Recording settlement discounts on sales

For all sales transactions which haven't been fully paid, the VAT is now calculated at the full value of the invoice. When a customer pays within the settlement period, you will need to enter adjustments to account for the VAT discount taken by the customer.

Invoices and orders

Record sales invoices

When you record the details of an invoice in Sage 200 that has been produced elsewhere, the details you record must match the details printed on the invoice and sent to the customer.

Free text invoices

The settlement discount percentage is entered on the invoice. Sage 200 calculates the VAT for the full amount of the invoice, before settlement discount is applied. When the invoice is printed, the amount of discount (net and VAT) that can be claimed if the invoice is paid early, as well as the full amount (net and VAT) due after the settlement discount period is stated on the invoice. This means that there is no need to issue an additional VAT only credit note, if the customer pays within the discount period. However, internal VAT adjustments will be required.

Sales orders and project bills

When invoices are produced from Sage 200, if you're using sales orders or project bills, each invoice states the amount of discount (net and VAT) that can be claimed if the invoice is paid early, as well as the full amount (net and VAT) due after the settlement discount period. This means that there is no need to issue an additional VAT only invoice, if the customer pays within the discount period. However, internal VAT adjustments will be required.

When creating sales order and project bills, you enter the amount of settlement discount on the Delivery and Invoicing tab of the order or bill. When the invoice is printed, Sage 200 calculates the VAT for the full amount before settlement discount is applied, and adds the required text to the invoice.

Receipts

Before you can process a receipt for a customer offered a settlement discount, we recommend that you establish whether the money you've received represents the full payment with no settlement discount, full payment with a discount or a part payment.

If the customer has taken the discount, you'll need to record the receipt plus the net discount amount. This makes sure that the net discount is posted to the Discounts Allowed nominal account.

Enter adjustments to account for the VAT discounts

Once you've entered and allocated payments received from customers taking settlement discounts, the discounted VAT amount will remain outstanding on the customer's account and the full VAT amount will be recorded on your VAT return.

To make sure the VAT is recorded correctly on your VAT return and to clear the outstanding balance on your customer's account, you'll need to process a credit note for the remaining VAT discounts.

How you record these VAT adjustments depends on the business processes you want to use. You may want to process them per invoice or enter a number of adjustments as one transaction for a customer.

We recommend that you process these adjustments before any credit control activities.

  1. Use the Customer Current Transaction Enquiry workspace to find the transactions that require adjustments for each customer.

     

  2. Enter a credit note for the discounted VAT amount. You can do this for individual transactions or as a single transaction for a customer. This makes sure that the VAT is reported correctly on your VAT return.

  3. Allocate the credit note to the remaining balance on the invoice(s).

Other things to consider

Example

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