Payment Terms for Service and Freight Contracts

After the services or freight details for a service or freight contract are determined, the invoice iteration type defines whether payments are due for a particular invoice and/or invoice iteration.

If payments are due, payable percentages are specified to determine the payable portion of the invoice. Often with provisional invoices, the full amount of the invoice is not always asked for, but perhaps only 90%, and then the final invoice will have 100% payable after all the costs are known.

The due payment date of the invoice is defined as the reference date on the invoice, chosen from a date relative to the despatch process, plus a defined or calculated number of days.

Instalments

Instalments effectively divide the payment into components: the total amount, tax amount or net amount.

At least one instalment has to be defined if payment is to be asked for on the invoice.

Sometimes invoices are created only for the company's internal records, that is, they are printed but not sent to the client. The percentage payment is defined for the instalment, as is the reference date and the number of days after which the instalment is due to be paid.

Payment Conditions

Payment conditions allow for the calculation of discounts for early payment of invoices, or penalties for payments that are outstanding beyond a certain date. They are related to the payment amounts and apply to all instalments. This discount or penalty can be applied based on a fixed amount or percentage owing, or on a percentage derived from a selected interest rate series. The percentage rate returned from the interest rate series can have a spread added to smooth rate fluctuations. Because percentage rates are usually stored per annum, the basis is used to define the number of days in this period, returning a daily interest rate. This resulting percentage is then multiplied by the cash discount method, selected from the previous invoice value, the previous invoice payment or the current invoice payment, and adjusted for the relevant period. This relevant period is determined as the number of days from issue date on the payment term to the due date on the instalment, that is:

(Interest Rate Series + Spread) * Value * (Instalment Due Date - Payment Term Issue Date) / Basis

Example: If the invoice payment is due in 21 days, a fixed discount might be given if it is paid before this. However, a percentage of the due payment might be charged as a penalty if payment has not been received by the due date.

Payable Percentage Overrides

The payable percentage specified for a payment term can be overridden for selected dynamic invoice item types.