Details of Accounts Receivable process in Accounting

1. Accounts Receivable Process
The Accounts Receivable
process starts with the shipment
of the goods to the customer.
When this occurs, the shipping
department automatically causes
SAP to send a bill to the
customer by integrating customer
master data with the shipment
data. This transaction also posts
to the Accounts Receivable
subsidiary ledger and also to the
reconciliation account. The
billing to the customer may be on
paper or by EDI.
This entry into the accounts
receivable system sets up the
account for the terms of sale and
also starts the clock running for
the dunning procedure.
When the customer pays the bill,
which may be by check or to a lockbox or by electronic transfer and EDI, the remittance advice
applies the cash paid to the open items on the account.
Accounts Receivable Management with SAP
Accounting Organizational Structure
Some important concepts:
 Client--A self contained unit for technical purposes. Usually refers to the overall
enterprise managed with SAP
 Chart of Accounts--The list of accounts that are posted to everyday.
 Legal Entity--A unit with external reporting requirements, usually a corporation.
 Business Area--A subdivision of a Company Code along the lines of the business, or a
division. Used for internal reporting and profitability analysis

2. Sales Areas: A sales area is a combination of sales organization, distribution channel and
division.

3. The Reconciliation Account and Subledgers:
 The General Ledger records all G/L accounts. The Chart of Accounts is used to organize
these accounts. The Income Statement and Balance Sheet are created from the General
Ledger
 Individual G/L reconciliation accounts are recorded in detail in the Subsidiary Ledgers
and summarized in the General Ledger. Important subledgers are maintained for:
o Accounts Recievable--Customer Accounts
o Accounts Payable--Vendor Accounts
o Asset Accounting--Asset Accounts
 The balance of the G/L accounts is automatically updated when postings are made to a
subledger.

4. The Purpose and Operation of the Reconciliation Account
 The Reconciliation Account is managed as an ordinary account in the G/L component.
 As in all G/L accounts there are two areas which contain master data:
o A chart of accounts area
o A company code specific area
 The chart of accounts area consists of specifications that are necessary for functions
across company codes. The company code-specific area contains data that may be
defined differently in each company.
 In all reconciliation account master records, line item display is deactiviated and a special
entry is made to indicate that the G/L account is a reconciliation account
 The required reconciliation account is entered in the master record of the customer
account.
MasterData
The concept of master data is an important one in data management. Although it may seem
complex at first glance it is the best method to eliminate duplication of data and to ensure
compatibility of data among transactions. Every customer has master data associated with it. It is
defined only once and in only one location, although there is a hierarchy of where that data is
stored.

5.  The customer master record is made up of three main areas that contain the following
information:
o General Data including the customer's bank details [at the client level]
o accounting data [at the company code level]
o sales data [at the company code level
 Data that exists at the client level is available to all company codes. Since numbers are
assigned to accounts at this level, a customer receives the same account number in all
company codes.
 Individual company codes store their own information on customers at the company code
level.
 Before you create a new customer master record, you should check whether the customer
already exists in the system.
Details on Master Records
Account Groups:
 The Account group controls the numbering and screen layout of master records
 You can define several account groups for one account type (D,K,S)
 You must assign an account group to every master record.

7. Address and Communications:
On the first screen of the customer master record basic data on the customer is listed. This
includes addresses and important numbers for communication. This data is entered at the client
level. Additional information can also be entered at the company code level. To prevent a
customer from being created twice in your system, you need to determine who in your
organization is responsible for creating new customers. Initial contact with a new customer will
probably be made by the Sales Organization and the master record will need to be completed by
the accounting and finance functions.

8. Bank master data includes the following items to facilitate payments to or from the customer by
check or EDI.
Account Management and Reconciliation Account
On the next screen of the master record you store the information that is relevant to accounting at
the company code level. This is a critical link between the sales data and the general ledger
systems.

9. Payment Transaction Data:
The following screen sets the parameters for the accounts receivable administration of the
customer. Payment term groups are defined in the IMG and are assigned to this account.
Likewise, tolerance limits for over and under payments of items are defined in the IMG and
assigned to the account. The days specified for check cashing time are inmportant for the
treasury and cash management modules. There are also fields for payment methods and lockbox
codes which have been defined in the IMG and assigned to this account.

10. Dunning Data:
The next screen shows the entries for setting up dunning for the account.

11. Summary: Creating and maintaining customer master records are of critical importance in SAP.
New customer masters can be created by using a reference from another account and simply
changing the relevant data. Much of the data can be automatically filled in by a pattern created
by a Group key which can be selected at the beginning of the generation process.
Navigation Guide
Accounts Receivable Structure and Master Data
Information about Posting
Retrieving Account Data
SD and Financial Accounting Integration
Lockbox Processing
Manual Postings
Dunning
Reporting and Information Systems
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