Overview
If your business is underwritten by Settle, you’ll be able to apply Extended Payment Terms (EPT) to qualifying invoices. When EPT is applied, Settle will pay your vendor upfront, and you’ll pay a fee to defer your payment to Settle by 30-120 days.
Applying EPT shifts financial liability from your vendor to Settle. In order to ensure your connected bookkeeping software stays up to date, we adjust your accounting ledger to reflect this shift in liability.
The EPT sync process
What Settle creates
New Accounts: When EPT sync is enabled, Settle will add the following to your Chart of Accounts in Quickbooks:
"Settle Clearing Out" - a "cash" account, used to mark the synced Bill as paid
"Settle Loans Payable" - a current liability account, used to represent the EPT principal amount owing to Settle.
Settle Loans Payable will be used to default, but you can re-map this to a different liability account by going to Settings > Integrations > View Preferences
EPT Fee Invoice: An EPT fee invoice is generated within Settle to represent fees owed to Settle.
EPT Loan Principal: When you use Extended Payment Terms, Settle pays your vendor upfront for a fee. The amount Settle pays to your vendor is known as the principal and will correspond to the vendor invoice amount. Principal is accounted for differently than the fee invoices above - please refer to the illustration below for a walkthrough.
Under Integration Preferences, select an account from your Chart of Accounts to map these fees to. We suggest using a Liability type account.
Turning the Sync On or Off:
The EPT sync feature can be toggled on or off under Settings > Integrations . View Preferences. The "start date" corresponds to when the checkbox was previously enabled by an Admin in your organization. It is also recommended that you designate an account to sync uncategorized invoices to prevent sync errors.
Quickbooks Integration:
For a high-level summary of events involved in EPT:
See this help doc
The following table breaks down the events involved in the EPT sync into journal entries, so that you can understand what impact each event or object has on your financials:
Step 1:
Invoice from The North Face uploaded to Settle. The invoice is due to the vendor on 1/15/2022. Bill is synced to QuickBooks.
Date | Account | Vendor | Amount | Object Synced to QBO |
1/1/2022 | Debit (Dr.) Office Supplies Expense | The North Face | $1,000 | Bill |
| Credit (Cr.) Accounts Payable | The North Face | ($1,000) | Bill |
Step 2:
You decide to extend this invoice. Settle creates a fee invoice and a Bill is synced to QuickBooks.
Date | Account | Vendor | Amount | Object Synced to QBO |
1/15/2022 | Debit (Dr.) Interest Expense | Settle | $15 | Bill |
| Credit (Cr.) Accounts Payable | Settle | ($15) | Bill |
Tip: For customers who use Settle in conjunction with other two-way syncing bill payment softwares, we will include a memo on the bill that says “No Action Required: Invoice scheduled to be paid in Settle”. This is a reminder that if the Settle bills get pulled into your other software, that you do not need to take any action to pay them outside of Settle.
Step 3:
You pay Settle for the fee invoice created above. A Bill Payment is synced to Quickbooks.
Date | Account | Vendor | Amount | Object Synced to QBO |
1/15/2022 | Debit (Dr.) Accounts Payable | Settle | $15 | Bill Payment |
| Credit (Cr.) Cash | Settle | ($15) | Bill Payment |
Step 4:
Liability shifting JE. We reclassify the payable from The North Face to Settle, since we've paid The North Face on your behalf, and you now owe Settle the $1,000.
Date | Account | Vendor | Amount | Object Synced to QBO |
1/15/2022 | Debit (Dr.) Accounts Payable | The North Face | $1,000 | Journal Entry |
| Credit (Cr.) Settle Loans Payable | Settle | ($1,000) | Journal Entry |
Step 5:
The original Bill to The North Face is marked as paid through a zero-dollar Bill Payment.
Date | Account | Vendor | Amount | Object Synced to QBO |
1/15/2022 | Debit (Dr.) Accounts Payable | The North Face | $0 | Bill Payment |
| Credit (Cr.) Settle Clearing Out | The North Face | ($0) | Bill Payment |
Step 6:
Upon maturity of the EPT loan, we record the repayment made to Settle.
Date | Account | Vendor | Amount | Object Synced to QBO |
2/15/2022 | Debit (Dr.) Settle Loans Payable | Settle | $1,000 | Journal Entry |
| Credit (Cr.) Cash | Settle | ($1,000) | Journal Entry |
The following screenshot illustrates the General Ledger impact upon transaction completion. The net effect is that you've repaid Settle $1,015, and incurred $1,000 of Office Supplies expense, and $15 of Interest Expense.
