Cash discounts in Vendor payment process

The vendor can propose offer incentives to encourage us to pay before the invoice due date. These discounts are called as early payment discounts (also known prompt payment discounts/cash discounts).

Benefits of Cash Discounts

Early payment discounts are beneficial for customers as well as for vendors.

Benefits for Vendors

Here’s how a vendor can benefit by offering early payment discounts:

  • Getting paid early.
  • Reducing the risk of non-payment or late payment.

Benefits for Customers

Although, the obvious one for customer is saving the customer money, there are couple more.

  • Save money again. The discounts add up over time to save you a significant amount of money, particularly if several of your suppliers offer the discounts.
  • Build strong relationships with vendors – The sooner you pay a vendor what you owe, the more likely that vendor will be to work with you in the future.

Let’s say that vendor give us a 0.5% cash discount if the invoice is paid within 10 days.

Look at the example below:

Imagine that our company bought some services or goods and received a $1,000 Net invoice. If we pay the invoice within 10 days of receiving it, we might be able to deduct 0.5%, or $5, from the payment. In other words, if we pay in 10 days or less, the invoice can be settled for $995 instead of $1,000. If we pay after 10 days, you must pay the full $1,000 amount.

And now let’s look at the settings in AX

Go to Account payable > Setup > Payment > Cash discounts


Create purchase order

Do not forget to specify Cash discount in the Purchase order header (Note: If you already specified Cash discounts on the vendor, then this field will be filled automatically)

purchase-order-with-cash-discountsConfirm the order by clicking Confirm button on the Action pane on the Purchase fast tab

Invoice the purchase order by clicking Invoice button on the Action pane on the Invoice fast tab

Check the due date of invoice

due-date-invoiceCreate payments in the payment journal (Account payable > Journals > Payment journal).

Go to the Payment journal line and click Payment proposal > Create payment proposal

vendor-payment-proposalVerify generated payment proposal

Invoice amount = 60$

0.5% discount

Cash discount = 60*0.5/100=0.3$

vendor-payment-proposal-with-cash-discountClick Transfer button

Payment line will be created. Payment will include invoice amount minus cash discount


If you go to the Settle open transaction form, you will see that created payment line settled with the invoice and Cash discount will be applied



If you go to the transaction form you will see that a new transaction was created with Transaction type = Cash discount



3 thoughts on “Cash discounts in Vendor payment process

  1. Hi Galyna,
    I just wanted to know, is there any possibility in AX to settle open invoices by taking discount out without going to CASH DISCOUNT tab in Settle Open transaction, its really a boring and wanted to get rid of this practice.


  2. Hi Ayaz Hassan,
    It’s absolutely unnecessary to go to Cash discount tab in the Settle transaction.
    1. If you payment date equal to cash discount date on your invoice, AX will take the discount automatically (It doesn’t matter how you selected the invoice, either through payment proposal or manual settlement).
    2. If you do not want to apply discount, just select Proposal type = Due date, and AX will automatically skip your invoice, because due date doesn’t become yet.
    3. If you always want to apply or do not apply Cash discount, you can use Use cash discount field (Never, Always) on vendor itself. AX will automatically apply (if it’s Always) or will not apply (if it’s Never) discount.
    As you can see none of steps above require going to Settle open transaction to Cash discount tab
    Best regards,


    1. Hi Galyna,

      Thanks for sharing such informative post. Actually we are using clearing control vendor account in which all our flooring vendor’s liability booked and then we move the liability to actual vendor account and here problem comes, we have debit and credit in that clearing control account and we have to manually settle these liabilities one by one and take the discount out by going to cash discount tab for each transaction. Is there any possible way that we can take discount off for all transaction in one go.


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