Please note: The Prompt Payment Discounts feature is currently only available in private beta, please contact us at [email protected] if you are interested in the feature.
Summary
Prompt Payment Discounts enable you to offer a % based discount to your customers on an invoice if it is paid within a specified time.
You can set the % discount and how long you want it to last for, then let Adfin manage the rest. For example, you can set a discount of 2% for a customer if an invoice is paid within 2 days.
When Adfin sends the invoice to your customer we’ll notify them of the discount and the terms. If the customer pays within the discount period, we’ll automatically apply the discount on the payment page. If the customer pays after the discount period, the full amount will be applied on the payment page.
Customer experience
See an example below of a 2% discount on a £1,000 being offered to a customer, from our demo biller Pied Piper.
Payment page during the discount period
Payment page after discount has expired
Configuring Prompt Payment Discounts
Please note: The Prompt Payment Discounts feature is currently only available in private beta, please contact us at [email protected] if you are interested in the feature.
Important: in order to offer a Prompt Payment Discount to a customer, you must comply with the UK VAT legislation on prompt payment discounts is VATA 1994, Schedule 6, paragraph 4.
HMRC guidance
Supplier will need to decide, before they issue an invoice, which of the 2 processes below they will adopt to adjust their accounts in order to record a reduction in consideration if a discount is taken-up:
1 - Issue a VAT invoice for the full value of the supply plus VAT and include the offer of a discount for prompt payment showing the rate of the discount offered (Regulation 14 of the VAT Regulations 1995 (SI 1995/2518)).
The supplier will not know if the discount has been taken up until they are paid in accordance with the terms of the PPD offer, or the time limit for the PPD expires.
If the discount is taken up, a credit note (or equivalent) must be issued to evidence the reduction in consideration. A copy of the credit note must be retained as proof of the reduction.
2 - Issue an invoice containing the following information (in addition to the normal invoicing requirements):
the terms of the PPD (PPD terms must include, but need not be limited to, the time by which the discounted price must be made).
a statement that the customer can only recover as input tax the VAT paid to the supplier.
Additionally, a supplier may choose to show:
the discounted price
the VAT on the discounted price
the total amount due if the PPD is taken up.
We recommend businesses use the following wording on the invoice:
‘A discount of X% of the full price applies if payment is made within Y days of the invoice date. No credit note will be issued. Following payment you must ensure you have only recovered the VAT actually paid.’
You can find more details here.
We recommend you create a new invoice template which includes wording on the invoice with details of the discount offer being provided.
Discounts are set per customer. When active, discounts are applied to all invoices (over £10) sent for payment by card or pay by bank (discounts are not applied for direct debit invoices).
To configure a discount for a customer, click into the customer record on the customer view tab and select discounts.
From here, you can:
Toggle discounts on and off
When discounts are on, the specified discount will be applied to all invoices (over £10) sent to that customer to be paid by card or pay by bank
Set the % discount applied to invoices
You can set a discount from 1% to 10%
We will round all discounts to the nearest £1 (we display this to your customer as a monetary value vs a %)
The minimum discount can be applied is £1
Set how many days the discount applies for
Discounts always expire at 5pm
For example, for an invoice sent at 11pm on Monday with a discount period of 2 days, the discount will expire at 5pm on Wednesday
Set Prompt Payment Discounts for a customer
If you need to create a discount for multiple customers, you can do this in a single step. To do this, select the relevant customers in the customer view tab and click “configure discounts” in the bottom tray.
Reconciling Prompt Payment Discounts
If you are using Adfin with Xero or Quickbooks, Adfin will automatically apply the payment made by the customer against the invoice.
If the payment has been made during the discount period, then the full balance of the invoice will not be cleared. You should raise a credit note on the remaining balance (the discount amount) in order to mark the invoice as paid.
Coming soon: Adfin is building support to automatically create credit notes on Xero / Quickbooks when a discount is used to fully automate reconciliation. This credit note will also be sent to the customer to support their own reconciliation process.