What Are Payment Terms?
Payment Terms define the conditions under which a customer must pay a Sales Invoice, or a vendor expects payment on a purchase invoice. They control the due date, any early payment discounts, and how cash flow is projected in Business Central.
Payment Terms are set up once and then assigned to customers, vendors, or individual documents. When assigned, Business Central automatically calculates the due date every time a document is posted.
Where Payment Terms Are Used
· Customer Card – Default Terms for all Sales Documents for that Customer.
· Vendor Card – Default Terms for all Purchase Documents for that Vendor.
· Documents – Can be Overridden per Document
· Journals – Can be used in Journals as well.
Setting Up Payment Terms
· Search > Payment Terms.
· Click New and fill in the following fields:
Field | Description |
Code | Short identifier, e.g. NET30, COD, 2/10NET30 |
Description | Full name, e.g. Net 30 Days |
Due Date Calculation | It Calculates Due Date from Document Date e.g. 30D means 30 Days |
Discount Date Calculation | Formula for Last Day Early Payment Discount is Valid, e.g. 10D |
Discount % | Percentage Discount given if Paid before Discount Date |
Calc. Pmt. Disc. on Cr. Memos | Whether Discount also Applies to Credit Memos |
Date Formula Syntax
Business Central uses a formula language for Date Calculations. Common Examples:
Formula | Meaning |
C | Current |
D | Days |
W | Weeks |
M | Months |
Q | Quarter |
Y | Years |
CW | Current Week |
CM | Current Month |
CQ | Current Quarter |
CY | Current Year |
Formula | Meaning |
5D | Net 5 Days (Document Date + 5 Days)
|
D5 | Coming 5th Day
|
CM+5D | 5th of the following month
|
1M+CM+5D | 5th of the month after next
|
These are the Important Examples which commonly use in the Practical World.
How Due Date Is Calculated
Business Central calculates the Payment Due Date (Due Date) by adding the payment terms to the Document Date, not the Posting Date.
Example
Payment Terms = Net 30.
Document Date = July 1st
Due Date = July 31st.
Even if you post the invoice on July 5th, the due date is still calculated from July 1st. This is important for accurate aging reports and cash flow forecasting.
Early Payment Discount
If Discount % and Discount Date Calculation are filled in, Business Central creates an entry for the potential discount.
Example
Payment Terms = 2/10NET30
Invoice amount = 1000
● Paid within 10 Days: Customer Pays 980 (2% discount)
● Paid Between Day 11 & Day 30: Customer Pays 1,000
● Paid After day 30: Invoice is Overdue
The discount is applied when the payment is posted in the Cash Receipt Journal. Business Central checks whether the payment date falls within the discount period and applies the discount automatically.
Separate Article is written for Payment Discount to understand this Calculation and Accounts in more detail.
Assigning Payment Terms
On Customer or Vendor Card
Navigate to: “Customer Card” or “Vendor Card”.
Go to “Payment FastTab” and in this you can find “Payment Terms Code”. This becomes the default for all documents created for that customer or vendor.
On a Document
On any Sales Order, Purchase Order, or Invoice, the Payment Terms Code field can be changed per document. This overrides the customer or vendor default for that specific transaction.
By Default:
If Change:
Payment Terms in Reports
Payment Terms affect the following reports and pages:
· Aged Accounts Receivable – Groups Invoices by Due Date
· Aged Accounts Payable – Groups Invoices by Due Date
· Customer Statement – Shows Due Dates Per Invoice
· Cash Flow Forecast – Uses Due Dates to Project Incoming and Outgoing Cash
Important Notes
– Payment Terms do not automatically send reminders or follow-up emails.
– Payment Terms set on the document header apply to all lines. You cannot set different terms per line.