sap accounts receivable accounting

Chapter 3

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Accounts Receivable AccountingAccounts receivable accounting in R/3 FI maintains and manages a cus-tomer accounting data. It is also an integral component of sales management.Sales and accounting have the same information requirements (creditworthi-ness, payment history). Because of this, a limitation of risk is undertaken atthe start of the transaction (bid, order). If the customer order results indelivery and subsequent invoicing, then these transactions are postedautomatically in the accounting system. The various stages of this processare updated in real time in cash management and forecasting, includingchanges to liquidity planning. To hedge foreign currency transactions, aforeign exchange transaction is assigned through foreign exchange manage-ment.

Fig. 3-1: Accounts Receivable Accounting

With its primary fixed asset and balance sheet accounts, the chart of accountsis the central posting-system link between the general ledger and correspon-ding customer accounts. Use of the automatic posting principle means thateach business transaction is posted simultaneously to the customer account.This is done as a line item to the general ledger on a totals level through theassigned balance sheet account. This tightly coordinated updating takesplace automatically and ensures that the general ledger and subledger ac-counts are reconciled at any given time.

You can use account analyses, alarm reports, due date lists, and a flexibledunning system to track open items. The correspondence associated withthis is set up for each company. This is also true of payment notices, balance

3 Accounts Receivable Accounting

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confirmations, account statements, or interest calculations. Incoming pay-ments are assigned to the debts due manually through user-friendly func-tions. It can also be carried out electronically using EDI or electronic accountstatements. The debit memo procedure and payments are automated withthe payment program.

Balance lists, journals, a balance audit trail, and numerous other standardreports are available for documenting transactions in accounts receivableaccounting. For key date analyses:

q foreign currency items are revaluated

q customers with a credit balance are identified

q resulting balances are sorted according to their remaining life

Accounts receivable accounting is more than a basic element of proper ac-counting methods. It provides data for effective credit management throughits close link to the sales component. It also provides information for optimi-zing liquidity planning through its connection to cash management and fore-casting.

The Customer Master Record

Significance of Customer Master Records

A customer master record contains all the information that a company needsfor its business relations with a customer. This data controls the postingprocedure and subsequent processing, such as payments and dunning. Cu-stomer master records also provide information on customers for the ac-counting and sales departments. Customer data records are centrally storedin the system. This means that the data record is always consistent, up-to-date, and free of redundancy.

The customer master record is characterized by the following features:

q It provides an overview of all of a customers data at any time.

q It allows flexible access to the data.

q It forms the data base that controls automatic dunning and automaticpayment transactions.

The layout of customer master records also leaves room for special require-ments.

One-time accounts permit effective and space-saving management of one-time or infrequent customers. One-time accounts contain only the most es-sential control information, such as the reconciliation account. These ac-

One-time Transactions

Accounts Receivable Accounting 3

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counts have no customer-specific information, such as address or bankingdata. Customer name, address, telephone number, and bank details are pro-vided when the invoice is entered. In this way, a one-time customer masterrecord is used for many customers. Customer-specific information for pay-ment or dunning procedures is taken from the invoice.

Shared tasks, which in some industries are performed by alternative areas ofthe company, are also represented through customer master records. Forexample, branch offices place purchase orders locally while invoices are paidby the companys head office. By linking a branch account to a head officeaccount, an invoice can be drawn up for goods supplied to a branch. At thesame time, sales figures are posted to the head office account. However, in-formation on the branch office is retained in the document. Dunning noticescan then be sent to the branch and head offices.

The account number of an alternative payer can also be entered in the cu-stomer master record. Debit memos and refunds by bank transfer are deter-mined by different payer bank data.

If dunning notices are not to be sent to the customer from whom the recei-vable is due, a different dunning recipient can be indicated.

If an affiliated company is invoiced, this must be reflected in a group conso-lidation. All sales achieved through business transactions within the groupmust be eliminated (elimination of IC sales). To do this, the groups uniformcompany ID must be entered in the master record. The uniform company IDis transferred to the document upon posting.

The customer master record constitutes the flexible data base for handlingbusiness relations with customers. It also offers space for special require-ments (one-time transactions).

Structure

The three-part structure of master records makes it possible to flexibly depictthe various organizational structures of an operation:

q General Data:This is data that is equally relevant to every company code and everysales organization within a company.

q Data for Company Codes:This is data that reflects the company-specific agreements with the cu-stomer.

q Data for Sales:This is data with different characteristics for a companys sales orga-nizations and channels.

Head Office and BranchAccounts

Alternative Payer

Alternative DunningRecipient

Affiliated Companies


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Fig. 3-2: Structure of the Customer Master Record

General data includes the address, telecommunications data (telephone, te-lex, fax), general information on the customer (plant number, industry,group allocation) and bank details.

