Zikpro - Payment Terms
Payment Terms facilitate the creation of a well-defined payment schedule.
A Payment Term lays down a specific payment split. For example, you can arrange to pay 50% on shipping and 50% on delivery. You can keep your company's payment terms in ERPNext and add them to all documents along the sales/purchase process. ERPNext will automatically make the relevant General Ledger entries.
In ERPNext, the Payment Terms form only specifies percentage amounts, whereas the payment schedule itself is controlled using the Payment Terms Template.
Where You Can Use Payment Terms:
Sales Invoice
Purchase Invoice
Sales Order
Purchase Order
Quotation
Getting Access to Payment Terms:
Go to:
1. How to Create a Payment Term
Open the list of Payment Term and click on New.
Enter the following information:
1. Payment Term Name: This is the title you assign to the payment term — it must clearly define when and how much payment.
Example: Use "50% Post-Shipment" if you wish to receive 50% payment after shipping the goods. You can similarly name it such as "Full Advance", "25% on Order", or "Net 30" according to your intention.
2. Invoice Portion (%): This indicates what portion of the invoice is included under this payment term.
Example: If your invoice amount is £1,000 and you wish to receive 50% at this stage, enter 50. That is, £500 should be paid under this payment term.
3. Due Date Based On: This determines how ERPNext will determine the due date for this payment. You get 3 options here:
Day(s) from invoice date: The due date is fixed a specified number of days from the invoice date (e.g., for 7 days from the 20th, the due date would be the 27th).
Day(s) from the end of the invoice month: The due date is fixed from the last day of the invoice month (e.g., 7 days from the 30th would be the 7th of the subsequent month).
Month(s) subsequent to the end of the invoice month: The due date is a certain amount of months subsequent to the invoice month (e.g., 3 months from the 20th of January would be the 20th of March).
4. Credit Days (optional): Credit Days is additional time that you offer to the customer to pay. It will vary based on the "Due Date Based On" option you used previously. If you put 0, then that means there is no additional time, and they need to pay right away.
5. Description (optional): Description is simply a brief note to indicate why the payment term is there. You can put anything like "50% payment after delivery" or "Full payment within 30 days".
1.1 Setting Up Discounts for Early Payments
You can provide a discount for early payment by setting up the following fields:
Discount Type: Discount Type allows you to specify if the early payment discount will be in percentage or in amount. Percentage is the default, but if required, you can change it to amount.
Discount: Discount is where you input the actual amount of the discount. So, if you're giving a 10% discount for payment early, input 10. If you're giving a fixed sum, say £100 off, input that instead.
Discount Validity Based On: Discount Validity Based On is similar to "Due Date Based On". It determines from where the system should calculate — from the date of the invoice or the last day of the month.
Discount Validity: Discount Validity is the period within which the customer has to pay in order to receive the discount. For instance, if you state 10 days from invoice date, then the customer has to pay within 10 days in order to receive the discount.
When you associate these Payment Terms with an invoice, the discount will apply automatically when payment is made.
1.2 Payment Terms in Converted Documents
Documents are converted or copied during the sales/purchase cycle, and related payment terms will be copied. For example, when creating a Sales Order from a Quotation, the Due Date from the quotation will be preserved and can be required to be updated.
To make it more convenient, you can create a Payment Terms Template and be able to apply it at any given time.
1.3 Applying Payment Terms to Documents
Once you have created a Payment Terms Template, you can apply it to sales and purchase transactions. According to the specified values, the Payment Schedule will be generated automatically, indicating the Due Date for each payment segment.
Payment Schedule:
The Payment Schedule may be shown in the Print View using the Print Format Builder.
2. Best Practices for Payment Terms
Clear and Concise Language: Use simple and clear language to avoid misunderstandings.
Dynamic Placeholders: Leverage placeholders to automatically insert transaction-specific details.
Regular Updates: Periodically review and update Terms and Conditions to reflect changes in business policies or legal requirements.
Consistent Application: Apply Terms and Conditions consistently across all relevant transactions.
3. Related Topics
2- Purchase Invoice.