When it comes to paying invoices, it’s fairly normal for there to be small discrepancies in the amount owed and the amount paid. This might be due to rounding differences. In Business Central, users can establish a payment tolerance threshold which allows users to close invoices that haven’t been fully paid. In today’s post, we will cover how to create payment tolerances in Business Central. We will then demonstrate an example of this functionality.

To begin, go to the General Ledger Setup page. In the ribbon, click ‘more Options’, ‘Actions’, ‘Functions’ and ‘Change Payment Tolerance’. When you do this, it’ll open a subpage:

This image shows the subpage that appears after you click Change Payment Tolerance on the General Ledger Setup page. On this subpage, you can define the Payment Tolerance % and the Max. Pmt. Tolerance Amount. As well as this, you can define whether any tolerances you create apply to all currencies, and if not, which currency they do apply to.

On this screen, you can define whether this applies to all currencies you handle, as well as the percentage tolerance. Finally you can define the Max. Pmt. Tolerance Amount. Personally, as you can specify the Currency Code you wish for these values to apply to, I think it’s safer to do it on a currency-by-currency basis. After defining the values for these fields, you’ll get an option to apply these changes to existing open entries:

This image asks you whether you wish to change the payment tolerance thresholds to existing entries.

After clicking ‘Yes’ or ‘No’ to the above question, stay on the General Ledger Setup page and go to the Application tab.

Interestingly, the Payment Tolerance % and Max. Payment Tolerance Amount fields here are greyed out. You must input the values using the aforementioned ‘Change Payment Tolerance’ action.

Payment Tolerance Warning

The Payment Tolerance Warning allows you to define whether or not you wish to be warned about processing payments that don’t match the invoice amount. If you enable this field, it’ll notify you that the amounts don’t match and you can choose how to proceed. If you have set payment tolerance percentages, with this field disabled, it’ll automatically process the payment tolerance, assuming it falls within the specified range. We recommend enabling this and for the purpose of demonstrating this functionality, it is here.

Payment Tolerance Posting

The first field to note is the Payment Tolerance Posting field. This allows you to specify where to post tolerance amounts to. You can choose between two accounts – Payment Tolerance Accounts or Payment Tolerance Discounts.

When choosing between these two, it’s important to identify which accounts these two values relate to. On the Customer Posting Groups page, scroll across to the Payment Tolerance Debit and Payment Tolerance Credit Acc.

Applying payment tolerances in Business Central

I have a Posted Sales Invoice amount of £20,000.00 below:

This image displays a line on a Posted Sales Invoice, specifically the Line Amount Excl. VAT value of 20,000.00.

On a Cash Receipt Journal line, after applying the appropriate invoice number, I amended the Amount value to 19,999.50, meaning the customer has left out 50 pence. When I input that value, prior to clicking anything else like ‘post’, the system loads up this subpage:

This image shows the Payment Tolerance Warning in full effect. After enabling it, when you go to input a value in the Amount field of a Cash Receipt Journal, the system prompts you whether you'd like to write off the rest of the amount not paid on the invoice or keep it as a remaining amount to be paid. This image displays those two options.

It’s prompting me to make a choice: accept this as full payment or leave a remaining amount to be paid in future. As I mentioned earlier, if I didn’t enable the warning, the system would’ve seen this value fell within the allowed tolerance and written off the remaining amount automatically.

If you post a Cash Receipt Journal amount that falls outside of the exceeded range, the system won’t ask whether you want to write off the excess amount. Remember, it must be within both the Payment Tolerance % and Max. Pmt. Tolerance Amount value. So for example, If I had a Posted invoice of £100, I could post a Cash Receipt Journal Amount of £95 without the system prompting me whether I want to write off the remaining £5. Despite it being within the Max. Pmt. Tolerance Amount threshold, it equates to more than 0.1% of the total value of the order. This means it doesn’t satisfy both conditions.

Block Payment Tolerance in Business Central

For both customers and vendors, you can choose on an individual basis whether to block payment tolerances. This might be a useful tool to manage customers that have a habit of routinely underpaying. To do so, simply toggle the Block Payment Tolerance field on each record you wish to apply this for.

This image shows the Block Payment Tolerance field, located in the Payments tab of both Customer and Vendor cards.

Closing remarks

Thanks for reading. Hopefully this will come in handy. Whilst it’s not an unusual request to write off small balances, it’s not always clear to users how to do so. That’s why we figured it was a useful post to write.

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