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SAP - Order To Cash - AR Steps
SAP - Order To Cash - AR Steps
Order to Cash supports the entire process chain for a typical sales process with a customer. The
business process encompasses all steps from creating an order, and optionally, based on a
quotation, creation of a delivery, to the billing procedure. During the sales order generation a
credit check for the customer is executed and subsequent handling of blocked sales documents
is demonstrated. An availability check is done followed by product allocation. Product
allocations represent an ordered allocation of production for certain periods, so that a partial
quantity can be delivered if not enough stock is available for further orders. Additionally,
Service Charges are entered manually in the sales order, depending on the quantity of goods
ordered. In delivery processing the delivery is created, the goods are picked, kitted, packed,
shipped and the goods issue is posted. In the billing process that follows, an invoice is created
and released to financial accounting. To complete the process, the customer payment is posted to
clear the accounts receivable.
1. Sales Quotation
2. Standard Order (Execute transaction VA01- Click on Sales tab:1 Clear delivery block /Clear
billing block)
3. Shipping
4. Delivery - (Execute transaction VL01N- Create Outbound Delivery with Order Reference.
Note: You may get delivery block due to Credit Check Procedure to remove credit check block
and release sales document: T code: VKM3 (sales document)Check the Cr.rep. Group and
click the Flag button (release) and click save. You will get message document no:… released.
Then Delivery Create: Overview screen will display. Go toEdit>Incompletion Log and
complete the delivery.
5. Picking: (sending the Inbound I DOC which does the following Delivery-Picking/Post Goods
Issue /Shipment) - VL02N. (Enter Delivery doc. Number, In the Change view Click Picking
Tab enter picking quantity, and batch then executeIf you get a message that batch not in
plant 1042 Procedure to get the correct Batch, go to T code: MMBE
Enter material no: 00336 Plant: 1042 Storage location: 1042 Display version:01,
then enter 1.You get stock over view in Company code/Plant/Storage location/Batch. 2. Select
appropriate batch and go to T Code: there again go to picking tab ,there enter the selected batch
and press Enter.
6. Posting Goods Issue (PGI) Click Post goods issue Tab. Delivery will be saved
7. Billing (Execute transaction VF01- Create Billing Document)
8. Payment of Customer (FD10N for Review Customer Balance - Billing document is an open
item (Execute transaction F-28 / F-32- F-02) Post Incoming Payments- Clearing Customer
Accounts: F-32/ Clearing In coming Payments: F-28/ Clearing Open Items F-02)
Accounting Doc at the time Delivery
You must assign each account to an account group. The account group ensures that only the relevant screens and fields are displayed and
Main Tabs in Customer Master General Data / Company Code data/Sales area data
Under General Data Tabaddress/Control data/Payment transactions
Under Company code TabA/C management/ Payment transactions/Correspondence
Name – Required
Search term –R
Street/House no: -R
Postal Code - R
Enter the Jurisdiction Code
Terms of payment – R
Payment terms that may be applied to the promotion or price
Payment methods – R
Identifies the payment method set up for the vendor
Dunn. Procedure – O - The dunning procedure to be used Example: 0001 – Four-level dunni
Dunn. Recipient – O - Account number of the customer who is to be the recipient of the dunning
Last dunned – O - Date on which the last dunning notice was made
Dunning clerk – O - Identification code
Dunning block –O - The reason for the dunning block
Example: 3 – Damaged product
Done.
B. A/R Transactions
Create Customer Invoice - FB70
Periodic Account Statements - F.27
Maintain Correspondence Request - F.64
Post Incoming Payment - F-28
Clear Customer Account - F-32
Create Customer Credit Memo - FB75
Display Customer Balance - FD10N
Lockbox is a process provided by a bank where the customer remits his payment to a PO
Box at your bank, the bank deposits the check in your account and enters the remittance data
from the customer. Then the bank sends the data to you electronically for you to import and
apply in SAP-AR. The structure that the bank uses is usually one of two formats.
BAI will provide you the customer information and the check amount but no invoice remittance
data. Usually cheaper and works well for a business where customers are paying only one
invoice at a time.
BAI-2 offers remittance data but the bank charges more for the service because they have to
enter more info
When the bank sends the customer payment data you use Treasury function FLB2 to import
and then process the payments.
