The Concept Of SAP Payment Terms
Every business has to maintain certain terms of payment with its vendors as well as customers. The terms of payment are agreed upon by the business while setting up a contract with its vendors and customers. This is an extremely important process for every business as it determines the cash flow and the working capital requirements of the business. This information can be configured in SAP by defining the terms of payment and can be used for automating the payment and Dunning process.
Most of the businesses have similar terms of payments with many of its customers as well as vendors, especially in the same customer or vendor account group. For e.g. if a business uses different account groups for domestic and international customers, then it may want to have similar terms of payments for all the domestic customers.Similarly, it may have the same terms of payments for customers and vendors belonging to other account groups. SAP allows the terms of payments to be configured once, and used multiple times for different customers and vendors having similar requirements. Payment terms are defined at the client level and therefore can be used by vendors or customers of any company code. This reduces the effort on the part of the end user and helps to maintain data consistency.
The terms of payment contain information about the discount offered, rules for deciding when payment and the default payment method. The terms of payment are mentioned in the customer as well as the vendor master records. The automatic payment and will dunning program pick up the vendors as well as the customers due for payment on the basis of the information entered in the payment terms.
Defining The Terms Of Payment
The terms of payment are defined at the client level and are available to be used by all entities in that client.
STEP1:Navigate to the Implementation Guide path as shown below or execute the transaction code OBB8 from the SAP Easy Access menu screen to open the terms of payment configuration screen.
STEP 2:Click the new entries button on the screen shown below to define a new payment term.
STEP 3:Define the name and day limit for the payment terms as shown below. The payment terms can be represented by a 4 letter key. This key is then available to be assigned to the customer or vendor masters. The short description can be used to explain the purpose for the terms of payment being defined. The day limit is the date of the month up to which the terms of payment being defined are valid. SAP allows multiple payment terms to be created with the same 4 letter key but different day limits. For e.g. if there is a payment term ‘1234’ defined with day limit 12, then this payment term will be used only for processing documents with baseline date up to 12th of a month. For any documents having baseline data after 12th another payment term with the key ‘1234’ and day limit 31 will have to be defined. The same is shown in the table below.
STEP 4: Define whether the payment terms are valid for customers or vendors, or both as shown in the figure below.
STEP 5: Define the default for the baseline date. The baseline date is the date from which the due date for the payment is calculated by some criteria defined in the baseline date calculation box. The baseline date can be set to be the posting date, the document date, the entry date of the document or it may be entered manually by selecting the ‘no default’ option.
STEP 6: The baseline date can be calculated from the default baseline date by specifying additional criteria. The baseline date can be defined as some fixed date of the month or of any of the coming months. For the example shown in figure 6 below, the default base line date will be entered manually while entering the accounting document in SAP. Let us assume that the default baseline date is entered as 15th April 2012. Then the baseline date will be the fixed date i.e. 18th of the default plus additional months entered. The default baseline month is April, so the next month will be May. Therefore, the final baseline date will be 18th May 2012.
STEP 7: The final step is to define the discounts to be given if the payment is made within a certain number of days from the baseline date. Mostly businesses will offer a discount if the payment is made fast. In the payment term definition shown below in figure 7, a 5 % discount is offered if the payment is made within 5 days from the baseline date, a 3 % discount is offered if the payment is made within 10 days from the baseline date and the full amount is due after 30 days from the baseline date.
STEP 8: Click the save button to save the payment terms. The success message is displayed.
Assigning Payment Terms To Customers And Vendors
The payment terms are defined at the client level and can then be assigned to customer or vendor master records. The automatic payment program and other SAP modules can then access this information from the vendor or customer master whenever it is required.
STEP 1: Open the vendor or customer master record using the transactions FD02 or FK02 respectively. Enter the details of the customer or vendor as shown in the figure below to select the customer or vendor master record. The example below shows the procedure for a customer.
STEP 2: Click on the company code data button on the screen shown in the figure below to display the company code data for the customer.
STEP 3:Click on the payment transactions tab to display the terms of payment field as shown below.
STEP 4:Enter the terms of payment as shown below and click on the save button to save the changes.
STEP 5:The success message is displayed as shown below to indicate that the new payment terms have been saved in the customer master.