What is payment terms and How it works | Step by Step Screenshot
By Jag - October 18, 2014
What is payment terms Oracle apps r2 and How it works | Exmple Step by Step Screenshot
Payables Manager –> Setup –> Invoice –> Payment Terms
Payments Terms are assigned to an Invoice to automatically create scheduled payment when Payables Invoice Validation is submitted for the Invoice
You can define payment terms to create multiple scheduled payment lines and multiple levels of discounts. You can create an unlimited number of payment terms.
Payment terms have one or more payment terms lines, each of which creates one scheduled payment. Each payment terms line and each corresponding scheduled payment has a due date or a discount date based on one of the following:
- a specific day of a month, such as the 15th of the month
- a specific date, for example, March 15, 2002
- a number of days added to your terms date, such as 14 days after the terms date
- a special calendar that specifies a due date for the period that includes the invoice terms date. Only due dates can be based on a special calendar. Discount dates cannot be based on a special calendar.
Payment Terms
Define Payment Terms
- Enter Unique payment term name and description.
- If you enter Day of Month terms, enter a Cut-off Day.
- If you enable Automatic Interest Calculation using the Interest Payables Options, enter a unique value in the Rank field.
- Enter each payment terms line.
Enter % due or Amount to determine the portion of an invoice due on the scheduled payment.
In the Due tab, choose between Calendar, Fixed Date, Days and Day of Month and Months Ahead to determine the due date.
- If you use discount terms, define payment terms lines in the First Discount , Second Discount, and Third Discount tabs. Define your discounts so that the first discount has an earlier discount date than the second and so on. You can realize only one discount on a payment terms line.
Note: You cannot use a special calendar to define discount terms.
(Document based on Oracle Window Help)
How the Payment Logic works
The Payment Terms defined works on three basic fields on which you have entered/defined information.
The below combinations along with Invoice date defaults your Invoice Due Date.
In the Define Payment terms screen
Method 1)
---------
Invoice Date and No of Days entered in Payment term Days field
a)Days
Say, Invoice date is 28-Nov-2001 then if you enter 60 days then due date will
be 27-Jan-2001. It means it calculates no of days from the Invoice date.
Method 2)
---------
Invoice Date + Cut Off day + Day of month with Months ahead.
1) Cut-off Day
2) Day of Month with Months ahead
For example :
If you enter Payment Terms like this:
Cut of day 31 (Last day of a Month) Means even though invoice is 28th 1st what so ever, it calculates from the last day of month.
Day of a month 29
Months ahead 2 ( Two Months)
If invoice is dated 28-Nov-2001, with the above setup you get Due date as 29-Jan-2001 as due date.
It will always calculate from the End of Nov ie 30th Nov and Then it takes Two Months here it gives you always 29th of Second month from Invoice date.
ie
Invoice Date Due Date
28-Nov-2001 29-Jan-2002
28-Dec-2001 28-Feb-2002
28-Jan-2002 29-Mar-2002
So on and so forth.
Either you give 29th or 30th what so ever, once you give the Day of Month you will get only that day as due date after Months specified in the Months ahead field.
This is how application works and desinged to work.
Please refer documentation for the following terms
Cutoff Day.
Days.
Day of Month
Months Ahead.
Further,
In case, you have two invoice payment terms which you are not able to define in AP and the due dates are not defaulting as expected;
The two terms are:-
(1) 60 DAYS END OF MONTH go to month end and add 60 days
E.G: invoice dated 28 NOV, due date is 29 JAN
(2) 90 DAYS END OF MONTH go to month end and add 90 days
E.G: invoice dated 28 NOV, due date is 28 FEB
How would you define these?
The Payment Terms functionality does not support the above example
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