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Partial invoice example for Legal Services

so we have talked about invoices and the calendar the discount and credit periods at this point however we've only talked about paying off the invoice fully so let's take a minute to talk about partial payments on an invoice so what if a full balance isn't paid remember we have this timeline this is our invoice date right here and at some point you know five days ten days into the future we might have the end of a credit or have a discount period and further in the future at some point we have the end of a credit period that end of the credit period that is the time that at that point they have to have their bit bill paid in full or they start getting charged penalties for this section it's this end of this discount period that's important if they pay between the invoice date and the end of that discount period they get a certain cash discount which is a percentage of the bill well what if they can't pay the bill in full well they can still pay what they can during that discount period and then the rest can be paid before the end of the credit period and they'll still get some of the discount for that partial payment so let's take a look at this let's say that we have an invoice that is twenty four hundred dollars with a 2% let's say it's a 2/10 net 30 and the buyer is going to pay $1,500 during the discount period so we want to know what is the balance due that balance do of course that's the balance it has to still has to be paid before the end of that credit period so the 2:10 here means it's a 2 percent discount in the 10 days and we're assuming that $1,500 is paid during that first 10 days so the the key here is really figuring out how much what is the credit applied to that account to that balance in other words and remember 2% discount we use the complement of that that would be 98% so 0.98 the amount paid is 1500 now before what we did was we took the balance the amount of the credit and we calculated the amount that needed to be paid now we're going backwards we were we're going to be paying 1,500 we want to go back to figure out what is the amount credited so when we had the the credit we multiplied by that compliment of the discount when we have the payment we're going to divide by it so we're take 1500 divided by 0.98 fifteen thirty sixty one so one thousand five hundred and thirty dollars and 61 cents is the credit that is applied to that account so that means the balance due on that $2,400 invoice there's twenty four hundred dollars minus the one thousand five hundred and thirty dollars and 61 cents which gives us eight hundred and sixty nine dollars and thirty nine cents is the balance that's outstanding so you think that's the balance do or sometimes referred to as the outstanding balance so that's the balance that still needs to be paid before the end of that credit period so let's put this together an example so I have an invoice that is dated March 21st and amount $1,900 terms let's go to ten one fifteen net thirty now I added in a little something here there are two discount periods here sell our pre pays $200 and freight so have to be reimbursed by air makes and $800 partial payment on March 29th find that outstanding balance so we have the $800 payment now we're we need to find what the discount is our timeline a little bit different here on this one we start on March 21st we don't have any modifiers so I start on the invoice date the 2:10 means if we go ten days that's March 31st there's a 2% discount well beyond that the the days are always from the invoice date so the 115 is going to April 4th between March 31st after the 2% discount is expired and April fourth you can still get a 1% discount if you still pay in that window then of course we're going to April 20th for the net 30 at the end of the credit period so this partial payment is made on the 29th it gets the 2% discount however we're not going to just take that 800 and divide by 0.98 like we did in the previous example because this example has Freight in it Freight is always paid first because it's reimbursed in reimbursing an actual expense the expenses are reimbursed before the invoice has started to get paid down so we take that $800 payment and the first thing we do is we subtract the $200 and freight so that leaves us with $600 that's going to be applied to the invoice so then that $600 is going to be adjusted by the discount discount of 2% so the compliment is 98 or 0.98 we divide by 0.98 giving us six hundred and twelve dollars and twenty four cents so six hundred and twelve dollars and twenty four cents is applied towards this invoice after the freight is paid the invoice was for $1,900 so the outstanding balance is nineteen hundred minus the six hundred and twelve dollars and twenty four cents which is going to give us one thousand two hundred eighty seven dollars and seventy six cents is that outstanding balance it's the balance due by the end of the credit period so that is a summary of partial payments