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Payment Terms & Baseline Date

What payment terms define — due dates and cash discount — how the baseline date that drives them is derived, and when to use a payment block.

Contents

Payment terms define when an invoice is due and whether paying early earns a discount. They are held under a four-character key and stored on the vendor or customer master, from where they default onto documents at entry.

The two things payment terms define

Broadly, payment terms set a net due date and up to two cash discount tiers, with the higher discount attached to the earlier deadline.

Example payment terms
TermsFirst discountSecond discountNet due
Net 30——30 days
2/10 net 302% within 10 days—30 days
3/10, 1/20, net 303% within 10 days1% within 20 days30 days
Month-end cut-off, pay end of next month——End of following month

Terms common in Japan, such as cutting off at month end and paying at the end of the following month, are expressed with fixed-day and end-of-month settings rather than a plain day count.

The baseline date

Payment terms say "within so many days", but without a starting point no due date can be calculated. That starting point is the baseline date.

Which date it is derived from is part of the payment terms configuration: the document date, the posting date or the entry date, optionally plus a fixed number of days.

Derived fromTypical reason
Document dateCount from the date on the invoice; the most common choice
Posting dateCount from when it was booked
Entry dateCount from when it reached SAP; useful when invoices arrive late
No defaultEntered by hand on the document

Accounting for cash discount

There are two ways to record a discount, chosen per company code.

  1. Gross procedure: record the payable at the full invoice amount, and when payment is made with the discount taken, book the difference as discount income. Whether the discount was actually captured becomes visible at payment.
  2. Net procedure: record the payable net of the expected discount. If payment misses the deadline, the lost discount is booked as an expense, which makes missed discounts easy to see.

Most Japanese companies use the gross procedure, but the net procedure is a better fit if capturing discounts is something the business wants to manage as a metric.

Instalment payment terms

Where one invoice is paid in several instalments, instalment payment terms split the line item automatically at posting into several items, each with its own due date.

Payment blocks

Separately from payment terms, there are times you need to keep a specific invoice out of a payment run — goods not yet accepted, or an amount under dispute. That is what a payment block is for.

A block can be set on the individual line item, or on the vendor master to stop all payments to that vendor. Blocked items are automatically excluded from the automatic payment program (F110).

Check your understanding

Test what you just read.

Quiz 1

What is the date used as the starting point for calculating payment due dates called?

Quiz 2

A Cash Discount applies when payment is made within the specified discount period.

Quiz 3

Which feature is used to exclude a specific vendor invoice from an automatic payment run (F110)?

Quiz 4

Payment Terms can be stored in both the vendor master and the customer master.

Quiz 5

With payment terms of "2% discount within 14 days, net 30," how much is paid on day 5 for an invoice of ¥10,000?

Quiz 6

How does the Automatic Payment Program (F110) handle an invoice whose due date has not yet been reached?

Quiz 7

Posting an invoice with installment payment terms automatically splits it into line items with separate due dates.

Quiz 8

Which method records an invoice at its full amount and books any cash discount taken as income at payment?

Quiz 9

Which pair of things do payment terms define?

Quiz 10

An invoice with a payment block is still paid by F110 once its due date has arrived.

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