Differences of Various Payment Types

Differences of Various Payment Types

In this guide, we will explore the different payment types available in the system. Each payment type functions differently to accommodate various business needs and payment terms. Below is a breakdown of the key payment types:

1. Cash

• Description: The cash payment type represents immediate payment with no delay. When this payment type is selected, the invoice is instantly considered paid and closed as soon as it is created.
• How it works:
  • The cash account is updated immediately.
  • All related sales transactions, including General Ledger (GL) entries, are processed and recorded.
  • There is no pending balance on the invoice, and the system reflects it as closed.

2. Prepayment

• Description: Prepayment is similar to cash, but the payment status remains open until the user specifies a due date. The invoice is not automatically closed upon creation.
• How it works:
  • The user can set a due date manually during invoice creation.
  • This payment type offers flexibility by allowing the user to define any desired payment due date.
  • The invoice remains open until the due date arrives, and it is paid manually.

3. After Number of Days

• Description: This payment type allows the user to set a due date based on a specific number of days from the invoice creation date. Common examples include terms like "30 days Net."
• How it works:
  • The user can create a payment term with a description (e.g., "30 days Net") and specify the number of days in the field labeled “Days (Or Day In Following Month).”
  • The system automatically calculates the due date by adding the specified number of days to the invoice date.
  • The invoice remains open until the payment is received within the calculated timeframe.
  • This type is ideal for setting consistent payment terms for customers.

4. Day in Following Month

• Description: This payment type works similarly to "After Number of Days" but calculates the due date based on the next month. Instead of counting days from the invoice date, the due date is set on a specific day of the following month.
• How it works:
  • The user enters a specific day (e.g., "15") in the “Days (Or Day In Following Month)” field.
  • The system then calculates the due date as the entered day of the next calendar month. For instance, if "15" is entered, the payment will be due on the 15th of the following month, regardless of the current month’s invoice date.
  • This payment type provides flexibility for businesses that prefer fixed monthly due dates.

Customizing Payment Types

The system allows users to create as many payment types as needed to meet the specific requirements of their business. By configuring various payment terms, users can maintain flexibility in managing their customers’ payment schedules.

• Customization Options:
  • Create new payment types with custom descriptions.
  • Configure the number of days or the specific day of the following month for each payment type.
  • Each payment type can be tailored to match the business’s sales terms.

Summary

• Cash: Instant payment, invoice is immediately closed.
• Prepayment: User sets a due date, and the invoice remains open until manually closed.
• After Number of Days: Due date is calculated based on a specific number of days from invoice creation.
• Day in Following Month: Due date is set to a specific day in the next month.

Business owners can optimize their invoicing processes and offer more flexible terms to customers.