Use this topic for an overview of invoice discounts and their role in reducing outstanding invoice balances.

Invoice Discounts are invoice-level adjustments used when the payment is less than the invoice amount because the customer is allowed to deduct an amount from the invoice. Unlike bank charges, invoice discounts reduce the invoice outstanding amount. This covers

• Early payment discounts

• Trade discounts

• VMS fees

• TDS / withholding tax

• Customer deductions

• Contractual deductions

• Invoice-level short payments

Use Invoice Discounts when:

• The deduction belongs to the invoice.

• The invoice should be closed after reducing the invoice outstanding amount.

• The deduction is based on invoice value.

• The deduction is agreed, expected, or valid based on business rules.

Example: Standard invoice discount:

Lets take a standard invoice discount configuration that follows the following scenario. A Trade Credit / Early payment discount when the customer is allowed to deduct a discount for paying within a specific period. The qualifying period and the discount percentage is different for every customer and is specifically recorded and used. Example, if a customer has the configuration of 2/10 Net 30, this means,

1. Customer gets a 2% discount on Invoice Payment.

2. The discount is valid if the payment is made within 10 days.

3. Invoice is otherwise due in 30 days.