Early Pay Discounts

Contents

Overview

An Early Pay Discount allows you to offer customers a percentage-based discount when they pay an invoice a specified number of days before the invoice due date.

The system automatically:

• Validates eligibility at the time of payment
• Generates a Credit when criteria are met
• Creates a separate Journal Entry for the discount
• Clears the remaining Accounts Receivable balance

Key Characteristics

• Must be enabled before configuration
• Configured at the Payment Term level
• Applies only when an invoice is fully paid
• Excluded for negative invoices

Before You Begin

Ensure the following prerequisites are met:

• Early Pay Discounts are enabled in Invoice Settings
• A Default Product is available
• A Default GL Account is available
• The invoice has a positive balance

Enable Early Pay Discounts

Early Pay Discounts must be enabled globally before they can be configured in a Payment Term.

Steps

1. In the left navigation menu, click Setup → Settings. The Settings page is displayed.
   
2. In the Invoice Settings section, enable Early Pay Discounts toggle.
3. Click Save. 

Configure Default GL Accounts for Early Pay Discounts

A designated GL account is required to record the accounting impact when a discount is applied.

The GL account is configured:

1. In the left navigation menu, click Setup → Finance. The Finance Setup page is displayed.
2. On the Default GL Accounts section, locate Early Pay Discounts.
3. Select the GL account that should be used when an Early Pay Discount Credit is generated.

Accounting Impact

When an Early Pay Discount is applied:

• A Credit is generated.
• A Journal Entry is created from that Credit.

The Journal Entry posts as follows:

Result

• Accounts Receivable decreases.
• The configured GL account records the discount.
• The original Invoice Journal Entry is not modified.

Configure Early Pay Discount in a Payment Term

Early Pay Discounts are configured at the Payment Term level.  Any invoice associated with that Payment Term becomes eligible for the configured discount. 

Steps

1. In the left navigation menu, click Setup → Billing → Payment Terms. The Payment Terms page is displayed.
   
2. Click ADD or EDIT.
   
3. The Payment Term Summary dialog box is displayed.
   

Payment Term Configuration Fields

Payment Terms define when invoice payments are due. These fields allow you to configure due date rules, payment timelines, and optional early payment discounts.

Payment Term Name (Required)

• Enter a name for the Payment Term: This name will be available when assigning Payment Terms to customers or invoices.

Due Date (Required)

Defines when the invoice becomes due. 

Two configuration options are available: 

• Option 1 — Number of Days from Invoice Date, Example: 30 days from Invoice Date
  • Invoice Date: April 1
  • Due Date: May 1
• Option 2 — Specific Day of the following Month, Example:
  • Invoice Date: April 10
  • Due Date: May 15

Status

Controls whether the Payment Term is Active or Inactive. 

Enable Early Pay Discount

• Enable Early Pay Discount toggle.
  

Early Pay Discount Configuration Fields

These fields define the rules and accounting settings for applying a discount when an invoice is paid before the due date. They determine the discount eligibility period, discount percentage, invoice display label, and the GL account and product used when the discount is applied.

Discount Term (Required)

Field: Payment made ___ days before invoice due date

Defines how many days before the Due Date payment must be made to qualify.

Example

• Due Date: March 15
• Discount Term: 10
• Payment must be made on or before March 5

Discount Amount (%) (Required)

Defines the percentage discount applied when eligibility conditions are met.

Validation Rules

• Must be a positive number
• Must be less than or equal to 100
• Negative values are not allowed

Error message: Early Pay Discount amount must be less than or equal to 100%

System Behavior

• Applied to Invoice Subtotal
• Sales Tax is recalculated
• Discount amount is subtracted from Invoice Total

Invoice Display Name (Required)

Defines the label shown on:

• Invoice page
• Invoice PDF
• Customer Portal

Example: 2% Early Payment Discount

Error message: Invoice Display Name must be entered for Early Pay Discount

Default Credit Account (Required)

Defines the GL Account used when the Early Pay Discount Credit is generated. If a Default GL Account has been configured under:

• Setup → Finance → Default GL Accounts

The value auto-populates here but can be overridden.

Error message: A Default Credit Account must be selected for Early Pay Discounts

Default Product (Required)

Defines the Product used in the Credit Line when the system generates the Early Pay Discount Credit.

The generated Credit will contain:

• One line item
• Quantity = 1
• Price = Early Pay Discount amount
• Non-taxable by default

Error message: A Default Product must be selected for Early Pay Discounts.

Example Scenario

If customer pays on Jan 20:

• Discount Applied: $20
• Customer Pays: $980
• Credit Note Created: $20

Save when finished. The “Payment term successfully updated” success message confirms the payment term has been updated

How Early Pay works?

The Early Pay Discount is applied at the time of payment — not at invoice creation. 

The system checks:

1. Was payment made within the configured Discount Term?
2. Is the invoice fully paid after applying payment?

If both conditions are met:

• A Credit is generated
• A Journal Entry is created for the Credit
• The remaining Accounts Receivable balance is cleared

Limitations

• Partial payments do not qualify.
• The feature must be enabled at the time of invoicing.
• Existing invoices are not retroactively impacted.
• Negative invoices are excluded.
• Early Pay Discounts do not impact AR Aging.

Related Topics

• Payment Terms – Ordway Support Portal
• Default GL Accounts – Ordway Support Portal