The following demonstration was executed on a Cronus database for Business Central version 23.5.

Purchase discounts in Dynamics 365 Business Central are a sophisticated feature designed to optimize procurement processes and enhance cost management for businesses. This functionality allows companies to negotiate and apply discounts on their purchases from suppliers, effectively reducing the cost of goods sold and improving overall profitability. Dynamics 365 Business Central supports various types of purchase discounts, including invoice discounts (applied at the level of the invoice) and line discounts (applied at the level of an invoice line for a specific item). These discounts can be automatically applied to purchase orders, invoices, and line items based on predefined rules and agreements with suppliers, ensuring businesses always secure the best possible terms and prices for their purchases.

The topic will be expanded from within procurement process, therefore everything that follows next is related to vendors, purchase orders or invoices.

Required Setup

Having system automatically calculate the invoice discount and post it in the required G/L accounts assumes the consultants defined the functionality in various areas of the system.

Take for example purchase discounts:

First stop: General Posting Setup

General Posting Setup in Dynamics 365 Business Central is a crucial feature that defines how financial transactions are recorded in the general ledger. It plays a foundational role in the system’s financial management, ensuring that transactions across various business operations are correctly and consistently posted to the appropriate general ledger accounts. This setup is essential for maintaining accurate financial statements, supporting compliance with accounting standards, and enabling detailed financial analysis.

The General Posting Setup involves mapping business transactions to general ledger (G/L) accounts based on a combination of business posting groups (for whom the transaction is applied: customer, vendor …) and product posting groups (what is transacted: item, resource, capacity …).

General Posting Setup had 2 pairs of discounting fields: a paid for sales and another pair for invoices:

Purch. Line Disc. Account	Specifies the general ledger account number to which to post purchase line discount amounts with this particular combination of business group and product group.
Purch. Inv. Disc. Account	Specifies the general ledger account number to which to post purchase invoice discount amounts with this particular combination of business group and product group.

Second stop: Purchase & Payables Setup

The Purchase and Payables Setup in Dynamics 365 Business Central encompasses a range of configurations and settings that govern how your business manages purchasing activities and accounts payable operations. This setup is crucial for optimizing the procurement process, ensuring accurate financial tracking, managing supplier relationships, and maintaining cash flow. It includes defining how purchase orders are processed, how invoices are handled, and how payments are made to suppliers, among other things.

The fields associated with discount calculation and posting are:

Discount Posting

Specifies the type of purchase discounts to post separately. No Discounts: Discounts are not posted separately but instead will subtract the discount before posting. Invoice Discounts: The invoice discount and invoice amount are posted simultaneously, based on the Purch. Inv. Disc. Account field in the General Posting Setup window. Line Discounts: The line discount and the invoice amount will be posted simultaneously, based on Purch. Line Disc. Account field in the General Posting Setup window. All Discounts: The invoice and line discounts and the invoice amount will be posted simultaneously, based on the Purch. Inv. Disc. Account field and Purch. Line. Disc. Account fields in the General Posting Setup window.

Calc. Inv. Discount

Specifies if the invoice discount amount is automatically calculated with purchase documents. If this check box is selected, then the invoice discount amount is calculated automatically, based on purchase lines where the Allow Invoice Disc. field is selected.

Third stop: Vendor Card

There are 2 levels of discounting you can setup for vendors:

• Line Discounts: for a specific vendor, specific item, specific minimum quantity ordered, a specific discount (%) and a specific data range for the discount to take effect.

• Invoice Discounts: set up different discounts that are applied for invoices for the vendor. An invoice discount is automatically granted when the total on the purchase invoice exceeds a certain amount.

• Payment Terms discounts: discounts can be applied when we pay the vendors.

Testing the setup

Let’s review the setup:

1. Vendor Card: Line Discounts:

Invoice Discounts:

Payment Terms Discounts:

2. Purchase & Payables Setup:

• Discount Posting: All Discounts
• Calc. Inv. Discount: true

3. General Posting Setup:

• Purch. Line Disc. Account: 10200
• Purch. Inv. Disc. Account: 10200

From the Vendor Card, Actions -> New Document -> Purchase Invoice.

Create an invoice with the following lines:

• trigger Line Discount setup by entering Quantity =10 for item 1900-S
• trigger Invoice Discount by ensuring the total exceeds 10000.

Posting the invoice shows the following G/L distribution:

Account	Debit	Credit
10700: Inventory	10518.70
20200: Purchase Discounts		554.49
20100: Accounts Payable		9964.21

Vendor Ledger Entry record shows the discount date (Invoice Posting Date + 8D) and Discount Amount:

Also, there is a potential discount for the payment of $199.28.

Let’s now create the payment.

From the Vendor Ledger Entry, locate the posted Invoice record and click on Create Payment in the ribbon:

Accept the defaults and click OK on the Dialog page.

This is how the payment journal line looks like:

The check shows the payment discount ( 2% if paid before Posting Date + 8 days):

Posting the payment exposes the following G/L Entries distribution:

And their reflection in the T-Accounts:

Account	Debit	Credit
10100: Bank Account		9764.93
20200: Purchase Discounts		199.28
20100: Accounts Payable	9964.21

Discounts Analysis

On the Vendor Ledger Entries page there are two fields that can reflect the discounts the company was able to take advantage.

Those two fields: Inv. Discount (LCY) and Pmt. Disc. Rcd. (LCY) are not displayed automatically on the page, but they can be easily added with a simple page extension.

Let’s run now the page Vendor Ledger Entries in Analyze mode and sum by these 2 fields: Inv. Discount and Pmt. Disc. Rcd.:

That should give a good idea of the size of the discounts received.