What is Payment schedule
A Payment Schedule in Microsoft Dynamics 365 F&O is a process to split a single invoice into multiple payments over time. Instead of paying the full amount at once, the invoice is divided into smaller installments based on an agreed schedule.
It works for both customer invoices and vendor invoices. Payment schedule in D365.
Steps to create payment schedule
1. Payment schedule creation
Create a Payment Schedule
Go to: Accounts Payable/Receivable > Payment setup > Payment Schedules
Choose how the invoice should be divided. There are 4 methods:
A) Total – The total invoice amount is divided equally across the payment schedule installments.
B) Fixed quantity – If applicable, the payment schedule is divided based on a fixed quantity of goods or services delivered per installment.
C) Fixed amount – Each payment installment within the schedule will be the same predetermined amount, regardless of the total invoice value.
D) Specified – You can manually define the exact amount for each payment installment within the schedule.
This document will cover the most used allocation method i.e. Fixed quantity. According to this allocation
method the invoice amount will be divided into no of equal installments.
Example:
If an invoice is $ 10000 and the schedule is for 5 months, the system will split it into $2000 per month.
Create the new payment schedule as per the image below;
Explanation of Payment Schedule Fields
- Allocation – Defines the method used to split the invoice amount into installments.
- Payment per – Specifies the timeline for each installment (e.g., monthly, quarterly).
- Change – Determines how frequently the installments are due.
- No. of payments – The total number of installments for the invoice.
- Sales tax allocation & Charge allocation – Defines how taxes and additional charges will be distributed among installments. Options include:
- Proportionally – Taxes/charges are distributed across all installments.
- First installment – Taxes/charges are applied only to the first installment.
- Last installment – Taxes/Charges are applied only to the last installment.
2. Apply payment schedule on the Invoice:
The payment schedule can be applied to the following:
- Free Text Invoice (FTI)
- Invoice Journal
- Purchase Order (PO) / Sales Order (SO)
It can be applied in two ways:
Automatic Application
- Assign the payment schedule to the payment terms.
- Link the payment terms to the customer or vendor master.
- The system will automatically apply the payment schedule when an invoice is created.
Manual Application
- Before creating an invoice, you can manually select a payment schedule on:
- Purchase Order (PO) / Sales Order (SO)
- Invoice Journal
- Free Text Invoice (FTI)
- Before creating an invoice, you can manually select a payment schedule on:
Application on invoice journal
Application on Free text invoice
Manual payment schedule application process
Let’s check how manual payment schedule in D365 works
Before posting an Invoice:
- Create and post a free text invoice by selecting the payment schedule (6 MONTHS).
- After posting free text invoice, the invoice will be divided into 6 lines in the customer settle transaction form automatically.
- Navigate to customer settle transaction form.
- Mark the Invoice and click on apply payment schedule
- click on payment schedule and select required payment schedule option
- Then the amount will be divided into 6 months based on the due date
Summary
A Payment Schedule in Microsoft Dynamics 365 Finance & Operations (D365 F&O) allows businesses to split an invoice into multiple installments based on applying a predefined schedule in F&O. This feature helps to manage cash flow efficiently by enabling structured payments for both customers and vendors.
Benefits:
✔ Improves cash flow management.
✔ Reduces lump sum payment burden.
✔ Automates installment tracking in Dynamics 365 F&O.
Special thanks to Santosh Kumar for his contributions to this post!
Connect with him on LinkedIn: Santosh’s LinkedIn Profile
