If you have maintained a key for the terms of payment in the vendor master record, the system automatically defaults this key whenever you enter an item for this vendor. The terms of payment key can determine the following:

- The valid cash discount rate for an individual payment with a maximum of 3 payment terms (first cash discount period, second cash discount period and due date for net payment) and also a baseline date for the payment, or
- The terms of payment for holdback/retainage

The following description applies to individual payments. Details on the terms payment for holdback/retainage can be found in Terms of Payment for Holdback/Retainage (Accounts Payable)

You can also enter the terms of payment directly in the *Days/Percent* fields. This would consist of up to two levels of cash discount and the due date for net payment (each with a certain number of days). You can also enter up to three decimal places for the cash discount percentage (for example, **2.125** for two and one-eighth percent discount).

For example, to enter terms of payment of "2/10 Net 30", enter 10 (for ten days) and 2 (for two percent) in the first two fields.

Enter the amount on which the cash discount is based in the *Disc.Base* field. This amount does not have to be equal to the amount of the line item. If you leave the *Disc.Base* field blank, the system calculates the cash discount basis based on:

- Whether the cash discount is calculated on the net or gross amount (that is, calculated before or after tax is added). This specification is made in the system configuration.
- Whether any G/L account line items are posted without cash discount (those with the
*W/o cash discount*field selected)

The *Disc. Amount* field enables you to enter the cash discount directly, overriding the system's calculation of the cash discount.

After you enter the line item and display it, you see the message *Cash discount basis is calculated*. The system calculates the cash discount when you post the document.

The following figure illustrates the relationship between posting date, terms of payment, cash discount, and due date.

You can enter G/L line items without cash discount. For example, assume you receive an invoice for goods and shipping. Cash discount is valid for the goods, but not for the shipping. In this case, enter a separate G/L line item for the shipping and select the field *W/o Cash Discount*. Most often, the calculated cash discount basis is the total of all G/L account line items where the field *W/o cash discount* is not selected.