Applying a discount to a sales invoice

You may on occasion need to give a sales invoice discount that you’ll need to record in your accounts. Before you enter it however, you must determine if the discount needs to be inclusive or exclusive of VAT. If unsure, please consult your accountant.

A discount that is exclusive of VAT will reduce the amount payable for the invoice but will not affect the VAT amount due.

Example:

Sales invoice for €1000 net with €200 VAT = Total payable is €1200
Discount exc VAT of €600 given.
Discount is applied as a net invoice amount
Amount payable is (€1000 – €600) + €200 VAT = €600

This type of invoice discount can be applied at the time of recording payment for the invoice. A discount amount can be entered along with the amount being paid. The invoice VAT amount will be included in full on your next return.

A discount that is inclusive of VAT will reduce the amount payable for the invoice and at the same time reduce the VAT amount due by the relevant percentage.

Example:

Sales invoice for €1000 net with €200 VAT = Total payable is €1200
Discount inc VAT of €600 given.
Discount applied is €500 net + €100 VAT
Amount payable is (€1000 – €500 net) + (€200 – €100 VAT) = €600

In order to apply this type of discount, you must enter an amount or percentage for each line on your invoice. This amount will reduce the net and VAT amounts due and ensure your VAT return includes only the post-discount VAT amount.

A prompt payment discount is another example of a VAT inclusive discount that can be recorded against an invoice. Read more about prompt payment discounts >

Apply a discount when creating an invoice

  1. Go to the Sales tab.
  2. Then click New Invoice.
  3. Click on the Discount box on the invoice line.
  4. In the Amount box that appears enter either the discount amount or the discount percentage you want to apply.
  5. Fill in the rest of the invoice details as normal.
  6. Click Save.

You have now successfully applied a discount to a sales invoice.

Apply a discount when recording a payment from within an invoice

  1. Go to the Sales tab.
  2. Select the relevant invoice you want to apply the discount to/record the payment for.
  3. Click Record Payment on the invoice line.
  4. In the pop up window in the Discount section you can enter the discount amount you want to apply.
  5. Fill in the rest of the Payment details as normal.
  6. Click Record.

You have now successfully applied a discount to the sales invoice and recorded the payment.

Apply a discount from the banking tab when recording a payment against an invoice

  1. Go to the Banking tab.
  2. Select the relevant bank account.
  3. Then New Entry, then Sales/Receipt.
  4. Then select the Customer and the relevant Bank Account, Method and Date.
  5. Then enter the Amount Received.
  6. Select the tick box beside the invoice you want to apply the discount to.
  7. Then click on the invoice line.
  8. In the pop up window enter the discount amount in the discount section, then click Apply.
  9. Click Save.

You have now successfully applied a discount to the sales invoice and recorded the payment.