The payment terms describe the terms that apply to the payment what charges may apply if
the payment is late or alternatively what early payment discounts are offered.
Settlement discounts mean that the payee pays less than the invoiced amount if he meets
certain criteria that typically are the following.
The payment is made before a certain date and/or
The payment is made by using a specific payment means. (E.g. cash payment).
The settlement discounts may be in the following way.
The Total amount is lowered by a fixed amount for the period.
For example, if paid by cash within 5 days of issue date the total amount is 95 instead
of 100, this fixed amount can also be expressed as a percentage from the total (5%) or
a amount that is to be deducted (-5).
The total amount is lowered by a specific percentage for each day the payment is made
before a specified day, for example the due date.
Settlement discounts can be in more than one period e.g. first 5 days 10%, next 5 days 5%.
Penalty charges are added to the Total amount if the payer does not pay the invoice on the
due day. Penalty charges are commonly in the following way.
A fixed charge is added to the Total amount.
A specified penalty percentage is added to the total amount for each day that the
payment is delayed past a specified date.
There may be several penalty periods that compile on each other. For example for the
first 10 days past due date there may be a one penalty percentage, for the next 10
days another and so on. Also a specific charge may be added to the invoice at due date
and then an additional charge 30 days later and so on.
Penalty charges can be applied in consecutive periods where penalty in one period is higher or
lower than the next one. Penalty charges are usually cumulative so that if an invoice is paid at
end of period 2 the payer must pay both charges incurred in period 1 and in period 2.
Application to the payment terms class in UBL
The payment terms that specify discounts because of early payment are not cumulative
but those that specify penalty are cumulative.
Penalty terms often include both a fixed charge as well as a penalty percentage.
Consecutive penalty terms may then add additional charges to the invoice cumulatively.
If the amount field is set to show the amount that is to added (positively or negatively to the
Invoice total this is more clearly stated. Then the payer easily sees that if he carries the
invoice over to the next penalty period he will have to pay this additional fixed amount as well
as the penalty percentages.
Elements and classes
The following table show the most used elements in the payment terms class with their English
name as well as in Icelandic.
ID A reference for the payment terms within the invoice.
PaymentMeansID A referece to the payment means that must be used so
that the terms apply.
Note Free text note for describing the payment terms.
SettlementDiscountPercent Percentage to be applied in the case of a discount.
PenaltySurchargePercent Percentage to be applied in the case of a penalty.
Amount Amount to be added to or deducted from invoice.
SettlementPeriode / StartDate The date from which the specific term applies.
SettlementPeriode / StartTime The time from which the specific term applies.
SettlementPeriode / EndDate The date to which the specific term applies.
SettlementPeriode / EndTime The time from which the specific term applies.
SettlementPeriode / Description Free text description of the settlement period.
PenaltyPeriode / StartDate The date from which penalty charges should be calculated
if other than the start of the settlement period.
PenaltyPeriode / EndDate The date to which penalty charges should be calculated if
other than the end of the settlement period.
Following is a detailed description for the use of the Payment Terms class.
If the class is not provided in the message general payment terms agreed between the buyer
and the seller apply.
The Payment terms ID number is used to identify different payment terms.
Payment Terms are applied by validity period and/ or ID number sequence. It is therefore
practical to use running numbers as payment ID. For example 1, 2, 3 etc. where the value “1”
If there are different penalty interest periods, for example one rate applies to the period
”31.03.2007” and another rate for the period ”30.09.2007” the first rate should have the
lowest ID value and so on.
The PaymentMeansID gives a reference to the means of payments that can be used for the
specific payment term. For example if there is a certain payment term that applies for direct
deposits but another if the payer uses a payment card. This requires specification of 2
payment terms and 2 payment means.
If PaymentMeans ID is specified the PaymentTerms should only be applied when that
PaymentMeans is used.
Free text describing the payment terms. For example ”Current month + 30 days”.
A fixed amount, positive or negative, to be added to the LegalTotal / PayableAmount. The
amount is cumulative for consecutive payment terms.
The settlement discount rate (percentage) offered for payment within the settlement period.
The discount is pro rata pr. day.
Settlement discounts are not cumulative so if a payment is made in an earlier period a
discount stated for the next period has no relevance.
The penalty rate (percentage) charged for late payment
Penalty surcharge percentages are cumulative so that percentages applied in consecutive
periods should be added up and paid by the payer.
Specifies the period of time during which the specific Payment terms apply. If no settlement
period is specified it is assumed that the period starts from the due date and has indefinite
Specifies the dates that should be used when calculating penalty interest for the given
PaymentTerm. For example if due date is 01.jan 2006 but the terms specify that penalty
interest should not be applied until 15. January 2006 but at that time calculating from the due
date. The PaymentTerms start date would then be 15. January but the penalty period start
date would be 01. January
If the invoice is paid after the 25. of January 2006 there is a fixed late payment charge of 2
EUR and penalty surcharge of 10%.
<cbc:Note>If payed after due date there are penalty charges.</cbc:Note>
An invoice is issued on 01/01/06. Due date is 15/01/06. Penalties are charged from 25/01/06
but calculated from the due date. If the invoice is paid 10 or more days before due date there
is a 5% discount. Penalty charges are 10%. When penalty charges start there is a 5 Euro fixed
charge. 30 after due date there is an additional 10 Euro collection charge and penalty interest
is raised to 15%.
<cbc:Note>Discount if paid 10 days before due date or earlier</cbc:Note>
<cbc:Note>If paid within 30 days after due date.</cbc:Note>
<cbc:Note>If paid later than 30 days after due date</cbc:Note>