SAP Financials Concept of Lock Box

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This document explains about the Concept of Lock Box in SAP ERP Financials.

This document explains about the Concept of Lock Box in SAP ERP Financials.

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  • 1. SAP ERP Financials CONCEPT OF LOCKBOX- INCOMINGS LOCKBOXPrepared By: Ms.Pramila Nagaraj First Class MBA Finance Graduate (2009-10) Global Academy of Technology, Bangalore (VTU- Belgaum) Trained up in SAP FICO @ SAPTAC Bangalore (FRESHER)
  • 2. SAP FINANCIALS/CONTROLLING © SAPTAC BANGALORE SAP ERP Financials Concept of Lockbox (Incomings - Lockbox)PurposeThis page is intended to explain the basic characteristics of LockboxOverviewA company can create accounts called lockbox at its bank (or banks) that act aspayment collection accounts for customer payments. The company then informs theircustomers that all open item payments for their accounts must be submitted to one ofthe established bank lockbox accounts. The bank collects these payments along withthe customers remittance information that indicates what open items the customerpayments intend to clear. Data entry clerks at the bank manually enter the informationinto an electronic file for transmission to the company to which the lockbox accountbelongs. These files are typically transferred nightly to the various lockbox owners(companies). The files adhere to one of two standard banking industry transmissionformats: BAI, BAI2 (Bank Administration Institute).Advantages of LockboxFollowing are some of the advantages of using the lockbox:Manual Handling of checks can be avoidedChecks can be processed in time.Easy reconciliationClearing Errors can be avoidedDifference between BAI and BAI2BAI and BAI2 formats differ in their level of information detail. BAI does not separate outthe incoming check line items by invoice subtotal reference. Instead, one check totalamount simply has all invoices listed underneath it. Thus, in BAI format files, the entirecheck amount must match perfectly (or within configured payment difference tolerances)the total amount for all invoices listed. Otherwise, the entire check will enter into SAPas:an "On account" posting (if the payment and invoice totals dont match), or An"Unprocessed" posting (if no customer account and documents could be identified fromthe transmission).In these scenarios, your Accounts Receivable cash application clerks will have toperform manual application to clear payments against open items on the properaccounts.Conversely, BAI2 splits the check total into separate invoice references and associatedpayment amounts. Thus, within a large batch, BAI2 format files will allow a "Partiallyapplied" status in which some identifiable payments within the check total will bematched and cleared, others will land on account. As a result, your hit rate percentageof payment-invoice matching from each transmission is likely to be higher when usingBAI2 rather than BAI formats. © 2010-2012 ALL RIGHTS RESERVED
  • 3. SAP FINANCIALS/CONTROLLING © SAPTAC BANGALORE FAQ What Bank will do? Bank Receives the payments, create a data file of the customer remittance information and payment amounts, and deposit the checks into client bank account. On regular basis, Client company receives this data file for processing to update in their accounts. What lockbox data file contain? Depending upon the choice of services with the Bank, the lock box file will contain information viz., Customer name, Customer Number, Customer MICR number ( Bank routing and Account Number), Check amount, Invoice number, Payment date, Payment amounts and other information. What is the Lockbox Data Flow? Customers send their payments to a lockbox. Then bank collects the data and sends (either through EDI 820 and 823 formats) to R/3 users EDI server (standard Process). The server translates the message using as standard EDI interface into an IDOC (Intermediary documents) and sends it to the SAP Server. What happens in SAP server? Once the message is received and stored in SAP table, a program is clicked (RFEBLB30 or FLBP transaction) to check the information stored in bank statement tables and create payment advices with Payment amount, invoice numbers and customer number. Payment advice processing Matching of customer open items The lockbox program uses detailed information from the payment advice to automatically search and match customer open items. The document