fi bbp phase1 ii

ABG Cements SAP Implementation

BUSINESS BLUEPRINT

(Financial Accounting)

SAP ERP 6.0 Implementation (Phase II)

File Name: Finance Blue Print Phase IICreated By: Rambabu NamamulaVersion: V1


Table of Contents:

1. Customer Master Data:..........................................................................................................3

2. Customer Account Groups...................................................................................................11

3. Business Processes..............................................................................................................17

4. Bills of exchange:.................................................................................................................19

5. Customer documents Park and Post...................................................................................26

6. Customer down payment....................................................................................................26

7. Dunning:...............................................................................................................................29

8. Credit control area:..............................................................................................................29

9. Tax collection at source:......................................................................................................30

10. Customer Balance Analysis:..............................................................................................31

11. Customer Evaluations:.......................................................................................................32



1. Customer Master Data:Requirements/Expectations

To provide Customer master data with respect to general, accounting, and Sales department.

To provide different groups for different class of Customers.

To generate the Customers numbers internally and externally.

To assign different reconciliation accounts to different Customers flexibly.

To provide the complete integration between sales and finance department to have one customer number across the company

General explanations

Customer master is created centrally in Sales and distribution & financial accounting with their respective views.

However, certain customer can be created only in financial accounting. When it is created centrally, it has sales view and also accounting views. In cases, where it is defined in financial accounting, the accounting views only are defined.

In case of central creation, sales and distribution personnel will create the sales view of the customer and financial accounting personnel will create the accounting views for the same.

It is necessary that the reconciliation account for the customer is correctly identified and defined in the master data.

Data in customer master records controls how transaction data is posted and processed for a customer. The customer master record also contains all the data you require to do business with your customer.

The master record is used not only in Accounting but also in Sales and Distribution. By storing customer master data centrally and sharing it throughout your organization, you only need to enter it once. You can prevent inconsistencies in master data by maintaining it centrally. If one of your customers changes their address, you only have to enter this change once and your accounting and Sales departments will always have up-to-date information

To avoid creation of duplicate customer numbers, search facility by names, address ….etc should be used before creation of any new customer number.



The master records of customer accounts consist of

General Data Segment Company code Segment And Sales Organization Segments

For a customer master record General data is created at Client level

General data consists of 1. Name and Address data, 2. Communication Language3. Communication details

Company code Data consists of

1. Reconciliation account2. Sort Key3. Payment Terms4. Tolerance Group5. Check for duplicate Invoices6. Payment Methods7. Payment Block8. Individual Amounts9. Account Statement Frequency

Sales Data consists of

1. Order Currency2. Payment Terms3. Price group3. Shipping Conditions4. Sales Group5. Partner Functions6. Rebates6. Invoicing dates



Explanation of functions and events

Customer account group

The account group is a classifying feature within Customer master records. The account group determines:

The number interval for the account number of the customer,

Whether the number is assigned by the user or by the system,

Which specifications are necessary and/or possible in the master record.

SWIFT CODE

SWIFT stands for Society for Worldwide Interbank Financial Telecommunication.

The SWIFT code is 8 or 11 characters, made up of:

4 characters - bank code (only letters)

2 characters - ISO 3166-1 alpha-2 country code (only letters)

2 characters - location code (letters and digits) (if the second character is '1', then it denotes a passive participant in the SWIFT network)

3 characters - branch code, optional ('XXX' for primary office) (letters and digits)

Where an 8-digit code is given, it may be assumed that it refers to the primary office.

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) handles the registration of these codes. For this reason, Bank Identifier Codes (BICs) are often called SWIFT addresses or codes.

IBAN:

The International Bank Account Number (IBAN) is an international standard for identifying bank accounts across national borders. It was originally adopted by the European Committee for Banking Standards



The IBAN was developed to facilitate payments within the European Union. Customers, especially individuals and SMEs, are frequently confused by differing national standards for bank account numbers. The IBAN is not yet used for routing, because the IBAN has not been widely adopted outside Europe, among other reasons. The ECBS expects that adoption may take up to ten years, so it remains necessary to use the current ISO 9362 Bank Identifier Code system (BIC or SWIFT code) in conjunction with the BBAN or IBAN

The IBAN consists of a ISO 3166-1 alpha-2 country code, followed by two check digits (represented by kk in the examples below), and up to thirty alphanumeric characters for the domestic bank account number, called the BBAN (Basic Bank Account Number). It is up to each country's national banking community to decide on the length of the BBAN for accounts in that country, but its length must be fixed for any given country.

The IBAN must not contain spaces when stored electronically. When printed on paper, however, the norm is to express it in groups of four characters, the last group being of variable length.

Recon Account

The reconciliation account in G/L accounting is the account which is updated parallel to the sub ledger account for normal postings (for example, Billing or payment).

For special postings (for example, down payment or bill of exchange), this account is replaced by another account (for example, 'down payments received' instead of 'payable').

The replacement takes place due to the special G/L indicator which you must specify for these types of postings.

Terms of Payment Key

Key for defining payment terms composed of cash discount percentages and payment periods.

