Here's one for you. A debtor deducts 3% if it pays your sales invoice within 120 days. When you then raise the c/n for this discount on your ledger, do you work out the VAT on this portion. I would but just want to make sure. This is not our terms but the terms that the debtor has adopted, which we have to abide by. Obviously this will be a cost posted to the P&L.
Thanks guys, wow, Guru status at last!!! Yippee.....
Bill
I thought about that, as obviously the VAT would be calculated on the lower amount etc etc, but I have not seen the terms and it's not possible to do that on the system that is used.....but its the debtor who decides how much to pay and one person said it was 3%, another said it was 3.5% and when working it out, it never does, so i just wait and c/n the difference!
When you are offering (or having imposed on you!) a settlement discount you must calculate the VAT on the entire invoice as though the discount was being taken. It doesn't actually matter whether they take it or not you still have to work it out as though they had.
I agree that the original invoice should have VAT based on the discounted figure irrespective of whether or not the customer avails themselves of the discount. There should also be a note on the invoice stating if invoice is settled within 120 days a 3% discount is allowable (or words to that effect).
Already look after the whole back office function! We only found out about the discount they apply from our credit controlling.....bit backward but thats the education we need to implement....
Steve
They are a new customer but are spending their money big time!!
If you already charging them for that than it's great!!! At the end of the day there is nothing wrong with these sort of things, they just make more work and more money for us!
but yes you calculate the vat on the reduced amount regardless of whether the discount is taken.
