When referring to Accounts Receivable or Accounts Payable, terms relates to the time frame in which you expect to receive payment from a customer or your vendor expects to receive a payment from you.
Some terms even allow for a discount for early payment. A list of commonly used terms is automatically supplied when you create a new QuickBooks company file.
You can easily edit or add new terms to the list as necessary. To access the terms list, choose Customer & Vendor Profile Lists from the Lists menu. Then, choose Terms List. You can add, delete, edit or inactivate terms from the Terms button at the bottom of the list.
In QuickBooks, payment terms can be set up as Standard or Date Driven. Standard terms are those due within a specific number of days from the invoice or bill date. Date-driven terms are those that are due as of a specific day of the month. The following fields must be defined as part of the setup of each term:
Once the terms list is set up, you can associate the terms to particular customers and vendors (on the Additional Info tab of the Customer/Vendor record). When you create an invoice to the customer, or enter a bill from the vendor, the associated terms and applicable due date will auto-fill on the form, based on the invoice/bill date and terms that you entered. If necessary, you can manually select the terms from the drop-down list as you create new transactions.
Also, be sure your aging preference is correctly defined!
On the Company Preference tab of the Reports & Graphs preferences, choose to age from the transaction or due date. The selection here will affect your aging reports, as well as the aging shown at the bottom of your customer statements.
By maintaining terms in QuickBooks, you will have accurate aging reports for your customers and vendors. In turn, you will be able to more effectively manage your cash flow!
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