It is used in sales orders, purchase orders, and invoices. Terms of payment provide information for:

Cash management

Dunning procedures

Payment transactions

Data can be entered in the field for the terms of payment key in various ways as you enter a business transaction:



In most business transactions, the system defaults the key specified in the master record of the customer/vendor in question.

In some transactions (for example, credit memos), however, the system does not default the key from the master record. Despite this, you can use the key from the customer/vendor master record by entering "*" in the field.

Regardless of whether or not a key is defaulted from the master record, you can manually enter a key during document entry at:

Item level in sales orders

Header level in purchase orders and invoices

Master records have separate areas for Financial Accounting, Sales, and Purchasing. You can specify different terms of payment keys in each of these areas. When you then enter a business transaction, the application in question will use the key specified in its area of the master record.

Payment Terms Key for Credit Memos: You use this key to define terms of payment that include cash discount

percentages and payment dates. The key can be defaulted when posting credit memos.

Credit memos in this context can be credit items posted to a customer account or debit items posted to a customer account.

Payment History record: Indicator that the payment history of the customer is to be recorded.

Information about cash discount payments and net payments is recorded separately.

The amount and number of payments are then recorded per calendar month, as well as the average days in arrears.

Dunning Procedure:

A pre-defined procedure specifying how customers or vendors are dunned. For each procedure, the user defines

Number of dunning levels

Dunning frequency

Amount limits

Texts for the dunning notices



Head office account:

This account number is only specified for branch accounts. All postings, for which the account number of the branch is specified, are automatically posted to the head office account. The account number of the branch affected is noted in the line item.

Branch account:

An account that is used to represent the head office or branch relationship of a customer or vendor.

Sales order Purchase orders, deliveries or invoices entered for branch accounts are posted to the head office account. Each branch account must be linked to a head office account.

Special organizational considerations For All customer accounts “Account Statement” is required.

Changes to existing organization

None

Description of improvements

Present system of customer management does not have the account group concept due to system constraint. New system will provide the concept of account group which will improve the customer reporting.

In ABG CEMENTS Customer will be created by the sales department and will be used by financial department for extending it to the company code information.

SAP R/3 being a strong integrated solution for business, the system expects much information in master creation stage, so that the transaction and report stages are relatively easy.

Description of functional deficits

Due to the document splitting, the transfer of balances across profit centers between Customer accounts and vendor accounts is not a straight process.

Approaches to covering functional deficits



A separate GL account of type “S” is needed to be used as clearing account.



Notes on further improvements

None.

System configuration considerations Identify the Customer Authorization groups and input in Master data.

File Conversion Considerations

None

Interface Considerations

None

Reporting ConsiderationsAll Master Data Related transactions.

Authorization and user roles

Restriction on Company codes, Customer account groups



2. Customer Account GroupsRequirements/Expectations

To provide customer master data with respect to general, accounting, and Sales department.

To provide different groups for different class of Customer.

To generate the Customer numbers internally and externally.

To assign different reconciliation accounts to different Customer flexibly.

To provide the complete integration between sales and finance department to have one Customer number across the company


Customer master is created centrally in Sales and Distribution & financial accounting with their respective views.

However, certain Sales can be created only in financial Sales. When it is created centrally, it has sales view and also accounting views. In cases, where it is defined in financial accounting, the accounting views only are defined.

In case of central creation, sales organization personnel will create the purchasing view of the customer and financial accounting personnel will create the accounting views for the same.

It is necessary that the reconciliation account for the Customer is correctly identified and defined in the master data.

Data in customer master records controls how transaction data is posted and processed for a customer. The customer master record also contains all the data you require to do business with your customers.

The master record is used not only in Accounting but also in Sales Organization. By storing customer master data centrally and sharing it throughout your organization, you only need to enter it once. You can prevent inconsistencies in master data by maintaining it centrally. If one of your customers changes their address, you only have to enter this change once and your accounting and purchasing departments will always have up-to-date information

To avoid creation of duplicate customer numbers, search facility by names, address ….etc should be used before creation of any new customer number.



Below account group fields mandatory when we create the customer master data For a Customer master record General data is created at Client level

General data consists of 1. Name and Address data, 2. Communication Language3. Communication details

Company code Data consists of

1. Reconciliation account2. Sort Key3. Payment Terms4. Tolerance Group5. Check for duplicate Invoices6. Payment Methods7. Payment Block8. Individual Amounts9. Account Statement Frequency

Sales Data consists of

1. Order Currency2. Payment Terms3. Price group3. Shipping Conditions4. Sales Group5. Partner Functions6. Rebates6. Invoicing dates




Customer account group

The account group is a classifying feature within Customers master records. The account group determines:

The number interval for the account number of the Customers.

Whether the number is assigned by the user or by the system.

Which specifications are necessary and/or possible in the master record.

Customer Account Group Description

Numbe Range From To

1000 Domestic Customers 01 100000 1999992000 Foreign Customers 02 200000 299999

3000Inter Company Customers - Trade 03 300000 399999

4000 FI Customers 04 400000 499999

Special organizational considerations For All Customers accounts set the field Status “Account Statement” is

required.

