Payment terms define the conditions to pay an invoice. They apply on both customer invoices and supplier bills.
Example, for a specific invoice:
Pay 50% within 10 days
Pay the remaining balance within 30 days
Payment terms are different from invoicing in several times. If, for a specific order, you invoice the customer in two parts, that's not a payment term but invoice conditions.
Configure your usual payment terms from the Configuration menu of the Account application. The description of the payment term is the one that appear on the invoice or the sale order.
A payment term may have one line (ex: 21 days) or several lines (10% within 3 days and the balance within 21 days). If you create a payment term with several lines, be sure the latest one is the balance. (avoid doing 50% in 10 days and 50% in 21 days because, with the rounding, it may not do exactly 100%)
Using Payment Terms
Payment terms for customers
Payment terms can be set on:
A customer: to apply this payment term automatically on new sale orders or invoices for this customer. Set payment terms on customers if you grant this payment term for all future orders of this customer.
A quotation: to apply this payment term on all invoices created from this quotation or sale order, but not on other quotations
An invoice: to apply the payment term on this invoice only
If an invoice has a payment term, the journal entry related to the invoice is different. Without payment term or tax, an invoice of $100 will produce this journal entry:
In the customer statement, you will see two lines with different due dates.
Payment terms for vendor bills
The easiest way to manage payment terms for vendor bills is to record a due date on the bill. You don't need to assign a payment term, just the due date is enough.
But if you need to manage vendor terms with several installments, you can still use payment terms, exactly like in customer invoices. If you set a payment term on the vendor bill, you don't need to set a due date. The exact due date for all installments will be automatically created.