Revenue Recognition for Prompt Payment Discounts

This document describes how to manage the 'Revenue Recognition for Prompt Payment Discounts' for customer invoices in 'Rev Recog f Prmpt Paym Discounts. Create' (ARS135).

The functionality is used to adjust the revenue with the prompt payment discount amount (cash discount amount) at period end for open invoices where the discount still is not used by the payer.

Limitations

Solution

The solution is based on all open customer invoices where a cash discount is granted. The invoices can be overdue or not, which is selected in (ARS135). The currency rates used are based on the accounting date selected in (ARS135).

If a cash discount term is set up with only one or two different percentages and 'cash disc % sel' is set to '3' in (ARS135), 'revenue recognition amount' will be zero. In that case, the invoice is not included in the proposal.

For overdue invoices where 'cash disc % sel' is used in (ARS135), the cash discount date will be the date connected to that percentage, which is displayed in 'Customer Invoice. Change' (ARS201) for the invoice. For overdue invoices where 'cash disc pct' is used in (ARS135), the cash discount date will be the accounting date set in (ARS135).

The parameter 'VAT method cash discount' on the FAM function AR61 is used to determine if the VAT part of the prompt payment discount amount should be calculated. The parameter also decides if the calculation should be executed on the main VAT code for the invoice or separately for each VAT code.

If the VAT part of the prompt payment discount amount should be calculated, 'Cash discount method' should be set to 'Gross method'. The parameter is displayed on the FAM function (AR10, AR20 and MF01) for some invoicing functions and in 'Settings - Customer Order Invoicing' (CRS722) or 'Settings - Project Invoicing' (CRS792) depending on type of invoice. With this method, the cash discount is calculated based on the total amount including VAT.

There is a verification in the program so that if a proposal is already updated once in a period, a warning message will display if you try to update another proposal in the same period. The warning says that the previous vouchers should be reversed first, but you can still continue.

Before you start

Before the procedure can begin, these prerequisites must be met:

Follow these steps

Create a proposal

  1. Start 'Rev Recog f Prmpt Paym Discounts. Create' (ARS135).

  2. Specify a description of the proposal.

  3. Select a range of customers, or all customers by leaving the fields blank.

  4. Specify an accounting date, which must be the last day of an accounting period. Open invoices with a connected cash discount until that date are selected.

  5. Optionally, specify a voucher text . If left blank, the voucher text will be blank when the voucher is updated in General Ledger as well.

  6. Select 'Incl overd inv' if you want overdue invoices to be included in the round.

  7. If 'Incl overd inv' is selected, specify either 'Cash disc % sel' or 'Cash disc pct'.

    • For 'Cash disc % sel' 1, 2 or 3 can be selected, which represents the different percentages in the cash discount term. The percentages can vary from invoice to invoice if several cash discount terms are used within the company.
    • For 'Cash disc pct' a percentage can be entered which is used for the whole round for all overdue invoices.
    • If a round contains overdue invoices and invoices that are not overdue, the percentages selected in (ARS135) will only be used for the overdue invoices.
  8. Press 'Enter' or click 'Next'. A proposal is created and printed (ARS137PF).

  9. The report, ARS137PF, can be reprinted using related option 6='Print' from (ARS135) when the status is set to 10.

Update a proposal

  1. In (ARS135), use option 2='Change' to open an existing proposal.

  2. Select the 'Update' parameter.

  3. Specify the voucher text if not specified already, or change the text if needed. If left blank, the voucher text will be blank when the voucher is updated in General Ledger as well.

  4. Press Enter. The report ARS138PF, which contains the accounting details, is created together with the accounting journal. Only the report ARS137PF can be reprinted using related option 6='Print' from (ARS135) when the status is set to 90.

  5. A voucher and a reversal voucher is created and updated in GL for the total amounts per payer.

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