Creating Payment Term

Payment terms are defined by selecting the payment term type and detailing the conditions under which payments should be made. These conditions include specifying the number of net days after which the full payment is due, the number of discount days within which a payment qualifies for a discount, and the exact percentage of the applicable discount. You can also set offset months both for the net payment period and the discount period, providing flexibility in managing timelines for financial obligations. This structured approach helps in creating transparent and understandable terms of payment, thereby facilitating smoother financial operations.

To create a payment term, go to Menu > Admin > Company > Payment Terms

Payment Term Fields

Field	Description
Type	Select the type of payment term. This acts as a label, distinguishing between different categories of payment terms. While it doesn't directly impact the calculation of discounts or due dates, it helps categorize and organize payment terms for easy reference.
Name	Enter a name for the payment term. This acts as an identifier for the payment term. It should be clear and descriptive, helping understand the terms of payment. For instance, terms like "Net 30" or "2% 10 Net 30" provide clarity regarding the payment expectations.
Net Days	This field allows you to specify the number of days after which the invoice or bill is due for payment. For example, if "Net Days" is set to 30, the full payment is expected within 30 days from the invoice date.
Customer Message	This field allows you to enter a message to be displayed to customers regarding the payment term. This message can include details about the payment expectations, any available discounts for early payment, or general information to guide the customer.
Discount Includes Tax	This option allows users to choose whether the discount provided as per the payment term should be calculated including or excluding tax. If this option is enabled, the discount is calculated on the total amount, which includes both the original amount and the tax. If this option is disabled, the discount is calculated only on the original amount, excluding the tax.
Net Month Offset	This field is used to adjust the due date of the invoice or bill by a specific number of months from the invoice date. For example, setting "Net Month Offset" to 1 would mean the payment is due one month after the stated due date in "Net Days."
Discount Factor	This field allows you to specify the discount factor as a decimal value to indicate the percentage discount offered. For example, a "Discount Factor" of 0.1 represents a 10% discount on the original amount due.
Discount Days	Enter the number of days within which the invoice or bill is eligible for a discount. For instance, if "Discount Days" is set to 10, the client can avail of the discount by paying within 10 days of the invoice date.
Discount Month Offset	This field allows for the adjustment of the discount eligibility period by a specified number of months. For instance, if "Discount Days" is 10 and "Discount Month Offset" is set to 1, the discount can be availed if payment is made within 10 days after one month from the invoice date.
Vendor Message	This field allows you to enter a message directed towards vendors concerning the payment term. Similar to the customer message, it can outline payment conditions, detail any early payment discounts applicable to vendors, or provide specific instructions or information that a vendor needs to be aware of.

After entering the required information, click on "Save" to create the payment term.

Once created, you can apply this term to a sales or purchase order to establish the payment timeframe.