Terms, Discounts, and Handling Charges

Terms

In this section, terms always refers to terms of payment. Terms of payment consist of the percentage discount available for prompt payment and the number of days allowed before payment. Terms are entered in the Billto File, and can optionally be overridden on each order or invoice. They can also be entered for each manufacturer in the Product Line File, and automatically picked up by each line item on an order. In this case, if terms are overridden on the header of an order or invoice, they would override the line item terms for all items on that order.

Terms can be assigned by product line, price class, promo, or by customer. Terms assigned by customer in the Billto File override terms assigned in the product line, price class, or promo files. Entering terms code M in either the Billto File or on the Order/Invoice Header activates the Terms by Manufacturer option. This causes terms to be retrieved on a line item basis from the product line, price, and promo files.

Simple terms such as 2% 30 or 1% 45 are entered in the Terms - %, and Days fields in the Billto File, other master files, and on the Order Entry and Invoicing Header screens. The one-character Terms Code field, also found in master files and on Order/Invoice Header screens, relates to terms defined in your Payment Terms File on page 2 of the Accounting File Maintenance Menu. The Payment Terms File comes with a few predefined special purpose terms. You can also define your own terms codes. The Floor Plan system, which manages third-party financing arrangements, has its own set of terms, which are maintained in the Floor Plan Payment Terms File. Floor Plan files are accessed via page 2 of the Accounting Files Menu.

Terms Codes

Terms codes are generally user-defined within the Payment Terms File. However, the following three terms codes are system-defined.

Code	Description
1	Due on the 10th of next month, if invoiced on or before the 25th of current month, and due on the 10th of the second following month, if invoiced after the 25th of current month. You cab add a percentage discount to this code in the Payment Terms File.
2	Due on the 10th of the following month. You can add a percentage to this code to make it 2% 10th prox.
M	Terms are controlled separately by manufacturer. The terms used are those that are entered in the Product Line File. For each line item, the system checks the Product Line File for terms. The Product Line File terms can be further overridden by entries in the Price File and the Promotional Pricing File.

Codes l and 2 can be combined with a terms discount percentage to read X% if by 10th of following month. There are other special codings for terms such as cash, COD, and letter of credit.

Most order documents include the terms. Invoices include the available terms discount and the due dates. The Cash Application screens (AR Enter Cash Program) show the available discounts, terms code, and due dates for each invoice. If a single order contains items that have different terms, the invoicing system automatically splits the order into multiple invoices by terms.

Special terms codes might have been assigned to your system that supersede or add to the terms codes provided with the system. See your data processing department for listing of terms codes on your system.

By combining all of the terms features of the system, you can manage most payment terms schemes. Two overall payment terms methods are available:

You can assign terms in each Billto File record that apply to all products the customer buys.
You can assign terms in the Product Line File that apply to all customers except customers that have terms entered in their master file.

Hierarchy of Terms

The following explains the hierarchy of the terms system.

Terms entered in the Product Line File are the first level default terms.

Terms entered in the Price File override product line terms.
Terms entered in the Promotional Pricing File override price and product line terms. Terms can be entered as part of a promotional price record, or a promotional file record can be set up for terms only. For example, you can set up a promotion that gives a customer, or group of customers, special terms for an item class, a manufacturer, a product line, a price class, or an individual item.
Terms entered in the Billto File override all product line, price file, and any promotional file terms. Therefore, if you want to use the Price and/or Promotional Pricing File to set special terms, you should consider basing terms in the Product Line File, not the Billto File. However, if you have set terms by customer, then using the Billto File terms is by far the easiest to maintain.
Terms entered on the Header Screen of an order override all terms described above, for that order.
Terms entered on the Header or Detail Line screens of an invoice, during invoice entry, override all other terms.

Terms in Accounts Receivable

The Accounts Receivable system uses the payment terms to calculate due dates and payment terms discounts. Payment terms discounts can be automatically taken or manually adjusted when applying cash. Payment terms discounts can be analyzed using the Discounts Analysis Reports on the AR Reports Menu.

Discounts

Discount refers to a percentage discount applied to order or invoice pricing. Do not confuse discount with payment terms discount. The Billto File and the Order and Invoice Header screens have separate fields for handling charge or discount percentage. A discount is entered as a negative percentage. A handling charge is entered as a positive percentage. This discount applies to the prices of each line item. The discount can be applied to line item unit pricing, with the L code, or can show separately at the bottom of the invoice. Discounts and handling charges can be assigned permanently to a customerâ€™s account, or entered or overridden on an order or invoice.

To enter a 10% discount, you would enter 01000- (assumes two decimals) in the Extra Charge/Discount% field. You can enter 10000- (100% discount) for free samples or a no-charge sale. When using discounts or handling charges, we recommend that you specify the L code, to apply discount to unit prices at the item level. This method keeps your profit by item statistics more accurate. The price and gross profit of each line item is affected. A discount applied with the S code is a separate deduction, which affects the overall profit of the order, but not the line items. Discounts applied with the S code are accounted for in the separate column labelled Discounts and Handling Charges on the Invoice Register and General Ledger Sales Reports. You can also enter a miscellaneous discount by using the Order Entry Miscellaneous Billing Screen, accessed via F6, and entering a description and a negative dollar amount.

Handling Charges

The five types of handling charges are:

You can enter a handling charge percentage, which increases billing, using the method described in Discounts. An example of this would be an intercompany account or employee sales account that is assigned a price list SC, standard cost, plus a 10% handling charge. This setup would always charge the account standard cost plus 10%. Similar to discounts, these handling charges are entered by percentage in the Billto File or on the Order Header Screen, and can be applied at the line item level or shown separately at the bottom of an order or invoice.
You can use the Order Entry Miscellaneous Billing Screen, accessed via F6, to enter miscellaneous charges by entering a description and a dollar amount.
You can also assess a restocking charge while entering a credit memo. See Credit Memos, Claims, Returns, and Refunds for more information.
You can use the Item Fileâ€™s minimum quantity charges feature. This feature allows you to charge a broken carton charge, handling charge, cut charge, packing charge, or below minimum charge for items purchased beneath a specified minimum quantity.
You can use the Minimum Order Charges File to add a handling charge for orders or shipments that fall below specified parameter levels.

The Monthly Invoice Register, which can be printed for any time span, and Daily Invoice Register lists handling charges, discounts, and tax in their own columns.

Associated Files