AR Invoice Terms

Accounts Receivable > Setup > AR Invoice Terms

AR Invoice Terms

You use this program to define the default settlement discount you want to extend to a customer whose payments are made within a prescribed period of time and to define when an invoice becomes due for payment.

The AR invoice term code is used to calculate the terms discount and invoice due date when:

a transaction is posted using the AR Invoice Posting program
sales orders are invoiced using the Sales Order Entry program
permanent entries are posted using the AR Post Permanent Entries program
quotations are printed using the Quotation Document Print program

Although each customer is assigned an AR Invoice term code using the AR Customer Maintenance program, but this can usually be overridden with a different terms code at the time of processing transactions.

AR Invoice Terms Details

Field

Description

Terms

This indicates the invoice terms code you entered on the toolbar.

This terms code can be assigned to a customer using the AR Customer Maintenance program, to establish the terms applicable to that customer.

The terms discount is calculated according to the A/R invoice terms code defined against the transaction, together with the options selected at the option: Calculation of terms discount (Accounts Receivable Setup - Terms Discount tab). If none of the options against the Calculation of terms discount are selected, then the terms discount is calculated only on the merchandise portion of the transaction.

For example:

A taxable Billing is entered using the Sales Order Entry program, with the following lines:

a merchandise line with a value of 100.00
a freight line with a value of 15.00
a miscellaneous charge line with a value of 30.00

The discount percentage defined against the invoice term applicable to this Billing is 2.50%.

The tax portion amounts to 14.50 against the invoice.

The following indicates how the terms discount for this transaction is calculated depending on your selections at the option: Calculation of terms discount (Accounts Receivable Setup - Terms Discount tab):

If Include tax is selected, then the discount is calculated as:
(Merchandise amount + Tax) x Discount percentage = (100.00 + 14.50) * 2.50/100 = 2.86
If Include freight is selected, then the discount is calculated as:
(Merchandise amount + Freight value) x Discount percentage = (100.00 + 15.00) * 2.50/100 = 2.88
If Include other charges is selected, then the discount is calculated as:
(Merchandise amount + Miscellaneous charge) x Discount percentage = (100.00 + 30.00) * 2.50/100 = 3.25
If Include tax, Include freight and Include other charges are selected, then the discount is calculated as:
(Merchandise amount + Freight value + Miscellaneous charge + Tax value) x Discount percentage = (100.00 + 15.00 + 30.00 + 14.50) * 2.50/100 = 3.99
If none of the options at the option: Calculation of terms discount are selected, then the discount is calculated as:
Merchandise amount x Discount percentage = 100.00 * 2.50/100 = 2.50

Discount is only calculated for credit and debit notes if the option Calculate terms discount for credit/debit notes is selected (Accounts Receivable Setup - Terms Discount tab).

Invoice terms information

Description

Enter a description for the invoice terms code.

To make this description more meaningful, you could include both the number of days and the percentage. For example: 30 Days - net or 30 Days -2.5%.

Discount percent

This indicates the discount percentage which must be used to calculate the actual discount amount. The discount amount is the amount given to customers if their payment is received within the discount options specified below.

This discount is only applied when receiving payment from the customer.

Discount

Discount option

Specify the conditions under which the discount amount is given to customers.

Field	Description
Number of days	Select this to apply the settlement discount only if payment is made within a specified number of days from the date of the invoice. This is enabled by default when the Invoice ageing method is By invoice date (Accounts Receivable Setup).
Fixed day	Select this to enter a specific day of the month and the number of months within which payment must be made by a customer in order to qualify for the settlement discount applicable to this terms code.
Fixed date	Select this to specify a fixed date by which an invoice must be paid to qualify for the settlement discount.
Number of days fixed	Select this to specify your own ageing buckets according to which an invoice must be paid to qualify for the settlement discount. Select Define at the Defined fixed day calendar field to enter the bucket end dates. This is only available when your Invoice ageing method is By statement (Accounts Receivable Setup).

Discount days

Indicate the number of days (from the invoice date) within which payment must be made by a customer in order to qualify for the settlement discount applicable to this terms code.

If you are using the Number of days fixed option, then the Discount days should match the length of the periods of your user defined discount ageing buckets.

Day of month

Indicate the specific fixed day of the month within which payment must be made by a customer in order to qualify for the settlement discount applicable to this terms code.

This field is disabled when the Invoice ageing method is By invoice date (Accounts Receivable Setup).

Number of months

Indicate the cut-off number of months for which the discount is applicable.

This field is disabled when the Invoice ageing method is set to By invoice date (Accounts Receivable Setup).

