Applying a Discount to an Issued Sales Invoice (Decision Tree: Status, Inventory, Tax & Submission)

When the customer requests applying a discount to a sales invoice that has already been issued (whether from an earlier date or today), use the following decision tree to choose the correct path. Do not suggest a single solution directly; instead, ask diagnostic questions first.

Diagnostic Questions (Ask in order, one question at a time)

1. What is the invoice status: Is the invoice “draft or pending approval”—i.e., still editable—or is it “approved or paid”—i.e., issued as final and cannot be edited?
2. Do you actually want to modify the VAT amount on the invoice, or do you want the discount without any impact on the tax?
3. Does the invoice contain inventory items, and if yes: do you agree to return the quantities of these items to inventory?

Decision Tree—Choose the Solution Based on Your Answers

Case 1: Invoice Status is Draft or Pending Approval—i.e., Editable (Not Locked and Not Submitted to the Authority)

• Solution: Enable the “Document Total Discount” option from Settings > General Settings > Sales Invoice Settings, then open the invoice, apply the discount to the invoice total, and save.
• Tax Impact: Tax is recalculated on the amount after the discount.
• Inventory Impact: Not affected.

Case 2: Invoice is Approved/Submitted to the Authority + Customer Wants to Actually Modify the Tax + Accepts Returning Quantities to Inventory (or Invoice Has No Inventory Items)

• Solution: Issue a credit note linked to the same invoice for the discount amount.
• Tax Impact: The credit note is automatically sent to the authority and reduces sales tax in the period return.
• Inventory Impact: The credit note automatically returns item quantities to inventory; alert the customer to this before issuing it.
• Important Note: Once a credit note is approved, it cannot be deleted or edited.

Case 3 (Most Common): Invoice is Approved and Submitted to the Authority + Customer Does Not Want to Modify Tax + Does Not Want Inventory Impact

This is the usual scenario when the customer wants to give a commercial discount after issuing a tax-approved invoice. There are two accounting-equivalent paths; choose the one that suits your workflow:

Path A: Manual Journal Entry Linked to the Invoice

1. From Accounting > Manual Journal Entries > Create New Entry.
2. Add two lines:
   • Debit: Account “Discount Allowed” for the discount amount.
   • Credit: Account “Accounts Receivable” with the customer’s name for the same amount.
3. To link it to the specific invoice: from the Accounts Receivable line, click the invoice icon and select the invoice and amount.
4. Save (or Save and Approve, depending on your permissions).

Path B: Pay the Invoice from the Invoice Screen Using the “Discount Allowed” Account

1. Open the Invoice List > click Pay Against Invoice
2. Select the Discount Allowed account.
3. Enter the discount amount and save; the remaining balance becomes marked as paid.

Tax and Inventory Impact for Both Paths

• Tax: The manual entry / paying the invoice via the discount account is NOT sent to the authority and does not modify the VAT return. Tax in the return remains calculated on the original invoice amount.
• Inventory: Not affected; quantities are not returned.
• Customer Balance: The amount due on the invoice is settled by the discount amount.

Creating a “Discount Allowed” Account (If It Doesn’t Exist)

• From the Chart of Accounts, click + to add a new account.
• Account Name: Discount Allowed.
• Account Type: Expense.
• The “Can Pay and Collect from This Account” option: Required only if you use the account in Path B (paying the invoice) or in payment vouchers. Path A (regular manual entry) accepts any expense account without requiring this option to be enabled.

Mandatory Rules

1. Do not suggest a credit note before explicitly warning the customer that the credit note: (a) is automatically sent to the authority and reduces tax on the return, (b) returns item quantities to inventory, and (c) cannot be modified after approval.
2. If the customer says “The invoice went to the authority” or “approved in e-invoicing” and doesn’t want to modify tax, jump directly to Case 3 and do not suggest a credit note.
3. Paths A and B in Case 3 are accounting-equivalent. Present them briefly and let the customer choose.
4. Do not confuse “Document Total Discount” (for editable invoices only) with “Discount Allowed” (post-issuance solution).