Make Recon (Reconciliation) account as Mandatory at Group Level for all groups.

Further details to the fields that need to be made mandatory at group level are given below.

Wherever applicable the settings need to be for all the three ( General Data, Sales Organization and Company Code)or two (General Data and Company code Data).

Filed Name Description Type Length Property

KTOKD Customer account group CHAR 4Mandatory

KUNNR Customer CHAR 16Mandatory

BUKRS Company Code CHAR 4 Mandator



y

VKORG Sales Organization CHAR 4Mandatory

VTWEG Distribution channel CHAR 2Mandatory

SPART Division CHAR 2Mandatory

ANRED Title CHAR 15 Optional

NAME1 Name 1 CHAR 35Mandatory

NAME2 Name 2 CHAR 35 OptionalNAME3 Name 3 CHAR 35 OptionalNAME4 Name 4 CHAR 35 Optional

SORTL Search term 1 CHAR 10Mandatory

STRAS House number and street CHAR 35Mandatory

PFACH PO Box CHAR 10Mandatory

ORT01 City CHAR 35Mandatory

PSTLZ Postal Code CHAR 10Mandatory

ORT02 District CHAR 35Mandatory

STR_SUPPL1 Street2 CHAR 40 OptionalSTR_SUPPL2 Street3 CHAR 40 Optional

STREET Street/House number CHAR 60Mandatory

PSTL2 P.O. Box Postal Code CHAR 10Mandatory

LAND1 Country Key CHAR 3Mandatory

REGIO Region (State, Province, County) CHAR 3Mandatory

SPRASLanguage Acc. to ISO 639 (Batch Input Field) CHAR

2 Mandatory

TELX1 Telex number CHAR 30Mandatory

TELF1 First telephone number CHAR 16Mandatory



TELFX Fax Number CHAR 31Mandatory

TELF2 Second telephone number CHAR 16 OptionalTELTX Teletex number CHAR 30 OptionalTELBX Telebox number CHAR 15 OptionalDATLT Data communication line no. CHAR 14 OptionalKUNNR Customer Number 1 CHAR 10 Optional

BEGRU Authorization Group CHAR 4Mandatory

VBUND Company ID of trading partner CHAR 6 Optional

BRSCH Industry key CHAR 4Mandatory

XZEMPIndicator: Alternative payee in document allowed? CHAR 1 Optional

AKONTReconciliation Account in General Ledger CHAR 10

Mandatory

ZUAWAKey for sorting according to assignment numbers CHAR 3 Optional

KNRZE Head office CHAR 10 Optional

BEGRU Authorization Group CHAR 4Mandatory

VZSKZ Interest calculation indicator CHAR 2 Optional

ZINRTInterest Frequency in Months (Batch Input) CHAR 2 Optional

QSSKZ Withholding Tax Code CHAR 2 optional

QSZNRCertificate Number of the Withholding Tax Exemption CHAR 10 Optional

ZTERM Terms of Payment Key CHAR 4Mandatory

GUZTE Credit memo pay term CHAR 4 optional XZVER Payment history record CHAR 1 optionalMAHNA Dunn .Procedure CHAR 4 optional

KULTGProbable Time until Check is Paid (Batch Input) CHAR 3 Optional

REPRFCheck Flag for Double Invoices or Credit Memos CHAR 1

Mandatory

ZWELSList of the Payment Methods to be Considered CHAR 10

Mandatory

HBKID Short Key for a House Bank CHAR 5 OptionalXPORE Indicator: Pay all items separately? CHAR 1 OptionalXVERR Indicator: Clearing between customer CHAR 1 Optional



and vendor?

EIKTOOur account number with the customer CHAR 12 Optional

QSREC Customer Recipient Type CHAR 2 Optional

QSBGRAuthority for Exemption from Withholding Tax CHAR 1 Optional

QLAND Withholding Tax Country Key CHAR 3Mandatory

BANKS Bank country key CHAR 3Mandatory

BANKL Bank Keys CHAR 15Mandatory

BANKN Bank account number CHAR 18Mandatory

BKONT Bank Control Key CHAR 2Mandatory

BVTYP Partner Bank Type CHAR 4Mandatory

XEZERIndicator: Is there collection authorization? CHAR 1 Optional

BANKA Name of bank CHAR 60Mandatory

STRAS House number and street CHAR 35Mandatory

ORT01 City CHAR 35Mandatory

SWIFTSWIFT Code for International Payments CHAR 11

Mandatory

BRNCH Bank Branch CHAR 40Mandatory

PROVZ Region (State, Province, County) CHAR 3Mandatory

KOINH Account Holder Name CHAR 60Mandatory

BZIRK Sales district CHAR 6 optional

VKBUR Sales office CHAR 4Mandatory

VKGRP Sales group CHAR 4Mandatory

KONDA Price group CHAR 2Mandatory

KALKS Cust .pric. proc CHAR 1 Mandator



y

PLTYP Price list CHAR 2Mandatory

LPRIO LPRIO CHAR 2Mandatory

VSBED VSBED CHAR 2Mandatory

VWERK Delivery Plant CHAR 4Mandatory

PERFK Invoicing dates CHAR 2Mandatory

ZTERM Terms of Payment Key CHAR 4Mandatory

INCO1 Incoterms (Part 1) CHAR 3Mandatory

INCO2 Incoterms (Part 2) CHAR 28Mandatory

KKBER Credit control area CHAR 4 Optional PARVW Partner Function CHAR 2 Optional

Description of improvements

In ABG CEMENTS customers will be created by the sales department and will be used by financial department for extending it to the company code information.

