Often when purchasing a piece of equipment there are installment terms within the contract. These can range from a simple "4 easy payments" like model to a more phased payment approach for larger projects. In this article, we will look at how to setup payment terms to handle these types of situations.
Setup & Configuration
- Navigate to Administration -> Setup -> Business Partners -> Payment Terms
- From within the Payment Terms window, create a new Payment Term Code. In this example, we will use "4 Easy Payments".
- Now define the Start From criteria. This start date determines when the first payment is due, most often, this is 30 days from when the invoice is created.
- Note: You may also set a start date to as a number of days from month end, month start, half month by selecting the option from the drop down menu. For example, if you have a payment that is due 5 days following month end, you can select Month End from the drop down menu, then + 5 days.
- Next, click on the golden link arrow () on the No. of Installments row to open the Installments window.
- Within the Installments window, you will define the number of payments necessary as the No. of Installments, we will use 4 payments in this example.
- The Credit Method specified is how the system will create a credit memo if its created against the invoice should the credit memo not be for the full amount of the invoice.
- First Installment - The credit memo amount will be applied to the first installment, then the second, etc.
- Last Installment - The credit memo amount will be applied to the last installment, then the second to last, etc.
- Equally - The credit memo amount will be applied equally across each installment according to the % defined.
- Taxes can be applied to the first installment only, or updated proportionally according to the percentage of each payment. The later is the most common scenario.
- Next, specific the installment due dates. These are based on the total amount of month & days for each row starting from the invoice due date. If you want the first installment due date to be the same as the invoice due date enter 0 in the month & days fields.
- Lastly, enter the percentage amount for each installment payments, this percent of the overall invoice amount that you will pay. In our example, we have a payment due every month at differing amounts.
- Once you finished, press the Update button to be taken back to the Payment Terms setup window, then press the Add button to create the new payment term.
- Lastly, apply this payment term to your vendor by navigating to the Business Partner Master Data for the applicable vendor, selecting the Payment Terms tab, and then choosing the new payment terms from the drop down menu.