Invoice Discounting in ERPNext
Invoice Discounting is the practice of using a company’s unpaid sales invoices as collateral for a short-term loan issued by a bank or financial institution.
It helps businesses get immediate liquidity by converting receivables into cash before customers actually pay.
Access Path
You can access Invoice Discounting in ERPNext at:
Home > Accounting > Banking and Payments > Invoice Discounting
1. Prerequisites
Before creating an Invoice Discounting entry, ensure the following accounts are created:
- Short Term Loan Account (under Current Liabilities > Loans)
- Bank Account Charges (Expense Account)
- Accounts Receivable Credit Account
- Accounts Receivable Discounted Account
- Accounts Receivable Unpaid Account
2. How to Create Invoice Discounting
- Go to Invoice Discounting list and click New.
- Enter Posting Date and Loan Start Date.
- Define Loan Period in days.
- Select invoices manually or click Get Invoices.
- Select Short Term Loan Account, Bank Account, and Bank Charges Account.
- Select receivable control accounts (credit, discounted, unpaid).
- Save and Submit the document.
- Click Disburse Loan to create a Journal Entry.
3. Loan Disbursement
After submission, ERPNext redirects to a Journal Entry for loan disbursement.
4. Features
4.1 Get Invoices
- Filter by Customer
- Filter by Date Range
- Filter by Invoice Amount range
4.2 Closing the Loan
When repayment is done before or at maturity, click Close Loan to generate a Journal Entry.
4.3 Auto Ledger Adjustment
If the loan is not repaid within the loan period, ERPNext automatically moves balances from:
- Accounts Receivable Discounted Account → Accounts Receivable Unpaid Account
This is handled via scheduled background jobs for accurate tracking.
5. Accounting Impact
- Receivables are moved to discounted receivable accounts
- Bank loan liability is created
- Bank charges are booked as expenses
- On closure, loan and receivables are reconciled
