Applying Discounts in Transaction Matching

Transaction Matching generates settlement discounts in accordance with the settlement terms for an account. Discounts can be generated for debtor/receivables, creditor/payables and client accounts.

If the transactions on an account match in all other respects but the values are out of balance, Transaction Matching checks to see if the difference is due to discount. It uses the discount terms for the transaction to calculate the amount of discount due and checks this against the matching out-of-balance amount. If the difference is the same as the discount amount, or within the tolerances set for the run, a discount transaction is generated which balances the transactions.

Input and output discount accounts are identified for the transaction matching run. The input discount account code is used to post the settlement discount received on creditor/payables accounts or on purchase transactions on client accounts. The output discount account code is used to post the settlement discount allowed on debtor/receivables accounts or sales transactions on client accounts. These discount accounts are not required if you are matching profit and loss, memo, or balance sheet accounts, as settlement discount is not appropriate to these account types.

If you select client accounts and you are posting discounts, the system also ensures that the larger value is an invoice and the smaller value a payment. For debtor accounts, no match is made if a credit value is larger than a debit value. For creditor accounts, no match is made if a debit value is larger than a credit value.

Discount Tolerance

You can enter a discount tolerance amount or percentage in the matching process. If no discount tolerance is allowed, then the difference between the transaction values must match the discount due according to the settlement terms exactly, before the allocation proceeds. This could lead to an allocation being rejected because of a trivial discrepancy between the actual and specified settlement discount.

When the matching process identifies an unbalanced allocation, it first checks the due dates and discount due dates for the transaction, to ensure that the payment falls within the discount terms. It then calculates the discount available. If the net of settlement discount amount for the invoice transaction does not match the receipt, then the discount tolerance is examined. The actual receipt value is added to the expected discount amount and compared to the invoice amount. If the difference between the two falls within the discount tolerance, then the discrepancy is deemed to be settlement discount.

Calculating the Tax Portion of the Discount

If you are generating settlement discount, the system can also calculate the tax portion of the discount and post it to the input and output tax accounts specified on Ledger Tax Calculations. In this case, the tax analysis dimension set in Ledger Setup (LES) must be one of your match criteria.

The Discount Transactions Generated

For each set of match criteria, the following transactions are generated: the discount value is posted to the debtor/creditor account and the output or input discount accounts, and the tax portion is posted to the input and output tax accounts specified in Tax Details (TXD).