SAP R/3 being a strong integrated solution for business, the system expects much information in master creation stage, so that the transaction and report stages are relatively easy.

Notes on further improvements

None.

System configuration considerations

Create Customers account groups as given below.

Customer Description

Number Range From To



Account Group1000 Domestic Customers 01 100000 1999992000 Export Customers 02 200000 299999

3000Inter Company Customers - Trade 03 300000 399999

4000 One time customers 04 400000 499999

File Conversion Considerations

None

Interface Considerations

None

Reporting Considerations

None

Authorization and user roles

As creation of Customer account group is a configuration activity no authorization to this is anticipated.

3. Business ProcessesThe Accounts Receivable application component records and administers accounting data for all customers. All customer invoices issued against sale of goods or services are posted to respective customer accounts. These customer accounts are integrated to the General Ledger through a reconciliation a/c. Postings made in Accounts Receivable are simultaneously recorded in the General Ledger. Separate G/L accounts are updated based on the type of transaction involved (for e.g. Receivables and down payments). The system contains due date Analysis and other standard reports that you can use to help you monitor open items.Balance confirmations, account statements, and other forms of reports are there to suit the various requirements in business correspondence with customers. There are balance lists, journals, balance audit trails and other internal evaluations available for documenting transactions in Accounts Receivable.Cheques received from customers with respect to invoices raised will be cleared as per reference of invoice no. given by the customer by post and clear method. There are standard reports in SAP



used to monitor open items. There are balances lists, journals, balance audit trails and other internal evaluations available for documenting transactions in Accounts Receivable.

Accounting Entries:Accounting documents will be triggered at 2 instances in the Sales process in SAP:

At the time of goods issue:The Goods issue document will trigger an accounting entry with a debit to the Delivered but not billed’ account and crediting the finished goods stock account.

Cost of Goods Sold Account …………......….......Dr.Finished Goods stock Account ………........................Cr.

At the time of billing:The billing document when released to accounting will recognize the revenue by debiting the Customer account and crediting the revenue account. At the same time it will also square up the provision account created at the time of goods issue by debiting the cost of goods sold and crediting the ‘Delivered but not billed’ account.

Customer Account…………………….....…....Dr.Sales Revenue Account …..…………………........Cr.

Revenue account determination:Separate GL accounts will be mapped for different sales like domestic sales, export sales and stock transfer etc. By using a combination of Chart of Account, Sales Organization, Customer account assignment Group and material assignment group in sales & distribution module related revenue.

SAP Standard delivered Correspondence Types will be assigned to every Company Code to facilitate this requirement.

Non-Sales Order based Accounting of Miscellaneous Customer Invoices:These Invoices are for miscellaneous sales that do not warrant creation of sales order and thus no inventory effect comes.Accounting location will post other sales revenue items. SAP standard Customer invoice document parking functionality that will trigger for approval by parking and posting.

Advance Adjustment:Advance transactions are treated as Special GL indicators which are adjusted against the respective invoices manually. Special GL transactions tracked by single character key.ABG Group will use “A” as special GL transaction for advances.



Following journal entry will take place during advance processing:During advance from customer:

Bank A/c ……………….Dr.To Customer A/c………..Cr……....(A)

During Sales Invoice bookingCustomer A/c……………Dr.To Sale Revenue…………Cr.

During Advance Adjustment with Invoice:Customer A/c……………..Dr……..(A)To Customer A/c…………Cr.

During Customer payment receipt:Bank A/c………………….Dr.To Customer A/c………….Cr.

Notes: Customer advance amount gets transferred from Special transaction balance to normal

account balance. Advances can be adjusted partially also.

Credit and Debit Notes, Returns:Debit and Credit notes are accounted for as subsequent debit or credit transactions in case of sales order related invoice transactions. For non-sales order related transactions, a pure finance debit / credit note transaction is posted at the accounting location based on the physical document through journal voucher.

4. Bills of exchange:Requirements/Expectations

Bill of exchange is changing the form of debtor, where the bill of exchange is prepared by vendor and it is accepted by customer. Bill of exchange can be used for discounting the customer bill from bank before the due date of payment receiving from customer, for cash management purpose.SAP R3 should provide accounting for the same.


None


Bills of Exchange



The following types of bill of exchange can be managed in and posted to the Accounts Receivable (FI-AR) and Accounts Payable (FI-AP) application components:

Bills of Exchange Receivable

Bank Bills and Bills of Exchange Payment Requests

Bills of Exchange Payable

Check/bill of exchange in Accounts Receivable (reverse bill of exchange)

ills of exchange are handled as special G/L transactions in the SAP System. These transactions are thus maintained independently of other transactions in the subsidiary ledger and are posted to a special G/L account in the general ledger. This affords you an overview of bills of exchange receivable and bills of exchange payable at any stage. Transfer postings are not usually necessary to display these items on the balance sheet.

