How Accounting uses Credit Terms

From Fall 2019, you can set up and manage credit terms within Foundations. Accounting can use the credit terms in Foundations instead of its own implementation of credit terms. The document due dates and settlement discounts that Certinia calculates are the same regardless of which implementation you use. The advantages of using the Foundations credit terms are that credit terms are maintained centrally where they can be used by other Certinia applications, and the Accounting fields added to both the Account and Accounting Company objects can be removed from page layouts.

Warning:

Credit terms in Accounting will be deprecated in a future release, therefore it is important that you configure Accounting to use the credit terms in Foundations.

To configure Accounting to use the credit terms in Foundations:

  1. Follow the instructions in Enabling Credit Terms to enable the Foundations credit terms.
  2. Follow the instructions in Updating Accounting to use Credit Terms in Foundations to configure Accounting to use the Foundations credit terms.

When you have successfully enabled both of these features, you can start creating and editing credit terms using the Credit Terms related list on your account and Foundations company records. For more information, see Creating Credit Terms.

The following sections explain how Accounting uses credit terms to calculate document due dates and settlement discounts.

Customer and Vendor Credit Terms

You can specify customer credit terms by entering your default credit terms at companyClosed A self-balancing accounting unit within your organization. level, and any specific credit terms, for those customer accounts that have them, at individual accountClosed In this context, accounts are organizations or people that you conduct business with, such as customers or vendors. Account is a standard Salesforce object. Certinia accounts can be any Account Record Type. level.

You can also specify vendor credit terms, for the products and services that you purchase, but only at account level.

Note:
  • If customer credit terms exist at both levels, those on the account record take precedence. If an account is both a customer and a vendor, and their credit terms are different, you must create two separate accounts.
  • You can also use multi-account credit terms when your companies trade with the same vendor and customer accounts. For more information, see Multi-Account Credit Terms Overview.

  • If the related company's credit terms are used, the credit terms are retrieved from the accounting company records and not from the Foundations company records when the following conditions are fulfilled:

    • Both the Multiple Companies Configuration feature and the Foundations credit terms are enabled.
    • Either a related multiple companies account config does not exist or has no multi-account credit terms specified.

Due Dates

Accounting uses credit terms to calculate due dates for the following documents:

Settlement Discounts

Accounting uses credit terms to calculate potential settlement discounts and dates for the following documents:

  • Sales Invoices and Credit Notes: When you post sales invoices and credit notes, potential settlement discounts and dates are calculated using the document date and the customer's credit terms, or if these are not set, using the credit terms for the current company. The discount information is stored on the transaction line for use in cash matching and is included when printing an invoice or credit note.
  • Payable Invoices and Credit Notes: When you post payable invoices and credit notes, potential settlement discounts and dates are calculated using the document date and the vendor's credit terms. The discount information is stored on the transaction line for use according to the payment date set in Payments or according to the discount date set in Cash Matching.

Potential settlement discounts are calculated in both account and document currency. They can be seen, along with the discount dates, in the relevant sections of the transaction line item. If the tax regime of your current company is VAT, and the account contained on an invoice or credit note uses the "Net of Discount" tax calculation method, the settlement discount will be calculated based on the document's net total. Otherwise, the settlement discount will be calculated based on the document's total.

Note:

Discount information is not stored on the transaction lines generated when you post a sales invoice with scheduled payments.

Net of Discount Tax Calculation Method

If the tax regime of your current company is VAT or GST, and the account contained on an invoice or credit note uses the "Net of Discount" tax calculation method, credit terms affect the tax calculation for the following documents:

  • Sales Invoices and Credit Notes: The credit terms on the customer account are used, or if these do not exist, those of the current company are used instead. The maximum available discount is deducted from the net value of the document before calculating the tax value.
  • Payable Invoices and Credit Notes: The credit terms on the vendor account are used. The maximum available discount is deducted from the net value of the document before calculating the tax value.

Credit Terms Example

The following examples illustrate how the credit terms held for an account or company determine the discount that is applied depending on when an invoice is paid. In each case the invoice date is 10 September 2010.

Example 1 Description 1 Standard Base Date 1 End of Next Month Days Offset 1 0 Discount 1 0.00
Example 2 Description 2 Invoice +10 Base Date 2 Invoice Date Days Offset 2 10 Discount 2 5.00
Example 3 Description 3 Next +15 Base Date 3 Start of Next Month Days Offset 3 15 Discount 3 2.00
Example 4 Description 4 Next + 20 Base Date 4 Start of Next Month Days Offset 4 20 Discount 4 1.00
  • Example 1: If the invoice is paid by 31 October 2010, no discount is applied.
  • Example 2: If the invoice is paid by 20 September 2010, the stated discount will be deducted (from the goods amount on the invoice).
  • Example 3: If the invoice is paid by 15 October 2010, the stated discount will be deducted.
  • Example 4: If the invoice is paid by 20 October 2010, the stated discount will be deducted.