There might be occasions when you wish to write off the amount of an invoice. For example if a customer has underpaid and you don’t wish to leave the balance on the invoice. You can achieve this using a payment tolerance.
In this scenario I have a posted invoice for £101.00 and the customer has sent a payment of £100.00. Instead of applying the payment and leaving a balance on the invoice of £1.00, we’ll write off the £1.00 using a payment tolerance.
Below is the invoice for £101.00 as shown in the Customer Ledger Entries page:
I’ll now go to a Cash Receipts Journal and raise the payment below and click “Apply Entries” to apply this to the Invoice (* Please note you can also post the payment for £100.00 and apply afterwards using the same technique)
Once in the “Apply Customer Entries” page I first change the “Pmt. Disc. Tolerance Date” so its after the posting date of the invoice, then I’ll add a “Max. Payment Tolerance” of £1.00 and finally enter £100.00 in the “Amount to Apply” as per below
Now, back in the Cash Receipt Journal window I’ll select “Preview Postings” so I can double check this is going to work as intended prior to clicking “Post”. I can check this by viewing the “Detailed Ledger Entries” and in this scenario everything seems to be fine as I have a “Payment Tolerance” entry type in the Detailed Ledger Entries.
As everything is fine I’ll now post this transaction, which will close the Invoice as fully applied:
After posting the Payment the remaining amount on the Payment and Invoice are both £0.00. If I click “Remaining amount” on the Payment I can see the “Payment Tolerance” in the Detailed Ledger Entries.
As I’ve mentioned several times on my blog I originally come from a Dynamics GP background so making the transition to Dynamics 365 Business Central has been a real learning journey for me, and one that is still ongoing.
Along the way I’ve managed to learn some important concepts which I hope to share in a series of short videos.
The first one focuses on how GP and BC differ when setting up and selecting default GL codes.
Hopefully new GP to BC users will find it useful. (or anyone new to BC for that matter)
When posting a payables invoice in Dynamics 365 Business Central you can specify payment discount that can be taken if the invoice is paid early. You define this using the option below
Please note this can also be defaulted for you onto the purchase invoice from the payment terms on the vendor.
However what happens if the “Payment Discount %” wasn’t entered onto the invoice when it was posted? How can you take payment discount?
Lets say I’ve posted an invoice as per below for £100.00 and I wish to take 5%, or £5.00, as a payment discount. (Therefore I should only pay £95.00 and take the £5.00 as discount). However at the time of posting the invoice I didn’t specify a “Payment Discount %’
First create the payment journal selecting the Vendor as per below and click “Apply Entries”. (no need to enter an amount at this point)
Once in the “Apply Entries” window click into “Remaining Pmt. Disc. Possible” and enter £-5.00. Also click into the “Pmt. Discount Date” and change the date to a date after the date of the payment. In my case I’ll change this to 01/11/2020, as my payment date is 31/10/2020
Now when I click “Process > Set Applies-to ID” although it appears to show the full amount being applied, if you look at the foot of page the Payment discount is showing £5.00 and the Applied Amount shows £-95.00
If I click OK this shows the payment amount of £95.00
After I post the payment and check the ledger entries I can see a payment for £95.00 has cleared the full amount of the invoice
Also, drilling down on the “Remaining Amount” of the Payment you can see the additional “Detailed Ledger Entry” for the discount:
So the key things to note are, when applying the invoice ensure you enter the amount of discount you wish to take in the “Remaining Pmt. Disc. Possible” and also change the “Pmt. Discount Date” so its after the date of the payment.