This process attempts to determine where to apply the payment and will post directly against
an invoice, an account to a customer or if it can't even determine the customer it posts into a
clearing account.
In the customer master under general data in payment transactions Tab: the Bank routing
no., Bank key, and bank a/c no: are required.
Whereas under company code data in payment transaction tab: Details of lockbox are
required. From this the program will come to know that for which lockbox the payment has
come.
7. Based on the file data Lockbox program will create a payment advice per check, and this will be used by the program to
1. Destination and Origin info. Is provided by the bank, and this info. Will be used t
Destination is Bank a/c (GL a/c)
Origin is bank routing number
a. GL posting (Dr. Bank a/c and Cr. Bak clearing a/c (for incoming check)
b. A/R posting (Dr. Bank clearing a/c and Cr. Customer a/c
3. Bank cl. a/c: Enter GL a/c which clears A/R a/c (represent all unapplied (lockbox) paymen
3. Lockbox Procedure:
a. What Bank will doBank 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.
b. 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.
c. Lockbox Data FlowCustomers sends 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.
d. What happens in SAP serveronce 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.
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.
1. Payment Advice Status
a. 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.
b. 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.
c. 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.
d. 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 applied.
Partially Applied: Checks that are partially applied may require further processing. Ex: Check
may have paid 5 invoices, but one was in correctly 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.
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.
e. The standards for lockbox transmission files are defined by the Bank Administration
Institute (BAI). BAI and BAI2 formats differ in their level of information detail.
BAI does not separate out the incoming check line items by invoice subtotal reference.
Instead, one check total amount simply has all invoices listed underneath it. Thus, in BAI format
files, the entire check amount must match perfectly (or within configured payment difference
tolerances) the total amount for all invoices listed. Otherwise, the entire check will enter into
“On account” or “Unprocessed” posting. Later AR clerks will have to perform manual
application to clear payments against open items on the proper accounts.
BAI2 splits the check total into separate invoice references and associated payment amounts.
Thus, within a large batch, BAI2 format files will allow a “Partially applied” status in which
some identifiable payments within the check total will be matched and cleared, others will land
on account.
f. EDI transfers structured data according to agreed message standards between computer
systems by electronic means (based on Set of rules which are agreed upon). Lockbox related
formats are EDI820 and 823
EDI 820 transactions can be an order to a financial institution to make a payment to a payee.
It can also be a remittance advice identifying the detail needed to perform cash application to the
payee’s accounts receivable system. The remittance advice can go directly from payer to payee,
through a financial institution. EDI 820 formats will be used to send information to Vendor
furnishing details of payment for his supplies. In fact EDI 820 is not a lockbox format but can be
used in place of lockbox for customer open item processing. This information however is not a
real payment but only a remittance advice.
D. Dunning
Sending reminders for early payment for overdue line items
Configuration Steps:
a. Basic setting for Dunning
Define Dunning Areas -OB61 - Optional
Define Dunning Keys - OB17
Define Dunning Block Reasons - OB18 - Optional
b. Dunning Procedure
Define Dunning Procedures- FBMP
Define Dunning Groupings - OBAQ -Optional
Define Interest Rates- OB42- Optional
c. Printout
Assign Dunning form (T Code
d. Dunning Run – F150
Basic setting for Dunning
1. Define Dunning Areas -OB61
Dunning Areas is an organizational unit within the company code. The dunning area can
correspond, for example, to a profit center, a distribution channel, a sales organization or a
business area. The individual dunning areas can use different procedures or the same dunning
procedure. The dunning areas with the required dunning procedures are to be entered into the
customer or vendor master record, otherwise, the system uses the standard dunning procedure.
The dunning area is then entered in the line item.
Click new entries, and add new dunning areas – There may be more than one dunning area per
Company Code.
You will get the warning message when you click OK button – Ignore it and save the settings.
You have specified a dunning area for company code 9100. If you want to create dunning notices
for this company code per dunning area, you must also specify the parameters for the company
code when configuring the dunning program.
Dunning Procedure
1. Define Dunning Procedures- FBMP
It is a pre-defined procedure specifying how customers or vendors are dunned.
Besides the main configuration, there are five other segments to be configured for dunning as
dunning procedures. In the main configuration screen we will define the following
Double click on Four-level dunning notice
Dunning Interval in daysyou must determine at which intervals the allocated accounts are to
be dunned for every dunning procedure. During every dunning run, the system then checks
whether the run date is at least this number of days since the date of the last dunning run.