number on the payment advice is matched against the document number in the customer open item file. Therefore, accurate payment data is necessary for automatic clearing to take place. Payment Advice Status If the checks were applied or partially applied, the advice is deleted from the system after processing. If the check was unprocessed or placed on account of customer, the advice is kept on file for further processing. Post Processing The post process function entails reviewing the status of the checks applied through the lock box function. User must manually clear any checks that were on-account of customer or not applied to customer account. The Lockbox overview screen details the number of checks in each category. Depending on the status of the check, the user determines what needs to occur to apply checks.  On Account: If the bank keyed in the correct invoice number, the Lockbox Import Program posts the payment on account. In the post processing step, you access the payment advice and correct the document number and upon saving the changes, the post process function clears the open item, deletes the payment advice and sets the check status to apply.  Partially Applied: Checks that are partially applied may require further processing. Ex: Check may have paid 5 invoices, but one was incorrectly keyed. The first 4 invoices would clear. The payment amount for the 5th invoice would be put on-account and would have to be post processed to clear. © 2010-2012 ALL RIGHTS RESERVED
  • 4. SAP FINANCIALS/CONTROLLING © SAPTAC BANGALORE  Unprocessed: Any payment that could not be identified either by customer MICR number (check) or the document number would remain Unprocessed. Once the payment is researched and the customer and invoice is identified, it would be applied during post processing.Configuration1. Define House BanksSAP IMG -> Financial Accounting -> Bank Accounting -> Bank Accounts -> DefineHouse Banks (Transaction Code: FI12)2. Define Lockboxes for House BanksSAP IMG -> Financial Accounting -> Bank Accounting -> Bank accounts -> DefineLockboxes for House Banks3. Define Control ParametersSAP IMG -> Financial Accounting -> Bank Accounting -> Business Transactions ->Payment Transactions -> Lockbox -> Define Control Parameters4. Define Posting dataSAP IMG -> Financial Accounting -> Bank Accounting -> Business Transactions ->Payment Transactions -> Lockbox -> Define Posting dataAfter preparing the lockbox file (for test purpose) execute the following transaction to testthe lockbox configuration:FLB2: Import Lockbox FileFLB1: Post processing Lockbox Data © 2010-2012 ALL RIGHTS RESERVED
  • 5. SAP FINANCIALS/CONTROLLING © SAPTAC BANGALORE BAI2 Format for Lockbox Purpose The purpose of this page is to clarify the understanding of the BAI2 format for lockbox, such as characters and segments of the file. Overview A wider knowledge about the file structure you are uploading to your SAP ERP allows you to avoid many problems those looks like to be application issues. In the following sections you will be able to understand better the BAI2 structure. BAI2 Structure Record 1 - Header Record 2 - Service Record 5 - Detail Header Record Record 6 - Detail Record Record 4 - Overflow Record Record 7 - Batch Total Record (Some banks process groups of checks in batches) Record 8 - Lockbox Total Record Record 9 - Trailer Record © 2010-2012 ALL RIGHTS RESERVED
  • 6. SAP FINANCIALS/CONTROLLING © SAPTAC BANGALORE Detailed information regarding each record can be found through Transaction Code SE11: FLB01 - Header FLB02 - Service © 2010-2012 ALL RIGHTS RESERVED
  • 7. SAP FINANCIALS/CONTROLLING © SAPTAC BANGALORE FLB05 - Detail Header Record FLB26 - Detail Record © 2010-2012 ALL RIGHTS RESERVED
  • 8. SAP FINANCIALS/CONTROLLING © SAPTAC BANGALORE FLB24 - Overflow Record FLB07 - Batch Total Record © 2010-2012 ALL RIGHTS RESERVED
  • 9. SAP FINANCIALS/CONTROLLING © SAPTAC BANGALORE FLB08 - Lockbox Total Record FLB09 - Trailer Record © 2010-2012 ALL RIGHTS RESERVED
  • 10. SAP FINANCIALS/CONTROLLING © SAPTAC BANGALORELockboxBasic Steps in Configuring the Lockbox1. Maintain Control Parameters -OBAY2. Maintain Posting Data - OBAX3. Create Lockbox Addresses for House Banks - OB10 & FI12Steps in processing of the Lockbox files1. Test Data Generation for the Lockbox Program - RFEBLBT2 and RFEBLBT3.2. Importing of the Lockbox file - FLB23. Display the documents posted -4. Post Processing - FLB1 © 2010-2012 ALL RIGHTS RESERVED