The following topics explain the preparation that is necessary for the posting and processing of the various bills of exchange. You can also find an explanation on posting and processing individual bills of exchange.

Bills of Exchange Receivable

Bills of exchange receivable are managed using the special G/L method in the SAP System.When posting a bill of exchange receivable, you normally clear open items or post thepayment as a payment on account. The system posts a bill of exchange receivable to thecustomer account and reduces the receivables from goods and services on the reconciliationaccount. The bill of exchange receivable is also automatically posted to the special G/L accountfor bills of exchange receivable in the general ledger. Information on posting a bill of exchangereceivable can be found in Posting Procedure for Bills of Exchange Receivable

You can monitor the existing bill of exchange receivable at any time via the customer account.The special G/L account for bill of exchange receivables shows you the total amount of bill ofexchange receivables that exist for the customers represented in this account. Bills of exchangereceivable are not canceled until they have been cleared.

For information on the specifications to be made when posting bills of exchange, refer to Postinga Bill of Exchange Receivable

Once you have presented the bill of exchange to a bank for financing, you post the bill of



exchange usage. You now have a bill of exchange liability since, as a drawer, the bank hasliability to recourse if your customer fails to honor the bill. This potential liability is posted to abank subaccount and deleted once it has expired.If you wish to pass on bills of exchange to a bank, the presentation list required can be createdautomatically. If you like, you can also arrange for bill of exchange usage to be postedautomatically or for posting to be prepared. This only applies to bills of exchange posted beforethe due date of the invoice, as is the case in Italy.You can find out what preparations are necessary for bill of exchange usage in Posting theUsage of a Bill of Exchange Receivable

Once the bill of exchange is due for payment and any protest period has elapsed, you cancancel the bill of exchange receivable and the bill of exchange liability. You can define acountry-specific bill of exchange protest period in Customizing.Bill charges are normally passed on to the customer. The system posts these amounts to thecustomer account and the corresponding revenue accounts. You can find out what preparationsare necessary for the bill charges statement by referring to Bills of Exchange Receivable: BillCharges

For bank bills and bill of exchange payment requests, there are certain special features thatmust be borne in mind when drawing-up and posting these items. Bank bills and bill of exchange

Bills of exchange are a form of short-term finance. If your customer pays by bill of exchange, he does not make payment immediately, but only once the period specified on the bill has elapsed (three months, for example). Bills of exchange can be passed on to third parties for refinancing (bill of exchange usage).

A bill of exchange can be discounted at a bank in advance of its due date (discounting). The bank buys the bill of exchange from you. Since it does not receive the amount until the date recorded on the bill, it charges you interest (discount) to cover the period between receiving the bill of exchange and its eventual payment. Some form of handling charge is also usually levied.

If you do not use the bill for refinancing in this way, you can either present it to your customer for payment on the due date, or deposit it at a bank shortly before the due date for collection. The bank charges you a collection fee for this service.

In some countries, you can also pass on a bill of exchange to a third party as a means of payment. You may pass it on to a vendor, for example, to clear your own payables (means of payment).



You can also sell your bills of exchange receivable abroad (forfaiting). When you use the bill in this way (otherwise known as non-recourse financing of receivables) you are freed, on the sale of the bill, from any liability to recourse.

When you deposit a bill of exchange receivable at a bank, you can make use of the following two functions offered by the system:

You can create a bill of exchange presentation list for your bank. If required, the system posts this bill of exchange usage automatically. This procedure applies to bills of exchange not yet due, for example in Italy.

You can present the bill of exchange at your bank and post the bill of exchange usage manually.

In the general ledger, the bill liability is managed in separate G/L accounts that offset the entry in the bank account.

Once the due date has been reached and the country-specific protest period has elapsed, you reverse the bill liability. You are no longer subject to any liability to recourse. The protest period enables the last holder of a bill to make use of his or her right of recourse whereby he or she demands that one of the parties recorded on the bill of exchange make payment of the amount. The protest is an official record that the drawee has not paid the bill of exchange.

By accepting a bill of exchange you incur costs which the customer pays if the bill is due later than the invoice. When you post a bill of exchange payment, you therefore levy bill of exchange charges on your customer. These can include interest charges (discount), and collection fees. You can enter the bill of exchange charges when you post the bill or you can have the system calculate them automatically. Any combination of the above-mentioned bill of exchange charges is possible. The charges are levied on the customer automatically. Generally, bill of exchange charges are due net immediately. If you require special terms of payment for the charges, these can be defined in the customer master record.



In some countries, you must record bills of exchange receivable in a bill of exchange list. The bill of exchange list is a subsidiary ledger and contains all the essential data of incoming bill of exchange receivables. The day of expiration of the bill of exchange and the address data of the issuer are included in this list.

In the system, you can distinguish between rediscountable and non-rediscountable bills of exchange. Rediscountable bills of exchange must meet country-specific conditions that allow a commercial bank to pass on the bill of exchange for rediscounting to the State Central Bank. Three "good" signatures on the bill of exchange.

