Payment Tolerance and Payment Discount Tolerance

You can set up a payment tolerance to close an invoice when the payment does not fully cover the amount on the invoice. You can set up a payment discount tolerance to grant a payment discount after the payment discount date has passed.

You can use payment tolerances so that every outstanding amount has a set maximum allowed payment tolerance. If the payment tolerance is met, then the payment amount is analyzed. If the payment amount is an underpayment, then the outstanding amount is fully closed by the underpayment. A detailed ledger entry is posted to the payment entry so that no remaining amount is left on the applied invoice entry. If the payment amount is an overpayment, then a new detailed ledger entry is posted to the payment entry so that no remaining amount is left on the payment entry.

You can use payment discount tolerances so that if you accept a payment discount after the payment discount date, then it is always posted to either the payment discount account or a payment tolerance account.

Applying Payment Tolerance to Multiple Documents

A single document has the same payment tolerance whether it is applied on its own or with other documents. Acceptance of a late payment discount when you are applying payment tolerance to multiple documents automatically occurs for each document where the following rule is true:

payment discount date < payment date on the selected entry <= payment tolerance date

This rule also applies to determine whether to display warnings when you apply payment tolerance to multiple documents. The payment discount tolerance warning is displayed for each entry that meets the date criteria. For more information, see the "Example 2 - Tolerance Calculations for Multiple Documents" section.

You can choose to display a warning that is based on different tolerance situations.

• The first warning is for the payment discount tolerance. You are informed that you can accept a late payment discount. You can then choose whether to accept tolerance on the discount date.
• The second warning is for the payment tolerance. You are informed that all entries can be closed because the difference is in the sum of the maximum payment tolerance for the applied entries. You can then choose whether to accept tolerance on the payment amount.

For more information, see the "To enable or disable payment tolerance warning" section.

To set up tolerances

Tolerance on days and amounts allows you to close an invoice even though the payment does not fully cover the amount on the invoice, whether this is because the due date for the payment discount has been exceeded, goods have been deducted or because of a minor error. This also applies to refunds and credit memos.

To set up tolerance you have to set up various tolerance accounts, specify both payment discount tolerance and payment tolerance posting methods and then run the Change Payment Tolerance batch job.

1. Choose the icon, enter General Posting Setup, and then choose the related link.
2. In the General Posting Setup window, set up a debit and a credit sales payment tolerance account and a debit and a credit purchase payment tolerance account.
3. Choose the icon, enter Customer Posting Groups, and then choose the related link.
4. In the Customer Posting Groups window, set up a debit and a credit payment tolerance account. For more information, see Setting Up Posting Groups.
5. Choose the icon, enter Vendor Posting Setup, and then choose the related link.
6. In the Vendor Posting Groups window, set up a debit and a credit payment tolerance account.
7. Choose the icon, enter General Ledger Setup, and then choose the related link.
8. Open the General Ledger Setup window.
9. On the Application FastTab, fill in the Pmt. Disc. Tolerance Posting, Payment Discount Grace Period and Payment Tolerance Posting fields.
10. Choose the Change Payment Tolerance action.
11. In the Change Payment Tolerance window, fill in the Payment Tolerance % and Max Payment Tolerance Amount fields, and then choose the OK button.

To enable or disable payment tolerance warnings

The payment tolerance warning appears when you post an application that has a balance in the allowed tolerance. You can then choose how you want to post and document the balance.

1. Choose the icon, enter General Ledger Setup, and then choose the related link.
2. In the General Ledger Setup window, on the Application FastTab, select the Payment Tolerance Warning check box to activate the warning. To deactivate the warning, clear the check box.

To block payment tolerance for customers

The default setting for payment tolerance is allowed. To disallow a certain customer or vendor payment tolerance you need to block tolerance on the respective customer or vendor card. The following describes how to do it for a customer. The steps are similar for a vendor.

1. Choose the icon, enter Customer or Vendor, and then choose the related link.
2. On the Payments FastTab, select the Block Payment Tolerance check box.

