What Is a Multiple Payment Term?

Multiple payment terms are used to create multiple due dates for a single invoice. A hierarchy of discount dates and percentages is optional. The following example illustrates multiple payment terms with discounts.

An invoice amount of $500,000.00 is to be paid in quarterly payments, with the first due date 60 days after the invoice date of January 1. Subsequent payments are due in 90 day increments. The discount options are as follows.

  • 3% discount if paid within 20 days after the invoice date (Jan. 21).

  • 2% discount if paid within 30 days after the invoice date (between Jan. 22 and Jan. 31).

  • 1% discount if paid within 40 days after the invoice date (between Feb. 1 and Feb. 10).

Discount Logic

Discounts are only offered if a payment is made before the first obligation discount date. Payments must be made on or before a discount date for a discount to be granted. The discount amount is calculated by multiplying the discount percentage by the total open obligation amount.

If the payment amount is less than the amount due, the remainder is due on the obligation date. If the payment amount is enough to cover more than one obligation, the remaining obligations are not due until the originally defined due dates.

Example

To fully pay the first three obligations and qualify for a 2.00 percent discount, a payment of 367,500.00 must be received on or before January 31. The payment amount is based on a 7,500.00 discount (2.00 percent) granted on 375,000.00 (the total amount of the first three obligations). The next payment will not be due until November 27, the original due date of the final obligation.

Obligation Due Date Amount Due Disc Date Disc Percent
Open Open Jan. 21 3.0%
Open Open Jan. 31 2.0%
Open Open Feb.10 1.0%
First March 2 125,000
Second May 31 125,000
Third August 29 125,000
Fourth November 27 125,000