Remaining life may not exceed three months.

Bill of exchange must be payable at a State Central Bank city, that is a city in which the State Central Bank has an office.

Commercial banks cannot pass on non-rediscountable bills of exchange to the State Central Bank for rediscounting. By distinguishing these two types of bills during entry, you can have the system display them separately in the balance sheet. The special G/L indicator indicates the type of bill of exchange entered. The bills of exchange are posted to different special G/L accounts. When a change to the status of a bill of exchange occurs, transfer postings are necessary before preparation of the balance sheet. For example, a non-rediscountable bill of exchange becomes rediscountable if its remaining life has changed.

If such a distinction is not required in your country, you will post all bills of exchange receivable using the same special G/L indicator.

Posting Procedure for Bills of Exchange Receivable

For bills of exchange receivable, there are three events which are posted in Financial

Accounting



1. Payment by Bill of ExchangeFirstly, the payment by bill of exchange is posted and used to clear the receivableagainst the customer. There is a now a bill of exchange receivable which is recorded onthe customer account and the special G/L account.2. Bill of Exchange UsageIf the bill of exchange is used for refinancing and is passed on to a bank, then the bill ofexchange usage must be posted. The bill of exchange liability (liability to recourse) thatyou now have is recorded on special accounts in the system until it has expired.3. Cancel the Bill of Exchange LiabilityOnce the due date of the bill of exchange has elapsed, including any country-specificperiod for the bill of exchange protest, you can cancel the bill of exchange receivable for your customer and the bill of exchange liability.

Posting a Bill of Exchange Receivable

This topic illustrates the posting procedure for a bill of exchange receivable by means of an

example. The subsequent topics describe the specifications that are necessary for posting.



1. You have a receivable amounting to 11,400 from your customer. This receivable isdisplayed on the customer account and on the reconciliation account for receivables fromgoods and services.The customer settles the receivable on June 10th with a bill of exchange. When clearing thereceivable, the following postings are made:2. You post the bill of exchange to the customer account. In the general ledger, thereceivable is posted automatically to the special G/L account for bill of exchangereceivables. A bill of exchange receivable now exists which is recorded on the customeraccount. Since it is a special G/L transaction, the bill of exchange receivable is managedseparately from the other receivables.3. From the customer account you choose the receivable to be cleared by the bill payment.The system posts the clearing amount to the customer account and to the reconciliationaccount for receivables from goods and services. It also indicates the original receivableas cleared.

The bill charges are also entered when entering the bill of exchange receivable. They are then passed on to the customer.

Special G/L Transactions: Bills of Exchange



In our example, the bill charges give rise to the following postings:4. Five percent of the bill of exchange amount is calculated as the discount charge 70. The tax on sales/purchases amounts to 14 percent. It is automatically calculated onthe discount charges 79.80 . These amounts are posted to the correspondingRevenue accounts.5. The system automatically posts the bill charges 649.80 to the customer account.

5. Customer documents Park and Post

Non-Sales Order based Accounting of Miscellaneous Customer Invoices:These Invoices are for miscellaneous sales that do not warrant creation of sales order and thus no inventory effect comes.



Accounting location will post other sales revenue items. SAP standard Customer invoice document parking functionality that will trigger for approval by parking and posting.

6. Customer down payment

Requirements/Expectations

ABG CEMENT has to sales orders receiving during the course of their business, advance payments to various parties like

Customers

These payments need to be mapped in SAP system Identifying advances separately per Customers.

General explanations None


Advance payments are known as down payments in SAP. Down payment request can be created by the Sales o department and the same can be viewed by the accounts receivable person. After checking the Sales order terms, the down payment is made by the accounts Receivable person.

The system posts the down payment transaction as a special general ledger transaction in the Customer account. Hence, these transactions appear with special GL Indicators attached to them.

Once, the down payment is cleared against an invoice, the balance is shifted from the special general ledger balance to the regular customer account balance.

Note: System doesn’t check the down payment for particular invoice. It should be made on manual judgment. But while paying the automatic payment, the system will net it off against the outstanding invoice and balance will be paid.

At the time of document entry, the appropriate special general ledger indicator needs to be chosen.



Down payments are payments made, without interest, before completion of the product, and represent short or medium term outside capital procurement. This improves the company’s liquidity.

Often in business, especially in a make-to-order environment, customers may be required to pay some amount in advance before delivery of goods. This process is used to create requests for down payment, record the receipt of the down payment, and create a final invoice after the deduction of the down payment received as well as a receipt of the final amount due on the invoice. The process makes use of the billing plan functionality. The integrated process allows for a proper document flow to be maintained between the sales and financial transactions.

This scenario consists of the following steps:

Sales order with a billing plan is created

Billing block is removed

Down payment request is created

Down payment is posted

Delivery is created

Goods issue is posted

Billing block is removed

Billing is created

Down payment is cleared

OBYR

Account Type

Spl GL Indicator Short name Description

Reconciliation Account

Alternate reconciliation Account

D F Dwn.Pmt.Req Down Payment Request D A Dwn pmt Dpwn payment



Advance Adjustment:Advance transactions are treated as Special GL indicators which are adjusted against the respective invoices manually. Special GL transactions tracked by single character key.ABG Group will use “A” as special GL transaction for advances.


