[How to] Configure Cash Discounts and Process automatic posting

Dear Dynamics 365 Lovers,

In this blog we shall talk about the ‘Cash Discounts’ functionality in D365 FO and how to configure and process cash discount transactions

What Is a Cash Discount?

Cash discounts refer to an incentive that a seller offers to a buyer in return for paying a bill before the scheduled due date.

Business Scenario

Company has a deal with a particular supplier to get cash discounts if we pay the amount by the following days and the percentage is agreed below.

If paid within 5 days, company will give 5%

If paid within 2 days, company will give 2%

Configurations

Cash discounts are setup and shared for Accounts payable and Accounts receivable, means in any of the below form setup can be done and can used for both, customer and vendor.

Accounts Payable-> Payment Setup-> Cash Discounts

Accounts Receivable-> Payment Setup-> Cash Discounts

Create Cash discounts Codes 2% and 5% as per the requirement

Create 2% like below

IMPORTANT-

• it is recommended to keep the cash discounts main account separate for AP and AR,
• The main setup works as per the "Discount principle" described below.

Create 5% Cash Discounts like below

Now we shall add the Next Discount Code 

Next Discount code- We can add series of discount codes as per the requirement

In our case, the next discount code is 2% when the 5% is not met/ paid between 5 days, then system will look for the next discount code.

Assign Cash Discount to vendor

Now we shall assign the cash discount to the vendor- Accounts Payable- Vendor- All Vendors

Go to payment section and add "Cash Discount" code, in our case, we shall add 5% code, system will find out if the 2% eligible or not based on the payment day.

The Configurations are done 

Processing Transactions 

Let’s process transactions and check how this works

We have created two AP journal with the below date and expected cash discounts to be received

 Lets look into the payment journal for 2nd Feb 2021, this is eligible for 5% discounts, as per the above table, because paid on 5th Feb (by 5 days)

See below, the 5% discount/ 25 amount  is deducted automatically by system based on the setup we have done.

 Lets look into the payment journal for 29th Jan 2021, this is eligible for 2% discounts, as per the above table, because paid on 5th Feb (by 10 days)

See below, the 2% discount/10 amount  is deducted automatically by the system based on the setup we have done.

 Reviewing transactions

If we want to see the transactions, then it will show us the separate auto transactions of cash discounts, see below.

This is it, I think this will be useful for your setup and review the cash discounts factuality to understand the basics.

Stay tuned for more articles like this.