Prompt Payment Discount

The change introduced on 1 April 2015

This guidance records the 2015 prompt payment discount (PPD) transition for Pegasus Opera 3 and Opera II. It describes the software versions, document designs and accounting workflows advised at that time.

From 1 April 2015, the guidance explained that VAT on an invoice would be calculated on the goods value before applying any prompt payment discount. Where a settlement discount was offered but not taken, the full invoiced VAT remained payable. Unbilled sales orders posted before that date needed to be billed under the new rules from 1 April 2015.

If a customer took the discount, an adjustment was needed for both the goods and VAT values on the VAT Return. In the Opera 3 and Opera II workflows described here, that adjustment was posted through a credit note.

Software versions and data structures

The transition releases were Opera 3 version 2.22 and Opera II version 7.42. Businesses offering or receiving prompt payment discounts were advised to upgrade before 1 April 2015 and run Update Data Structures after the upgrade.

These release numbers and configuration instructions are retained for historical reference. For advice on your installed release, use our Opera support service.

Preparing customer transactions

Invoices, quotes and orders

Invoices dated before 1 April 2015 that offered a prompt payment discount continued under the old rules, including receipts that subsequently took the discount. Businesses were advised to consider billing relevant outstanding quotes and orders before the change.

Quotes and orders billed on or after 1 April 2015 used the new rules. Changing a quote or order on or after that date could recalculate VAT and produce a different value from the original.

Credit notes and evidence

Businesses were advised to post any required credit notes for invoices under the old rules before 1 April 2015 where possible. A credit note posted afterwards would use the new rules and could require a VAT-only invoice to correct the VAT.

Posting through SOP/Invoicing provided documentary evidence. A credit posted directly in the Sales Ledger required evidence to be provided separately.

Credit notes in SOP/Invoicing could be emailed. To use that facility for customers offered PPD, the customer record could be updated on Sales → Processing → Terms.

Printed invoices

Invoices printed before 1 April 2015 were not to include references to the new PPD rules. An invoice posted before the change and reprinted afterwards retained the VAT values originally calculated.

Preparing supplier transactions

The original transition checklist advised businesses to:

1. Consider taking eligible settlement discounts using Authorise Cheques or Authorise BACS before 1 April 2015, while the old rules applied.
2. Resolve supplier disputes involving earlier invoices and post the necessary credit notes.
3. Process outstanding Purchase Invoice Register (PIR) entries into the Purchase Ledger before the change where appropriate.

Under the new Opera discount workflow, Authorise Cheques and Authorise BACS could no longer process invoices on which PPD could be taken. These invoices were marked with an asterisk and required manual payments in the Purchase Ledger. The Suggested Payments Report could still identify invoices offering a discount.

Configuring Opera for the 2015 rules

The original setup flowchart covered home-currency transactions and distinguished businesses using the EC VAT application from those that did not.

Without the EC VAT application

1. Open Company Profiles from System → Maintenance.
2. Select the Options tab.
3. Check that VAT calculated before settlement discount from is set to 01/04/2015.
4. Close the form.

The original guidance stated that Update Data Structures set this date automatically on upgrade. That date was used only when EC VAT was not activated.

With the EC VAT application

1. Open Countries from EC VAT → Maintenance.
2. Locate the home country.
3. Clear VAT After Discount.
4. Save and close.

Once configured, the guidance explained that Opera handled the home-currency discount calculation in the same way whether EC VAT was in use or not.

Invoice and statement layouts

For the standard PEG630 invoice and PEG610 statement designs, open Reports Layout from System → Maintenance. Select the Default box, and the E-Mail Default box if required, for:

• PEG630 Sett. Disc. Invoice Laser.
• PEG610 Sales Statements Sett. Disc. UK Laser, or PEG610 Sales Statements Sett. Disc. Foreign Laser when using foreign statements.

Save the changes and close the form. Businesses using their own invoice or statement designs were advised to copy the VAT adjustment information from the standard design into their customised layouts.

Purchase Ledger: paying and adjusting the invoice

The guidance distinguished the supplier’s documentation from the posting required in Opera. It noted that HMRC had not mandated a credit note in every case, while Opera 3 and Opera II used a credit note to account for the discount and the associated VAT adjustment.

The Purchase Ledger clerk needed to establish whether the supplier would issue a credit note and confirm the required VAT adjustment and supplier reference. A business could need to pay promptly to secure the discount before that documentation arrived.

The advised workflow was to post the discounted payment on account using Processing → Payments, hold the invoice while awaiting the supplier’s credit note where applicable, and then allocate the invoice, payment and adjusting credit together. This prevented the held invoice from being allocated to other payments while the credit was outstanding.

Sales Ledger and SOP/Invoicing

The new PEG630 invoice design, using SQININSD, displayed the VAT adjustment information associated with the offered payment dates. When a customer took the discount, a credit note accounted for both the reduction in goods value and the VAT adjustment.

Posting through Sales Order Processing or Invoicing automatically created documentary evidence of the credit. The original guidance reminded businesses to retain evidence of PPD adjustments for a VAT audit.

The business also needed to decide how to analyse the credit: to a Discounts Allowed Profit and Loss Account, or to the Sales Profit and Loss Account used on the original invoice line.

After banking the receipt, the invoice and credit note were allocated against it to close the transaction. The PEG610 statement design displayed the credit note’s second reference so the related invoice could be identified.

Support for your workflow today

These instructions describe the 2015 releases and transition. Our Opera support team can help you review the workflow and document layouts used by your business today.