Payment terms define when an invoice is due and whether an early payment discount applies. Payment methods define how a payment is made, bank transfer, check, cash, or similar, and optionally specify a balancing account to post against automatically.
Both are set up centrally and then assigned to individual customers and vendors. Once assigned, they populate automatically on sales and purchase documents.
Set Up Payment Terms
- Search for Payment Terms using
Alt + Q. - Select New.
- Fill in the following fields:
| Field | Description |
|---|---|
| Code | A short identifier, e.g. NET30, 2/10NET30, COD |
| Description | A readable explanation of the terms |
| Due Date Calculation | A date formula that calculates the due date from the document date |
| Discount Date Calculation | A date formula for the last day a discount applies (leave blank if no discount) |
| Discount % | The discount percentage if payment is made within the discount period |
Date Formula Examples
Business Central uses date formulas like 30D (30 days), 1M (1 month), or 10D (10 days). These are entered directly in the Due Date Calculation and Discount Date Calculation fields.
Example Payment Terms
| Code | Description | Due Date Calculation | Discount Date Calc. | Discount % |
|---|---|---|---|---|
| NET30 | Net 30 days | 30D | 0 | |
| NET60 | Net 60 days | 60D | 0 | |
| 2/10NET30 | 2% if paid in 10 days, net 30 | 30D | 10D | 2 |
| COD | Cash on delivery | 0D | 0 | |
| PREPAID | Payment in advance | -1D | 0 |
For 2/10NET30: if a customer pays within 10 days of the invoice date, they can deduct 2%. Otherwise the full amount is due in 30 days.
Set Up Payment Methods
Payment methods are used to categorize how a payment is received or made, and optionally to post directly to a bank or cash account.
- Search for Payment Methods using
Alt + Q. - Select New.
- Fill in the fields:
| Field | Description |
|---|---|
| Code | E.g. BANK, CHECK, CASH, CARD |
| Description | A readable label |
| Bal. Account Type | The type of account to offset against, typically Bank Account or G/L Account |
| Bal. Account No. | The specific bank or G/L account to post the balancing entry to |
If Bal. Account No. is left blank, the payment method is informational only and does not generate an automatic balancing entry.
Assign Payment Terms and Payment Methods to Customers
- Open the Customer Card for the relevant customer.
- Navigate to the Payments tab.
- Set the Payment Terms Code field to the appropriate code.
- Set the Payment Method Code field if you want a default payment method for this customer.
When a sales order or invoice is created for this customer, both codes will populate automatically from the card. They can be changed on the individual document if needed.
Assign Payment Terms and Payment Methods to Vendors
- Open the Vendor Card for the relevant vendor.
- Navigate to the Payments tab.
- Set the Payment Terms Code and Payment Method Code fields.
The same logic applies: the values default onto purchase documents and can be overridden per document.
If you need to configure finance charges for customers who pay late, see How to Set Up Finance Charge Terms in Business Central.