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Following journal entry will take place during advance processing:During advance from customer:

Bank A/c ……………….Dr.To Customer A/c………..Cr……....(A)

During Sales Invoice bookingCustomer A/c……………Dr.To Sale Revenue…………Cr.

During Advance Adjustment with Invoice:Customer A/c……………..Dr……..(A)To Customer A/c…………Cr.

During Customer payment receipt:Bank A/c………………….Dr.To Customer A/c………….Cr.

Notes: Customer advance amount gets transferred from Special transaction balance to normal

account balance. Advances can be adjusted partially also.

Credit and Debit Notes, Returns: Debit and Credit notes are accounted for as subsequent debit or credit transactions in

case of sales order related invoice transactions. For non-sales order related transactions, a pure finance debit / credit note transaction is posted at the accounting location based on the physical document through journal voucher.

7. Dunning:

A dunning area is an organizational unit within a company code used for the dunning process. Customer dunning for outstanding will be done based on Dunning Procedure assigned to

the Company code segment of the Customer Master Data. Different dunning levels and various letter formats will be maintained as per Company

Code requirements.Purpose

For obvious reasons, a complete and continuous follow-up of outstanding debts is essential for business whenever customer payments are not immediately bound to the delivery of goods and services or drawn automatically using direct debit.The dunning system in SAP Business One enables you to trace liable customers who have not paid their open invoices within a given time span. It enables you to handle the process from, for example, sending a reminder to customers of their outstanding payments through to referring such customers to collections agencies. The dunning system is composed of windows in which preliminary definitions are made. A step-by-step Dunning Wizard guides you through automatic creation of dunning letters according to the selection criteria. The dunning system covers the following documents:



Open A/R invoices, including invoices that are partially credited or partially paid

Invoices that include installments

A/R credit memos

Incoming payments that are not based on invoices

If you wish to use the automatic dunning procedure, you have to make settings in the following places before using the system and while it is operational:

In Customizing for Financial Accounting (IMG)

In the master data for your customers or vendors

When you post documents

Once you have decided in which countries you wish to use the automatic dunning procedure, adjust your settings to meet the country-specific business requirements. In the USA, for example, debtors are not usually dunned. In Customizing, you can make company code-specific settings so that the fields for dunning are hidden for the company code USA. You use the following attributes to control the dunning program, and you can configure them according to the needs of your company:

Dunning Procedure:The dunning procedure controls how dunning is carried out by the system. You can define as many dunning procedures as you like.

Dunning levelThe dunning levels are calculated based on the number of days open items are in arrears. You can also have the system calculate the dunning levels based on the dunning amount or a percentage paid (sales-related dunning level determination).You can determine more than one dunning level per dunning procedure.

Dunning areasA dunning area is an organizational unit within a company code used for the dunning process.A dunning area can be a division or a sales organization. You assign a dunning area to an open item when you are posting. You can dun items separately by dunning area.

The SAP System allows you to use either the automatic dunning program, which duns all overdue items in accordance with your selection criteria, or, if required, you can dun individual customers or vendors You have the following options and functions for dunning:

Payment deadline, interest on arrears, and dunning charges:



You can enter a specific payment deadline in the dunning notice, as well as interest on arrears and dunning charges (both calculated by the dunning program)

Dunning currency:If all the open items in an account have been posted in the same currency - either local currency or a foreign currency, the dunning program uses this currency. Otherwise, the dunning program uses the local currency of the company code. The items are displayed in document currency in the dunning notice, and the totals in local and foreign currency.

Dunning one-time accounts:You can dun a one-time account just like any other business partner account. All the items for a one-time account that have the same address are grouped in one dunning notice. The dunning date and level are updated in the item, not in the account master record.

Dunning historyThe dunning history provides you with information on all of the dunning runs you have executed and the dunning notices you have sent (overdue items, dunning totals, and so on). If required, you can also select by account type, company code, and/or customer or vendor.

8. Credit control area:

The credit control area is an organizational entity which grants and monitors a credit limit for customers. A credit control area can include one or more company codes. An organizational unit that represents the area where customer credit is awarded and monitored.

Credit Management



Most enterprises extend credit to their customers. This literally means, selling their goods and collecting money at a later point of time. The amount of credit extended is determined by the customer’s credit worthiness (Also called credit limit ) . The number of days for which credit is extended is based on the payment terms associated with that transaction.

Types of credit checks:

1. Simple credit check2. Dynamic Credit Check

Simple Credit Check

This is very similar to the example we have discussed earlier. Simple credit check compares the Customer’s credit limit to the total of all the items in the order and the value of all open items.

Credit Exposure in Simple Credit Check = Value of all Open Items + Value of the Current Sales Order.

Open items are orders that have been invoiced to the customer but the payment for the invoices have not been received yet. The system can be configured to either block the delivery, send a warning or an error message when the credit exposure has exceeded the credit limit of the customer.

