---
title: "Settlement Discount"
canonical: "https://kb.myframeworks.com.au/space/FRAM/28382446/Settlement%20Discount"
format: markdown
---
Settlement discount is a mechanism whereby, for prompt or immediate payment, the customer is able to deduct an agreed percentage of the total invoice. Generally, this approach requires particular attention as:

- Your credit control system needs to be even more efficient to ensure that discounts are not taken outside of the stated terms.
- You are effectively giving away part of your profit. A 3% reduction for cash discount does not affect your operating costs or cost of sale. It will however, reduce your profit by 3% of the sale price less the possible saving on finance costs.
- You need to carefully evaluate the actual cash effect of giving discount and the potential savings on interest's costs.

Settlement discount percentages are defined in the **System Control File** and the flag is set at the customer account level in [Customer Maintenance](https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/28389894).

#### Settlement Discount can be controlled by customer flags:

| **Flag** | **Description** |
| --- | --- |
| **Settlement Discount** | Enable if this customer attracts a settlement discount for early payment. If you type **'Yes'** or check the Provisional Discount field, you cannot type **'Yes'** or check this field. |
| **Provisional Discount** | Enable if provisional discount is to be calculated for this customer. If you have typed **'Yes'** into the Settlement Discount field, you cannot type **'Yes'** or check this field.   
The difference between these two fields is that, if a customer does not take advantage of the Provisional Discount amount, the amount is still recorded in a separate G/L account. |