Accounting: Payment Terms


Purpose

The purpose of this documentation is to outline how to set up and use Payment Terms in the Odoo Accounting app.

Payment terms designate the schedule to pay the full balance of an invoice. You can apply payment terms for both your customers and vendors.

Payment terms can be set on a contact, sale order, invoice, purchase order, or vendor bill.

Process

To get started, navigate to the Accounting app.

Odoo CMS - a big picture

Creating a Payment Term

Once there, click on Configuration > Payment Terms.

You will be presented with a list of existing payment terms, which you can view and edit. To create new payment terms, hit the Create button.

You will be prompted to complete the following form.


Payment Terms: The name of your payment terms. Typically summarizes the payment schedule for that payment term.

Company: This will auto-populate with the company you're working in. In a multi-company environment, you can leave this blank to apply to all companies, or make a selection to apply to that company only.

Description on the Invoice: You can input a description of the payment terms conditions in more detail in the description so that your customers will understand the conditions to complete payment.

Terms: These lines represent the schedule for a set portion of the invoice's amount. To set the terms, you will need to add a new line for every condition.

To add a new line, click ADD A LINE and a modal will appear with the below options: 


You'll then see a new form where you'll outline your first payment term. We'll go over each option below.


Type: There are three types of terms that you can use to construct your payment terms. The type is the amount that is due for this line. 

  • Balance: The total remaining balance to be paid. You will enter the value of the balance once you close the modal. 

  • Percent: Input a percentage of the total balance to be paid based on the total amount of purchase. 

  • FixedAmount: Input a fixed dollar amount.

Due Date Computation: This is where you input when the amount you specified above is due. You'll have three options:

  • __ days after the invoice date: This defines how many days a payment is due based on the invoice date. 

    • On the __ of the month: This allows you to select a specific ordinal day of the month in which this payment is due (e.g. 1st, 15th, 30th).

  • Due the __ of the following month: This defines the ordinal day of the following month when the payment is due (e.g.1st, 15th, 30th).

  • Due the __ of the current month: This defines the ordinal day of the current month when the payment is due (e.g.1st, 15th, 30th).

Once you have these fields set, you can click SAVE & CLOSE if you only need one line. If you need multiple lines, you can click SAVE & NEW to save your existing line and get a new line to appear without leaving the modal. 

You can also order your payment lines by using the  icon. It's important that the down payment, if any, is on the top of the list and the Balance entry is at the bottom.

Once you have your payment terms set and ordered, click SAVE

Important!

End With a Balance

When creating a payment term with multiple lines, it is crucial that the last one is for the Balance. This is to ensure the invoice will be paid in full and you won't be left with only a partial payment, or an overpayment. 

Layaway Example

For our example, we've created a layaway plan which requires a 25% down payment and 25% every 30-days for 3 months.


Important areas to note:

  • The down payment is the first entry. It shows that 25% of the total price is due 0 days after the invoice is created (i.e. same day).

  • The next payment is the second entry. It shows that 25% of the total price is due 30 days after the invoice is created. 

  • The next payment is the third entry. It shows that 25% of the total price is due 30 days after the invoice is created. 

  • The final line is a call for the Balance.  We could have simply added another 25% line, but sometimes the totals don't amortize into equal amounts. Configuring the Balance as the final line ensures you'll be paid the appropriate amount.

Applying Payment Terms

Applying Payment Terms On Contacts

You may have certain customers that you have an agreement with on their payment terms. Once you've created the Payment Terms that will apply, you'll need to then apply it to their contact record to ensure the terms apply to sales moving forward.

To do so, click CUSTOMERS > CUSTOMERS.  From the list of partners, select the contact to set the payment terms for.


Click Edit then navigate to the Sales & Purchases tab. On this tab, you'll see if your contact is a customer, vendor, or both and can apply payment terms to the contact as needed. 

When you're done, click SAVE

Odoo CMS - a big picture

To Quotations (RFQs) & Sales Orders

If you'd like to set Payment Terms per sale, then you'll want to do so through the RFQ or Sales Order itself. To get started, navigate to the Sales app.

Odoo CMS - a big picture

Once there, click create to make a new Sales Order. 

Set the customer you are generating the Sale Order for. If there are any payment terms associated with the customer, they will display automatically in the payment terms field. This can be changed manually if needed.

If the customer does not have payment terms set for them, you can choose the correct payment terms from the drop-down menu. 

Proceed with creating the rest of the Sales Order or Quotation, then hit SAVE and confirm when ready.

Odoo CMS - a big picture

Applying Payment Terms On Invoices

If you'd like to set Payment Terms on a customer invoice, first navigate to the Accounting app.


Next, go to CUSTOMERS > INVOICES, then create a new invoice by clicking CREATE.

Set the customer you are generating the invoice for. If there are any payment terms associated with the customer, they will display automatically in the payment terms field. This can be changed manually if needed.

If the customer does not have payment terms set for them, you can choose the correct payment terms from the drop-down menu. 

Proceed with creating the rest of the invoice, then click SAVE and post when ready.

Odoo CMS - a big picture

Applying Payment Terms on Purchase Orders

If you're making a purchase from one of your vendors that has payment terms, Odoo lets you define those terms as well, to keep your payments on track.

To define payment terms on a purchase order, first navigate to the Purchase app. 

Odoo CMS - a big picture

Once there, click create to make a new Purchase Order. 

Set the vendor you are creating the Purchase Order for, then navigate to the Other Information tab and you'll see the Payment Terms field. If there are any payment terms associated with the vendor, they will display automatically in the payment terms field and can be changed as needed.

If the vendor does not have payment terms set for them, you can choose the correct payment terms manually. 

Fill in the remaining details for the Purchase Order. When ready, hit SAVECONFIRM ORDER, or SEND BY EMAIL

Odoo CMS - a big picture

Applying Payment Terms on Vendor Bills

If you'd like to set Payment Terms on a vendor bill invoice, first navigate to the Accounting app.


Next, go to  Vendors > Bills and click create to make a new vendor bill. 

Set the vendor you are creating the vendor bill for. If there are any payment terms associated with the vendor, they will display automatically in the payment terms field. This can be changed if needed.

If the vendor does not have payment terms set for them, you can choose the correct payment terms manually.

Proceed with creating the rest of the vendor bill. When ready, click Save or post.

Odoo CMS - a big picture

Payment Terms and Reporting

Aged Receivable

We've created a Sales Order for a customer on the Layaway plan we created earlier in this document. The total purchase price is $400, they've agreed to pay us 25% today, then 25% at 30 days and 60 days, then at the 90-day mark they'll pay the balance. This is what the invoice looks like:


To review Aged Receivables, navigate to the Accounting app.


Once there, navigate to Reporting > Aged Receivable.

Here you can see that Odoo has created four invoices due at the agreed intervals:


Aged Payable

We've purchased a floral arrangement from a vendor. The total is $75.17 and we've agreed to pay 50% upon ordering, then the final payment in 15 days. This is what the vendor bill looks like:


To review Aged Payables, navigate to the Accounting app.


Once there, navigate to Reporting > Aged payable.

Here you can see that Odoo has created vendor bills due. The first is to today, the final is due in 15 days. Note that because the total purchase price was an odd amount, these payments are different by 1 cent.