Settlement discounts are discounts which are given to a customer for the early payment of an invoice. If a payment is received from your customer within the number of days negotiated then the discount may be deducted from the invoice value.
This serves as an incentive for early payment from your customer, which in turn will improve your cash flow. You can create different types of Settlement Discounts and allocate them to your customer accounts and also select them when processing Customer Documents (e.g. Invoices).