The Day of month is the fixed day of the month and the Number of months indicates how many months to add. The program overwrites the invoice date with the Day of month. The Number of months is then added to the invoice date to give the due date. If the due date is less than the invoice date, then an extra month is added to the month.

For example:

Invoice date is 28/10/yy

Day of month = 10

Number of months = 0

Replacing the invoice date with the Day of month makes the invoice date 10/10/yy

Adding the Number of months to the invoice month (10 + 0 = 10) giving 10/10/yy

The calculated due date is less than the invoice date so 1 is added to the month. The new calculated due date is now 10 + 1 = 11 making the due date 10/11/yy.

The Day of month with Number of months option is therefore only totally accurate when the Day of month is the last day of the month.

Discount date

Indicate the cut-off date by which payment must be made by a customer in order to qualify for the settlement discount applicable to this terms code.

Defined fixed day calendar - Define

Select this to specify the end dates of the ageing buckets if you selected the Discount option - Number of days fixed.

These dates are used as the cut-off dates by which payment must be made by a customer to qualify for the settlement discount for this terms code.

The dates can be copied from the Invoice due dates, but the two calendars need not be identical.

Ageing heading code

This only applies to the Number of days fixed options for Discount and Due. When you define your own ageing buckets, the standard headings of Current, 30 days, 60 days, 90 days and Over 120 days can no longer be assumed. You need to define your own ageing bucket headings against a heading code in the AR Terms Ageing Headings Maintenance program and then indicate the heading code to use in this field.

Due

Invoice due option

The invoice options enable you to define the time periods within which an invoice is due for payment.

Once the periods defined here are exceeded, the invoice is classified as overdue for payment.

The Invoice options are used:

when credit checking is performed on the basis of invoice terms. Credit checking is defined on the Terms/Margins tab of the Sales Order Setup program or against the customer using the AR Customer Maintenance program.
by the AR Finance Charge Calculation program when the Invoice ageing method is set to: By invoice due date (Accounts Receivable Setup - General tab).

Field	Description
Number of days	Select this to classify an invoice as overdue after a specified number of days from the invoice date. You specify this number of days in the Invoice days field.
Fixed day	Select this to enter a specific day of the month within which payment must be made by a customer before an invoice is classified as overdue. You can only select this option if your Invoice ageing method is defined as being By invoice due date(Accounts Receivable Setup).
Fixed date	Select this to enter a specific cut-off date by which payment must be made by a customer before an invoice is classified as overdue. You specify this date in the Invoice due date field. You can only select this option if your Invoice ageing method is defined as By invoice due date (Accounts Receivable Setup).
Number of days fixed	Select this to specify your own cut off dates by which payment must be made by a customer before an invoice is classified as overdue. Select Define at the Invoice defined fixed day calendar field to enter theses cut off dates. This enables you to age invoices based on your own ageing buckets. It works in the same manner as the By statement ageing method except that the buckets are user defined and not 30 day buckets calculated from the AR period end dates. This option is only available when your Invoice ageing method is By statement (Accounts Receivable Setup).

Invoice days

Indicate the number of days (from the invoice date) within which payments must be made by a customer before an invoice is classified as overdue.

If you are using the Number of days fixed option, then the Invoice days should match the length of the periods of your user defined invoice ageing buckets.

Invoice day of month

Indicate the specific day of the month after which the invoice becomes overdue.

Invoice number of months

Indicate the cut-off number of months before an invoice is classified as overdue.

In the example below, the day of the month is 25 and the number of months is 1.

A/R Invoice Terms - Invoice due dates defined using Fixed Day option

Invoices dated	Date on which invoice becomes overdue
26th January to 25th February (inclusive)	26th March
26th February to 25th March	26th April

Invoice due date

Indicate the date after which the invoice is classified as overdue.

Invoice defined fixed day calendar - Define

Select this to specify the end dates of your ageing buckets if you selected the Invoice due option - Number of days fixed.

These dates are used as the cut-off dates by which payment must be made by a customer to prevent the invoice becoming overdue.

This calendar is used for all invoice ageing. The transaction date is the basis for determining the

The dates can be copied from the Discount dates, but the two calendars need not be identical.

Notes and warnings

eSignature considerations

Electronic Signatures provide security access, transaction logging and event triggering. This enables you to increase control over your system changes.

Access to the following eSignature transactions within this program can be restricted at Operator, Group, Role or Company level. You configure this using the Electronic Signatures program.

eSignature Transaction	Description
AR Invoice terms added	Controls access to the New Invoice Term function in the AR Invoice Terms program.
AR Invoice terms changed	Controls access to the maintenance of invoice terms in the AR Invoice Terms program.
AR Invoice terms deleted	Controls access to the Delete function in the AR Invoice Terms program.

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