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How to Create Settlement Discounts
How to Create Settlement Discounts

Managing automated settlement discounts

Brenda Beckham avatar
Written by Brenda Beckham
Updated over a week ago

When specified on an invoice, a settlement discount is a percentage discount given to the customer for prompt payment. For example, a 2% discount if the invoice is paid within 10 days. The terms under which the discount can be claimed are entirely up to you and should be included within the payment terms you enter. The prompt payment amount and the regular invoice total are indicated on the invoice.

Adding a Settlement Discount

Open the sales order you wish to add a sales discount to and enter a value:

Note that a settlement discount can only be specified before invoicing.

When you create an invoice, you will see that the settlement discount and prompt payment total are summarized at the bottom. The summary also details how the VAT has been calculated on the discounted subtotal.

Settlement Discounts and VAT

Uphance has several options for determining how tax/VAT is calculated for invoices involving settlement discounts. You may want to consult your accountant when deciding on which option to use. The options are:

  1. To calculate and show two different tax/VAT values based on original and (settlement) discounted goods totals.

  2. To calculate tax/VAT based on the discounted goods total only. (Choose this option to treat the additional untaxed amount as a financial penalty).

  3. To calculate tax/VAT based on the original goods total only.

Navigate to the Tax settings page to choose the option that is appropriate for your business.

Clearing Outstanding Balances

When you've received a prompt payment from your customer and entered the payment into Uphance, the invoice will still have an outstanding balance. To clear this balance, click the "Settlement Discount" button on the invoice in question. This will record the settlement discount against the invoice and clear the outstanding balance, marking the invoice as fully paid.

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