discount for early invoice payment

[Geert Janssens]

Hi Chris,

On Saturday 29 August 2015 12:32:30 Chris Good wrote:
> Hi,
> 
> 
> 
> I'm updating GnuCash Guide for billing terms & sales tax tables, and I
> thought I'd update the section on account setup to include a tax
> account and discount account.
> 
> 
> 
> Anyone know where Geert's document on how to fix up payment problems
> is?
> 
Do you mean this one:

http://wiki.gnucash.org/wiki/Correcting_Business_Transaction_Mistakes
> 
> 
> How do we cater for a customer invoice early payment discount?
> 
> I see that Billing Terms does calculate invoice due date but
> calculation of early payment discount is not yet implemented.
> 
I don't think it is indeed.
> 
> 
> I thought it could possibly be done by doing a credit note and
> selecting the transfer account as Expenses:Discount but it is not
> possible to select an Expense account.
> 
That's indeed not possible.

(Serious IANAA warning for what follows...)

Is a customer payment discount really an expense ? I would consider it a reduction of income 
(you receive less than you planned but you didn't spend money on something for that). So I 
would think you could create a separate income account for it and book applied customer 
discounts there. That account would only decrease over time instead of increase like your 
regular income accounts.

This you could do via a credit note if you wish. However again as I understand it, a customer 
discount is a payment condition on the original invoice. So a credit note is not really the proper 
counter for it (at least it's not in my jurisdiction).

Most other accounting programs I have used deal with this when processing the payments:
The payment of the reduced amount would go to the bank account and the remainder would 
be booked as a negative income to balance the invoice total.

Unfortunately this is not possible either in GnuCash by using the Process Payment window. So I 
suppose the way to deal with this is to
1. Pay the invoice in full
2. Manually edit the payment transaction (ugh) and split the payment into the reduce payment 
and a compensating split in some income account.

My 2c.

Regards,

Geert