Overview
Credit Terms are used to calculate payment Due Dates on Sales Order and PO-AP Match Invoices that are then passed to Accounts Receivable (AR) and Accounts Payable (AP). Credit Terms can also be used to calculate early payment discounts and late payment finance charges for Sales Order Invoices that when using Rootstock Financials, will automatically calculate discounts/finance charges based on when Cash Receipts are processed in relation to the settings defined.
Credit Terms setup is mandatory and is required to be set on Customer Master and Vendor Master records.
Application
Once Credit Terms are created, they are then assigned to Customer Master/Vendor Master records.
When processing Sales Order/PO-AP Match invoices, the Sales Order/PO-AP Match Invoice Due Date is calculated based on the Due in Days setting in the Credit Term assigned to the Customer Master/Vendor Master and the Invoice creation date:
EXAMPLE
Invoice Creation Date = 22 Jan
Due in Days = 30
Invoice Due Date = 21 Jan
When using Rootstock Financials and configuring the early payment discount option for SO Invoices within Credit Terms and AR Control, if the Customer pays the invoice within the window set for early payment, a discount is automatically applied when processing Cash Receipts and the Debtor balance is updated accordingly.
EXAMPLE
Invoice Creation Date = 22 Jan
Receivables Discount Base Date Method = Invoice Date
Discount Days from Base Date = 10
Discount Percentage = 2
Using this example, if the Customer pays the invoice within the 10-day window from 22 Jan, a 2% discount will be applied in Cash Receipts. If payment is received outside the 10-day window, no discount is applied.
When using Rootstock Financials and configuring the late payment finance charge option for SO Invoices within Credit Terms and AR Control, if the Customer pays the invoice outside the window set for late payment, a finance charge is automatically applied when processing Cash Receipts and the Debtor balance updated accordingly.
EXAMPLE
Invoice Creation Date = 22 Jan
Finance Charge Base Date Method = Invoice Date
Finance Charge Days from Base Date = 10
Finance Charge Percentage = 2
Using this example: if the Customer pays the invoice after the 10-day window from 22 Jan, a 2% finance charge will be applied in Cash Receipts. If payment is received within the 10-day window, no finance charge is applied.
Navigation
Terms Code
Processing
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To add a record, click on the ‘New Terms Code’ button on its list view.
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To modify an existing record, click on the ‘Edit’ button.
Fields
Code: Unique identifier for the Credit Term record (Text 15 characters).
Description: User-defined description for the Credit Term Code (Text 50 characters).
Due in Days: The number of days in which payment is due from the Invoice Date.
Receivables Discount Base Date Method: Indicates the method for determining the Base Date (start date) used for calculating the due date, invoice aging, and potential discounts. Options are:
Discount Days from Base Date: Number of days from the Base Date when the discount will be applied to the invoice.
Discount Percentage: Discount percentage to be applied.
Finance Charge Base Date Method: Indicates the method for determining the Base Date (start date) used for calculating the due date, invoice aging, and potential Finance Charges. Options are:
Finance Charge Days from Base Date: Number of days from the Base Date when finance charges will be applied to the invoice.
Finance Charge Percentage: Finance percentage to be applied.
Due Date Calculation Method: This picklist field designates the method to be used to determine a Transaction Due Date for transactions that reference this Terms Code. In addition to a simple Date + Days, options are:
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Add Due In Days to Transaction Date
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Add Days Then Advance to Prox Day
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Advance to Prox Day Then Add Days
NOTE The term "Prox" is short for the Latin proximo mense, meaning "the next month." For example, if payment terms are "Net 30th Prox", then payment is due on the 30th of the following month.
Due Date Prox Day: This picklist field can be used in the calculation of the Due Date as directed by the Calculation Method. For example, we can add the DAYS to the DATE and then advance to the next occurrence of this Day.
Payables Discount Base Date Method: This picklist field designates the method to be used to determine the Payables Discount Base Date for transactions that reference this Terms Code. Options are:
Inc Tax and Freight in Discountable Amt: When checked, the Tax and freight charges will be included while calculating the Discount.
NOTE The fields '
Payables Discount Base Date Method' and '
Inc Tax and Freight in Discountable Amt' is only available in Rootstock Financials.
Calculation of Due Dates based on the Due Date Calculation Method
- When the 'Due Date Calculation Method' is set as 'Add Due In Days to Transaction Date', the due dates are calculated as below:
| Scenario | Due in Days (in Terms Code) | Transaction Date | Net Due Date |
|---|
| Receivable Transaction | 20 | 07/22/2024 | 08/11/2024 [07/22/2024 + 20] |
| Payable Transaction | 30 | 07/20/2024 | 08/19/2024 [07/20/2024 + 30] |
- When the 'Due Date Calculation Method' is set as 'Add Days Then Advance to Prox Day', the due dates are calculated as below:
| Scenario | Due in Days (in Terms Code) | Due Date Prox Day (in Terms Code) | Transaction Date | Net Due Date |
|---|
| Receivable Transaction | 30 | End of Month | 08/01/2024 | 09/30/2024 [08/01/2024 + 30 + End of Month (Prox)] |
| Payable Transaction | 15 | 20 | 08/13/2024 | 09/20/2024 [08/13/2024 + 15 + 20 (Prox)] |
- When the 'Due Date Calculation Method' is set as 'Advance to Prox Day Then Add Days', the due dates are calculated as below:
| Scenario | Due in Days (in Terms Code) | Due Date Prox Day (in Terms Code) | Transaction Date | Net Due Date |
|---|
| Receivable Transaction | 20 | 10 | 08/10/2024 | 09/30/2024 [08/10/2024 + 10 (Prox) + 20] |
| Payable Transaction | 10 | End of Month | 08/01/2024 | 09/10/2024 [08/01/2024 + End of Month (Prox) + 10] |
SEE ALSO
Customer Master
Vendor Master
Accounts Receivable User Guide
SO Invoice and Credit Memos
AR Control
