When referring to Accounts Receivable or Accounts Payable, terms relates to the time frame in which you expect to receive payment from a customer or your vendor expects to receive a payment from you.

Some terms even allow for a discount for early payment. A list of commonly used terms is automatically supplied when you create a new QuickBooks company file.

You can easily edit or add new terms to the list as necessary. To access the terms list, choose Customer & Vendor Profile Lists from the Lists menu. Then, choose Terms List. You can add, delete, edit or inactivate terms from the Terms button at the bottom of the list.

In QuickBooks, payment terms can be set up as Standard or Date Driven. Standard terms are those due within a specific number of days from the invoice or bill date. Date-driven terms are those that are due as of a specific day of the month. The following fields must be defined as part of the setup of each term:

Field

Description

Net Due

For standard terms, this is the number of days in which customer or vendor payments are due. For date-driven terms, this is the specific day of the month by which payment is due

Due the Next Month If Used only for date-driven terms to handle instances where invoices or bills are issued just prior to the due date. If the invoice or bill is issued within the number of days you enter, payment is not due until the following month.
Discount Percentage

This is the discount, entered as a percentage, that the customer or vendor is entitled for early payment, provided that payment is made within the specified time period.

Discount if Paid

For standard terms, this is the number of days within which a customer or vendor payment can be made in order for the discount to apply. For date-driven terms, this is the specific day of the month by which payment is required in order to apply the discount.

Once the terms list is set up, you can associate the terms to particular customers and vendors (on the Additional Info tab of the Customer/Vendor record). When you create an invoice to the customer, or enter a bill from the vendor, the associated terms and applicable due date will auto-fill on the form, based on the invoice/bill date and terms that you entered. If necessary, you can manually select the terms from the drop-down list as you create new transactions.

Also, be sure your aging preference is correctly defined!

On the Company Preference tab of the Reports & Graphs preferences, choose to age from the transaction or due date. The selection here will affect your aging reports, as well as the aging shown at the bottom of your customer statements.

By maintaining terms in QuickBooks, you will have accurate aging reports for your customers and vendors. In turn, you will be able to more effectively manage your cash flow!


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