Discount Date Calc. > Due Date Calc. in Payment Terms

mart1n0

A customer changed its Payment Terms setup and has a Discount Date Calculation greater then the Due Date Calculation.
E.g. "10D" as the Due Date Calculation and "17D" as the Discount Date Calculation.

I personally think this is a very bad idea, I just wanted to know if anyone can tell me when a setup like this makes sense.

The customer says they know what they are doing and that they do it because if he pays after e.g. 11 days they still want to give him e.g. 2% Payment Discount. I would appreciate your opinion, or comments why I should or should not convince them to do this.

I discovered it since there detailed payment terms on the invoice gave that they got a xxx.xx EUR discount on a date later then the due date printed on the line just above it. Which looks pretty stupid, so they just asked me to hide the second line if this is the case instead of fixing it.

Savatage

for us if the customer pays past the discount date BUT we are still allowing them to take the discount we just manually change the discount date with a "T" and then apply the payment.

AdamRoue

Essentially the terms offered are taking into account a standard slippage, the old adage of terms of 20 days pays in 45 springs to mind. So they are saying you must pay in 10, but we offer discount up to 17. Strange, and to be honest I would not offer this, only offer discount to 10, otherwise the customer will always pay in 17, why not? Of course they may also have a payment date 17 days and the client receives the cheque a few days later, and it clears even later, so you get the money after 25 days, on terms of 10 days and they still get discount! The customer has all the power here, and the client is not strong enough to enforce the terms and discount. That said I once did an implementation where the MD told me the business did not offer early settlement discount, however customers always took it and the clerks always posted it to "suspense" - the £500K in suspense was always "written off" at year end :-)

idiot

IIMHO there's no reason for a NAV consultant to question why a company operates in a particular way (unless you're engaged as a BPR consultant as well). It doesn't matter to me if the company makes losses every FY as long as they pay what they owe to me.
Bearing in mind that this is a NAV consultant & not a BPR consultant, this is an example of a cause of budgets overruns...
If the client understands the concept (in this case what is a Payment Discount) & still wants it their way, the questions I would ask would be:
1. Can the system handle?
2. Any legal/stability implications?
3. How much to charge?