Example 1 - Tolerance Calculations for a Single Document

The following are some example scenarios showing the expected tolerance calculations and postings occurring in different situations.

The G/L Setup window contains the following setup:

• Payment Discount Grace Period: 5D
• Max Payment Tolerance: 5

Scenarios with alternative A or B represent the following:

• A In this case, the payment discount tolerance warning has been turned off OR the user has the warning on and has selected to allow the late payment discount (Post the Balance as Payment Tolerance).
• B In this case, the user has the warning on and has selected not to allow the late payment discount (Leave the Balance as Remaining Amount).

Payment Range Diagrams

In relation to the scenario above, the diagrams of payment ranges are as follows:

(1) Payment Date <=01/15/03 (Scenarios 1-3)

Remaining Amount per

Normal Application Rules

(1) If payment falls in these ranges, all application entries can be closed with or without tolerance.

(2) If payment falls in these ranges, all application entries cannot be closed even with tolerance.

(2) Payment Date is between 01/16/03 and 01/20/03 (Scenarios 4-9)

Remaining Amount per

Normal Application Rules

(1) If payment falls in these ranges, all application entries can be closed with or without tolerance.

(2) If payment falls in these ranges, all application entries cannot be closed even with tolerance.

(3) Payment Date is after 01/20/03 (Scenarios 10-15)

Remaining Amount per

Normal Application Rules

(1) If payment falls in these ranges, all application entries can be closed with or without tolerance.

(2) If payment falls in these ranges, all application entries cannot be closed even with tolerance.

Example 2 - Tolerance Calculations for Multiple Documents

The following are some example scenarios showing the expected tolerance calculations and postings occurring in different situations. The examples are limited to being only those scenarios that result in all entries in the application being closed.

The G/L Setup window contains the following setup:

• Payment Discount Grace Period 5D
• Max Payment Tolerance 5

Scenarios with alternative A, B, C, or D represent the following:

• A In this case the payment discount tolerance warning has been turned off, OR the user has the warning on and has selected to allow the late payment discount (Post as Tolerance) in any invoice.
• B In this case, the user has the warning on and has selected not to allow the late payment discount on any invoice.
• C - In this case, the user has the warning on and has selected to allow the late payment discount on the first invoice but not the second.
• D - In this case, the user has the warning on and has selected not to allow the late payment discount on the first invoice but allowed it on the second.

Payment Range Diagrams

In relation to the scenario above, the diagrams of payment ranges are as follows:

(1) Payment Date <=01/15/03 (Scenarios 1-3)

Remaining Amount per

Normal Application Rules

(1) If payment falls in these ranges, all application entries can be closed with or without tolerance.

(2) If payment falls in these ranges, all application entries cannot be closed even with tolerance.

(2) Payment Date is between 01/16/03 and 01/17/03 (Scenarios 4-9)

Remaining Amount per

Normal Application Rules

(1) If payment falls in these ranges, all application entries can be closed with or without tolerance.

(2) If payment falls in these ranges, all application entries cannot be closed even with tolerance.

(3) Payment Date is between 01/18/03 and 01/20/03 (Scenarios 10-21)

Remaining Amount per

Normal Application Rules

(1) If payment falls in these ranges, all application entries can be closed with or without tolerance.

(2) If payment falls in these ranges, all application entries cannot be closed even with tolerance.

(4) Payment Date is between 01/21/03 and 01/22/03 (Scenarios 22-27)

Remaining Amount per

Normal Application Rules

(1) If payment falls in these ranges, all application entries can be closed with or without tolerance.

(2) If payment falls in these ranges, all application entries cannot be closed even with tolerance.

(5) Payment Date is after 01/22/03 (Scenarios 28-30)

Remaining Amount per

Normal Application Rules

(1) If payment falls in these ranges, all application entries can be closed with or without tolerance.

(2) If payment falls in these ranges, all application entries cannot be closed even with tolerance.

See Also

Finance
Setting Up Finance
Managing Receivables
Working with Dynamics NAV

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