Dynamic Credit Check:

Simple Credit Check alone is not sufficient for most businesses. Instead of just considering open items only, there is a need to consider existing open orders and open deliveries as well. Also, for old and seasoned customers, even if the credit exposure exceeds the credit limit set for the customer, the order can still be processed because of the good payment history with the company.

However, for new customers credit needs to be strictly monitored. For the purpose of Credit Management, SAP allows us to recategorize customers into different ‘Risk Categories’. Some examples of risk categories could be Medium Risk, High Risk, Low Risk etc.



9. Tax collection at source:

Tax collection at source arises on the part of the seller of goods. Here, tax is collected at the source of income itself. It is to be collected at source from the buyer, by the seller at the point of sale. Such tax collection is to be made by the seller at the time of debiting the amount payable to the buyer to the account of the buyer or at the time of receipt of such amount from the buyer, whichever is earlier. A person collecting tax shall furnish a certificate specifying whether tax has been collected or not, what sum has been collected, the rate of tax applied on it and other such particulars as may be prescribed. It shall be furnished within 10 days from the date of debit or receipt of the amount furnished to the buyer to whose account such amount is debited or from whom such payment is received. The taxes collected must be remitted into the income tax department's account. Every person collecting tax shall, within such time as may be prescribed, apply to the Assessing Officer for the allotment of a tax-collection account number.

The following goods when sold must be subjected to tax collection at source:-

Alcoholic liquor for human consumption (other than Indian made foreign liquor). Timber obtained under a forest lease. Timber obtained by any mode other than under a forest lease. Any other forest produce not being timber.

This is a form of tax in India, which is collected at source from the buyer by the seller of prescribed items. It is commonly referred to as TCS.

The system automatically calculates the tax collected at source and makes the relevant postings in Financial Accounting (FI) and Sales and Distribution (SD).

Prerequisites

You have:

Made settings as described in Customizing for Tax Collected at Source

Entered the TCS withholding tax type and withholding tax code and selected the W/tax checkbox in the customer master.

For more information, see Customer Master (Withholding Tax Data).


http://help.sap.com/erp2005_ehp_04/helpdata/en/9a/538f3c4d0b0500e10000000a114084/content.htm

http://help.sap.com/erp2005_ehp_04/helpdata/en/ef/1b7d59f528432680c600ad083fbf18/content.htm

http://help.sap.com/erp2005_ehp_04/helpdata/en/49/dd8b8577a471cee10000000a421944/content.htm

http://business.gov.in/outerwin.php?id=http://www.taxmann.com/TaxmannDit/DispCitation/htmpage.aspx?fn=http://www.taxmann.com/DitTaxmann/IncomeTaxActs/2006ITAct/section206C.htm


Features

Tax Collected at Source has the following features:

The rate of tax collected at source differs based on the type of commodity.

The Education Cess and the Secondary and Higher Education Cess are applicable at a certain percentage on the tax collected at source.

The seller of the items should furnish a tax certificate specifying whether tax has been collected, the amount that has been collected, rate of tax applied, and such other particulars as may be prescribed.

Activities

You post the tax collected at source by creating:

1. A sales order using the Create Sales Order (VA01) transaction.

2. An outbound delivery using the Create Inbound Delivery (VL01) or the Create Inbound Delivery with Order Reference (VL01N) transactions.

3. A billing document using the Create Billing Document (VF01) transaction.

Example

Consider an invoice for goods of INR 1000 and TCS of 10%. The goods buyer pays the tax collected at source. During the creation of billing document, the system makes the following postings:

Account Debit (Dr) Credit (Cr)Customer A/c Dr 1100Sales A/c Cr 1000TCS payable Cr 100



10. Customer Balance Analysis:SAP Standard Customer Balance Analysis will be available for all Customer Accounts. The summary of Postings made during a posting period can be analyzed using this functionality. Yearly Closing procedure and balance transfer activity will have to be run for transferring closing balances from one accounting period to the next.

The account balance displays the following: The opening balance (the balance carried forward from the previous year) The total of all transactions for each posting period, broken down into debit and credit

postings (transaction figures) From these figures the system also calculates the following for the account balance

display: The balance per posting period The accumulated account balance Account Balance of Special GL transactions.

11. Customer Evaluations:

Various standard SAP standard reports are available for Customer Evaluations. These are of following types:

Due Date Analysis. Customer Payment History. List of down payments made to customers. Special GL transaction balances

Due Date Analysis.

This query gives an overview of the payment behavior of a customer within a specific period. It shows the open items from Accounts Receivable Accounting per organizational unit of Collections Management and per company code.

The due date analysis displayed is based on the due date of the open receivables. The intervals each cover a period of 30 days and are distributed as follows:



Four intervals for receivables that are already overdue

Four intervals for receivables that are due in the future

Customer Payment History:

Recording your customers’ payment history helps you to make decisions about their liquidity and their ability to make payments in the future.

Whether or not the agreed cash discount terms were utilized.

The average number of days items were overdue per period based on payment term, or the average number of days open items were cleared prior to their due date per posting period.

If there are any trends in the payment history, for example, if your customer is continuing to miss payment for cash discount


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customer documents park

customer balance analysis