Total due items from dunning levelDunning level from which all due items are to be totaled.
Minimum days in arrears Days in arrears after which a dunning notice will be sent
Line item grace period Grace periods per line item that are taken into consideration during
determination of the due date for the dunning run.
Interest indicator Interest calculation indicator for calc. of dunning interest. This indicator
only becomes effective if there is no interest calculation indicator entered in the master record.
Otherwise the indicator in the master record has priority.
Min. amount: Minimum amount of the overdue items which is necessary to set a dunning level.
Minimum percentage: The minimum percentage is multiplied by the total of all open items on a
particular account. A dunning notice is only created at this level if all the items due at this
dunning level have reached at least the level determined by the multiplication.
Note: Total of all the open items of a Customer account say - $2000
Minimum percentage rate used in editing at dunning level 1- 2%
Amount due as per Minimum percentage rate – 2% of $2000 = $20
Whereas the actual total of open items, which are due, say -$15 (which is below the calculated
amount – So system will not create the dunning notice. If the due amount is above $20, then the
system will create dunning notice at that dunning level.)
Min. Amt. for Interest: Minimum amount to be reached by interest in order to be identified at
this level in dunning notices.
Click Display
Keep the Cursor on Main Window row, and Click Text elements
Save settings
Now Click on Tab
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E. Tax on Sales/purchase
Configuration Steps
- With the access sequence you define the condition tables used to access the condition records
the sequence of the condition tables which field contents are the criteria for reading the tables
Select MWST, and double click the Fields folder on the left
Here we define the steps for determination of Tax from base amount and various dependencies.
Select the TAXUS and double click Control folder
2. Assign Country to Calculation Procedure – OBBG
In this activity we have make necessary specifications for posting taxes. In doing this we have
specify the following indicators under the Process Key
Double click MW1 Process Key
Internal Process Key (Transaction Key) The internal processing keys are used by the system to
determine accounts or posting keys for line items, which are created automatically. The
processing keys are defined in the system and cannot be changed by the user.
Posting IndicatorHere we specify whether the Tax amount is posted separately or distributed
to expense or revenue items.
Procedures Procedures are used in pricing in SD, output control ((printed confirmations, EDI
messages, electronic mail), acct. det., Calculating taxes on sales/purchases, and for costing
(Costing Sheet for Overheads calculation.
LgLength of the state code, the county code, the city code, and a local code.
Tx InDetermination of taxes line by line
DiN Indicates that tax on sales/purchases is not included in the base amount used for
calculating cash discount.
Note: If taxes are calculated using jurisdiction codes, the settings in the company code table do
not have any effect. Base amount determination is controlled in the jurisdiction code definition.
This type of tax calculation is used, for example, in the US.
TxN Indicates that the cash discount amount is deducted from the base amount used for
calculating taxes on sales/purchases.
6. Define Tax Codes for Sales and Purchase - FXTP The tax jurisdiction code consists of up to
four parts depending on the tax jurisdiction code structure for the relevant calculation procedure:
the state code, the county code, the city code, and a local code component. The system uses these
component parts to determine the tax rate for each tax authority.
You have to define a separate tax code for sales/purchases for each country in which one of
your company codes is located.
Each Tax code contains one or more tax rates for the different tax types.
If you have to report tax-exempt or non-taxable sales to the tax authorities, you need to define a
tax rate with the value 0.
In this activity, we will define.
– Tax code , for a country and tax procedure
– Type of tax , whether the defined tax code is a output tax or input tax
– Tax rate for condition type
AccKY(MWS) The transaction keys are used to determine accounts or posting keys for line
items, which are created automatically by the system.
TcodeOBCN
Condition Type The condition type is used for different functions. In pricing, differentiating
Tax types ect. (T CodeOBQ3)
Note:
1) Tax Code for sale or purchase will be defined at account master control data tab. Here we
can define all tax code for input tax or output tax for tax procedure attached to country and
company code or a single tax code.
2) Tax procedure is attached to country not company code, and company code is attached to
country. Hence tax procedure indirectly attached to company code.
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In this step, you define information needed for the automatic posting of customer incoming
payments with the POR procedure. To do this, you specify a company code, the document type,
and the number of the incoming payments account and of the payment clearing account per POR
subscriber number.
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