Note: accrual basis company.
A client has 60 day net terms and offers an early payment program, where the discount is variable based on market rates and days paid early (DPE). This means the discount isn't known until funds are pulled.
To apply this discount, historically we've used the % / $ discount line item directly on the invoice. And the majority of the time, funds are pulled before the month-end close in which the invoice was issued, so the effects on the Income Statement aren't relevant/noticeable.
However there can be an instance where an invoice is left longer, i.e. to reduce the DPEs/discount taken, and as such, going back and using that discount feature on an invoice in a month that's been closed will impact the reporting, since the revenue is based on when the invoice was issued. In short, it would decrease the revenue of the closed month.
So since the discount feature will directly impact the income of the month in which the invoice is issued, would a credit memo be the best way to avoid impacting a closed month? Even if you want the discount to amend the closed month's revenue, is a credit memo the best way to do that post-close, since there's more transparency?
