A customer has still deducted a significant settlement discount even though they paid the invoice late. Their terms did allow a settlement discount but only on payment end of month following.
I don't think they can legally do this. Am I correct? So far they have refused to repay.
Thanks
Replies (8)
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VAT?
The above answer seems to focus on the VAT treatment of settlement discounts, but as far as I can see your question is nothing to do with VAT.
If your terms are clear, and in writing, then no your customer can't claim a discount they are not entitled to. If that's right you will probably win if you sue. But do you want to go down that route?
Absolutely correct.
My approach would be to write a polite letter pointing out the error with the dates of payment clearly set out against the terms. If they still refuse to pay you will have to establish whether it's worth pursuing a claim.
EDIT; crossed with John.
Is it worth offering the discount?
To be honest, and this goes a bit against the answers above, every purchase ledger function I have worked with (businesses of the 5-25m turnover range) always put the invoice on the system at the discounted value regardless - and then pays the invoice in whatever timing they can get away with for that supplier.
I have never offered settlement discounts as I would expect the exact same treatment.
I know this is all a bit cynical and not really cricket - but it tends to be what happens in my experience.
Sad fact of life
@Tom123 - not directed at you personally but this attitude of the bigger companies is tantamount to bullying and is why small companies are forced to put the settlement discounts in place in the first place.
Agreed
@Tom123 - not directed at you personally but this attitude of the bigger companies is tantamount to bullying and is why small companies are forced to put the settlement discounts in place in the first place.
I quite agree
You will always be paid the lower amount. It is unfair but people pay what they can get away with.
I don't offer discount for prompt payment in this manner but I have in the past offered a discount on their next invoice but that has its own complications which is why I stopped it.