Taking Discounts and Adjusting the Tax

Some transactions may be eligible for discount when they are paid. The discount terms for a supplier or customer are identified in the payment terms. Payment terms are defined using Payment Terms (PYT) and assigned to a supplier or customer using Supplier (SUS) or Customers (CUS).

The payment terms can determine two levels of discount. These are used to calculate two discount due dates and the amount of discount available on each date. The discount terms are linked. The first discount terms identify the highest level of discount available. The second discount terms identify a lower level of discount that may be allowed after the first terms have expired. Both sets of discount terms are optional.

Taking Discount in a Payment Run

If the discount details appear on selected transactions, Payment Run (PYR) uses this information to test whether or not the transaction is eligible for either discount, and if so calculates the amount of discount on offer.

A transaction is eligible for the first discount if the discount date is on, or after, the Base Date for Discount entered in Payment Run (PYR). The discount amount is calculated by multiplying the transaction amount by the first discount percentage on the payment terms. If the transaction is no longer eligible for the first discount, then the second discount due date is checked to see whether this level of discount is still available. If it is, the discount amount is calculated using the second discount percentage.

The tests for discount eligibility are performed before the transaction due date is checked. So, if a transaction is eligible for discount, it is paid regardless of whether it is considered due for payment. This is to ensure that any eligible discount is taken. To prevent this happening, you can adjust any of the dates entered in Payment Run (PYR), that is the base date for payment, base date for discount, or next payment date.

The next payment date is particularly powerful. If, on that date, a transaction is eligible for discount, it is not paid during this payment run.

Note:  Different discount rules apply to a Payment Collection Run (PYC).

Tax on Settlement Discount

When you have taken settlement discount you also have the option to calculate and record any tax included in the discount amount automatically. This is defined in the Tax Analysis Dimension and Tax on Settlement Discounts fields in Ledger Setup (LES), and also in Tax Details (TXD).

You can specify a tax account to record the tax included in any settlement discount amount. Postings are made to this account for each combination of analysis codes.