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How to Set Up Discounts for Early Payment

Contents

Objective

Early payment discount is used by companies as a gesture of acknowledge a payment received before it comes due.

In other words an early payment discount agreed upon the parties means a financial discount for the customer, because:

Above means that this type of discounts are shown as a separate item reducing Sales in the P&L report of the company.

If instead of using an early payment discount, a price offer (or lower price) is used, then the sales order is issued net of the discount.

Therefore, the main difference between these two ways of reducing sales is the way those are represented in the P&L report of the company:

Early Payment Discounts can apply to both, Sales and Purchase:

Early payment discount can be of many types, for instance:

It is important to remark the way early payment discounts work in Openbravo:

Recommended articles

Managing early payment discounts requires a clear understanding on how to create a Discount and how to issue a Sales Invoice.

Execution steps

In Openbravo, the company in this example requires to manage a 10% early payment discount as the customer has commited to pay a sales invoice before its due date, that means in the next 5 days.

To get that working, the company in this example needs to:

Creation of the "discount" product

Products are created and maintained in the Product window.
Product window contains multiple product related information, but only few basic data is required to be filled in the Header and in the Accounting tab of the Product window.

Header tab:

Accounting tab:


HowToSetupEarlyPaymentDiscounts Product.png

Creation of an Early Payment Discount

Discounts are created and maintained in the Discounts window.

The fields to fill in there are:

HowToSetupEarlyPaymentDiscounts Discount.png

Business Partners set up

Business partners are created and maintained in the Business Partner window.
The company in this example will have to complete business partner data by entering discount information in the Discount tab of the business partner window:

As shown in the image below, the data to fill in here are:

Bulbgraph.png   Realize that a customer can sometimes be a provider of the company at the same time, that's way it is possible to define if a discount will apply if the business partner acts as customer and/or as a vendor.

HowToSetupEarlyPaymentDiscounts BP.png

Sales Invoice creation

The next step is to create a sales invoice.
It is important to check that the configured early payment discount has been automatically included in the Discount Tab of the sales invoice once the invoice has been completed.

Then a new line is included in the Invoice Line Tab. That line is the discount Line which won’t be shown in the Invoice Form.

Bulbgraph.png   When developing a new Invoice form, isDiscount column on c_invoiceline table will differ both line types. Make sure your form includes Discounts on it development.

HowToSetupEarlyPaymentDiscounts Invoice.png

As shown in the image above:

From an accounting point of view:

Account Debit Credit
Customer Receivable Total Gross Amount
212,40
Discount Product Revenue Discount Amount
20
Product Revenue Line Net Amount
200,00
Tax Due Tax Amount
32,40

Results

This completes the creation and processing of an Early Payment Discount. As a result:

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