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8. Types of Payment Advices Types delivered with the system: Account Statement EDI Bank Lockbox Manual
9. Automatic Handling of Payment Differences Payment Difference Detected How to Handle the Difference: Write off to a G/L Expense Account (Charge Off Indicator is set) Or Generation of a New Item (Charge Off Indicator is not set) Reason Code
10. Lockbox Processing Bank: Checks Cleared Documents BAI: Bank Administration Institute A Payment Advice is created for each check. Lockbox File (Format) Payment Advice Database
11. Lockbox Processing Key Reports: RFEBLBT1 : Generates pre-programmed test data (for internal use only) RFEBLB00: Imports data into lockbox processing RFEBLB20: BAI format processing RFEBBU00: Post account statement / check deposit listing Key Tables: T049A: Destination and origin definition (“Who”) T049B: Format definition (of EDI, BAI, etc.) (“How”) T049C: Evaluation of Autocash Tapes (creation date and time) (output - results) T049L: Link to House Bank table for Lockbox Master
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Editor's Notes
As a result of this chapter, you should be able to: Enter an incoming payment in full. Process payment differences within tolerance. Process payment differences out of tolerance using partial payment and residual payment functionality. Enter a manual Payment Advice and use it to clear open items. Use reason codes to automatically resolve payment differences.
This slide depicts the data entry screen for an Incoming Payment. Notice the following: Document Type DZ defaults because this is the Document Type for an Incoming Payment. Mandatory fields include the Document Date, Account Number for the bank and the Account Number of the Customer. The Account Type D defaults because this is the Account Type for Customers. Posting of an Incoming Payment will create an accounting entry, which will debit an appropriate G/L Cash Account and credit the appropriate Customer (sub-ledger) Account. At the same time, a credit is posted to the G/L Reconciliation Account assigned to the Customer Account.
For the illustrated business transaction, it is necessary to select the Customer Invoice to which this payment is to be applied because a Customer Account can contain numerous outstanding invoices. In this case, the Process Open Items push-button must be used to apply the payment. Entering an Incoming Payment and applying it to an open Invoice may also be referred to as processing the Customer open item or clearing the Customer open item. The concept of clearing is discussed in detail in Chapter 14: Document / Account Maintenance.
To process an open item, it must be selected. There are several ways to select open items: The number of displayed open items can be limited by using the Additional Selections that are indicated on the Header Data entry screen. Set the system to list all open Line Items as selected. Set the system to list all open Line Items as deselected and the user must: double-click on the appropriate Line Item to activate it. Use the Edit / Find function and the system selects the open item(s) that equal the amount of the payment entered in the first screen. The line items must be deselected for this feature to work. Note: The initial status of the open line items (i.e., (de)selected) is controlled through Editing Options. For an Incoming Payment (or clearing document) to post, the Not Assigned field must either be zero or fall within the tolerance settings for that Employee and Customer. Open items can be selected from other accounts as well by selecting Edit/ Select More. This feature is useful when a customer sends a single payment for open items in multiple company codes.
If the incoming payment exceeds the tolerances for the Employee and Customer, the payment can still be processed as a partial payment or residual payment. (manual process). A partial payment leaves the original invoice intact and creates a credit in the customer account for the amount of the partial payment. No items are cleared as a result of a partial payment. The System automatically updates the Invoice Reference and Allocation fields when a partial payment is posted. A residual payment results in clearing the original invoice and creating a new open item for the difference between the payment and the original invoice. Whether cash discount is granted completely or partially and which terms of payment apply to the residual payment depends on the Tolerance Group of the Customer.
A Payment Advice contains detailed information about an incoming payment. The information is necessary for the matching of the payment and the open item. This information can be: Amount Payment Date Reasons for Underpayment Document Number The payment advice is used for the automatic search and matching of open items during the clearing process. Instead of selection entries when processing payments, it is only necessary to provide the payment advice number.
It is possible to send and receive EDI payment advices with an SAP system and use the advice information for clearing. The exchange of EDI information is handled by an EDI subsystem. Advantages of EDI include: Early notice of payment Structured clearing information Paperless communication This functionality permits the exchange of payment advices with the line item information between trading partners. The aim is to obtain an “early notice” about incoming payments and “structured clearing information” that is not provided in the bank statement. If the sender is an SAP system, the Payment Program can, instead of printing paper advices, trigger the sending of EDI advices. The Payment Program calls an ALE (Application Link Enabler) function that sends an EDI payment advice via an EDI sub-system. The precondition for sending EDI payment advices is that the EDI information in the Customer/Vendor master record and a partner agreement (what, when, and how often messages are sent) is maintained. The receiving SAP system obtains its payment advices from an EDI subsystem and stores them in a database for further processing.
Payment Advices are categorized by the first two digits of the Advice Number: 01: Lockbox Advice 02: Advice from an Account Statement 03: Advice created during manual clearing 04: Manually entered advice 05: Bank Advice 06: EDI Advice Payment Advices from the Lockbox file are created during the clearing process. They are kept regardless of whether clearing is successful or unsuccessful. Advices from the electronic bank statement are only created automatically if clearing was successful. Other Payment Advices are automatically deleted if clearing is successful.
To automatically resolve payment differences within a Payment Advice, each item on a Payment Advice, which contains a payment difference can be classified with a Reason Code . Reason Codes can be configured to determine how the payment difference is handled. If the Charge Off Indicator is set, the payment difference is charged-off to a G/L Expense / Revenue Account. The G/L Account and posting rules for each Reason Code are configured in the Implementation Guide (Chart of Accounts dependent). The Reason Code can be configured to include a Correspondence Type sent to the customer in the event of a payment difference. If the Charge Off Indicator is set, a new item is created for the amount of the difference. If the Disputed Item Indicator is set those items with a difference will not be counted against the credit limit assigned to the Customer. Reason codes can also be used in regular payment processing (without Payment Advices).
Lockbox processing is a system mainly used in the US to accelerate payment receipt and check processing. The bank enters checks sent by customers as credit memos and notifies the payee via file transfer. The system imports the Lockbox File in BAI (Bank Administration Institute) format into the bank data memory and generates for each check a Payment Advice in the Payment Advice database. The system then posts the transactions to the General Ledger via batch input. Lockbox processing is configured within the Treasury module.
Interest calculation is controlled by settings made in the interest indicator. An interest indicator can be assigned to the master records of the customer and vendor accounts. When executing an interest calculation run, further specifications can be made that have priority over the settings in the interest indicator.
Clearing - The process of matching open debit entries with open credit entries. Partial Payment - A process of handling a payment difference out of tolerance where the original invoice is left intact and a credit is created in the Customer Account for the payment amount. No items are cleared as a result of the process. Residual Payment - A process of handling a payment difference out of tolerance where the original invoice is cleared and a new open item for the amount of the difference is created. Payment Advice - A system document that contains detailed information about an incoming payment, which is used for the automatic search and matching of open items during the clearing process. Reason Code - A system value used to automatically classify and resolve out of tolerance customer payment differences Lockbox Processing - A system mainly used in the US to accelerate payment receipt and check processing.