applied after the invoice has been generated, are on the pre-tax amount of the bill only.

The steps are as follows:

1. Setup Accounts Payable discounts ledger number
2. Automatic supplier discount
3. Discounts on bills.
4. Discounts on checks
5. Discounts on Check Run / Bills Due
   

Setup Accounts Payable discounts ledger number

To enable this feature, create an Income ledger account for Discounts Earned in your chart of accounts. Then choose the following Navigator menu: Setup Tools | Setup Wizard | Suppliers and Payables | A/P Discounts. The Accounts Payable Discounts window appears.

Click the Ledger Number for Supplier Discounts down-arrow and select the ledger number you created for supplier discounts from the drop-down list. It is important that this account be used only for discounts and dispersals.

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Automatic supplier discount

On the Supplier Details window, select the Financial tab. If you have set up the ledger number for A/P discounts, you should see an Automatic Discount panel.

Select the discount rule. Currently there are three selections:

• No Discount.
• Pay by Due Date. If this is selected, and if you create a check prior to the due date of the bill, an automatic discount is created. Enter the percentage of the discount.

• Pay within <#> days of bill date. Enter the percentage of the discount. If you select this option, you can further select the number of days.

• Pay by a specific date of the month the bill was issued.

• Pay by a specific date of the month following the bill month.

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Discounts on bills

Normally the discount is not applied to the bill immediately when you create a bill. It is usually applied when the check is created on time.

If you wish to apply the discount on the bill anyway, simply press the [Discount] button on the top of the bill.

Once a discount is applied to the bill, no further discounts are applied.

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Discounts on checks

When creating a manual check, the discounts show in the Check Wizard. If you do not pay the bill in full, the discount is not applied.

When you add the bill to the check, the bill is changed to the lower amount with a discount line added to the bill. Note: If you then delete the bill from the check, the discount still stays on the bill.

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Discounts on Check Run / Bills Due

When you run the Check Run, Bills Due, the discount shows in the discount column. If you do not pay the bill in full, the discount is not applied. If the discount does not show up in green, then the discount is already applied and no further discount is taken.

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