Company code data includes the terms of payment and dates:

q for automatic payment transactions (bank collection),

q for correspondence (account number and the person in charge at thecustomer location)

q for the automatic dunning procedure

In addition, the reconciliation account for G/L accounting is indicated at thecompany level. Transaction figures for this general ledger account are auto-matically updated to the customer account upon posting.

Information on order processing, shipping, and invoicing is found amongthe sales-specific data. This is described in greater detail in the correspon-ding SAP brochure for the SD application area (R/3 Sales and Distribution).

The system offers specific options for controlling master data responsibilityin keeping with the company philosophy during system setup. Strategicdecisions, such as whether a new customer should be included for the entirecompany or only for sub-areas, are made centrally. Thus, all data areas canbe entered and updated centrally. Alternatively, accounting and sales canmaintain the general data together and in their respective areas separately.

The structure of the customer master record supports the consistent, redun-dancy-free use of accounting and sales data.


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Editing Master Records

Separate functions are available for creating, changing, and displaying whenediting customer master records. Authorization for these functions is gran-ted based on the employees area of responsibility. Each new master recordmust be assigned to an account group. This classifies customers according tothe following criteria:

q Type of Number Assignment:Each master record has a unique number that is assigned either by thesystem (internally) or by the user (externally). External number assignmentis appropriate especially when the numbers are adopted from a front-endsystem. The system ensures that an account number is only assigned once.

q ccount Number Range (number interval):Number intervals are user-defined. Vendors and customers can be de-fined with the same number or a hierarchy can be depicted.

q User Interface Layout (screen images):You can specify which information is mandatory or optional for each groupof customers. Information that is not needed can be blanked from the inter-face. In this way, only data a company needs to transact business is required.

Fig. 3-3: The Customer Master RecordAddress/AccountManagement/Correspondence


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The system offers the broadest possible support for keeping data free of red-undancy. For example, You can use a convenient search feature to create anoverview of existing accounts. An automatic duplication check ensures that amaster record is created only once for sales and accounting.

A copy feature provides support when entering new master records. Data fromone master record can be included in a new one. Additionally, a group of cus-tomer master records can be copied from one company code to another.

You can specify which fields can be changed. For example, authorization canbe used to prevent unintentional modification of the reconciliation account.You can always access the specific areas that you would like to change (forexample, only payment data). The system logs all changes that are made, sothat an overview of the update history can be obtained at any time.

You can select areas that interest you for display purposes. You can also callup another master record from the current display of a master record to dis-play or change it. You can access the change feature from the display.

The easy-to-use user interface, which you can customize, makes it possible toedit and manage master records easily and quickly.

What is the function of the customer data record?

The customer data record and its data (link to the general ledger, informa-tion on the business partner) constitute the basis for accounts receivableaccounting. It is also the link between the sales and accounting functions ofthe SAP system. Through its special characteristics, it provides specialaccounting correlations.

Accounts Receiving Accounting Transactions

Invoices and Credit Memos

With the integrated use of SAPs sales and financial accounting systems, thebilling system prepares and posts outgoing invoices. Invoices from otherR/3 billing systems can also be transferred to accounting through an inter-face, after which they are posted. Only invoices not created in an R/3 systemmust be recorded manually.

A document consists of a header and several line items. The header containsinformation that applies to the entire document. This includes the documentdate, number, and type. Line items contain the terms of payment, the ac-count assignment, and amounts. Some line items, such as sales tax, are gene-rated by the system automatically. These line items supplement the ma-

Entering Data

Changing Data

Displaying Data

Document Layout


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nually generated items and complete the document. Before posting a docu-ment, you can call up and change any of these line items.

Fig. 3-4: Customer Invoice: Posting Document/Document Line Item

Besides the accounting document described above, the system features se-veral special documents, such as recurring entries and sample documents.

You can generate recurring entries for regularly recurring transactions thatalso feature the same amounts. An example of this is receivables to be paidby a customer in monthly installments. These entries do not affect accoun-ting when they are generated. Rather, they are posted to the accounting sy-stem only upon execution. The so-called recurring entry original docu-ment contains data for posting the accounting documents, such as amountand account number. It also contains controlling information, such as thedate of the beginning and end of execution and deadline data.

If information about the time and amounts are the only ways in which thepostings differ, the sample document technique can be used. If a sampledocument serves as a model, then only minor adjustments are necessary(such as in the posting date or the amount). Instead of a sample document,an existing accounting document can also be used as a model.

Recurring Entries

Sample Documents


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The system provides a number of supporting features for entering invoicesand credit memos. They include:

q setting default values

q fast entry for simple invoices and credit memos

q noting data from previous activities

q user-defined retention of data for multiple transactions

q adjustment of editing options

q flexible search mechanism for accounts, cost centers, and so on

If it is not possible to complete entry of a document, the entry process can beinterrupted at any point and saved. The document can then be completed andposted later. The input data is checked immediately and adjustments are offe-red if errors are detected. A document can be posted (and thus updated in thetransaction figures) only if it is complete and error-free. Complete means:

q debit/credit balance is zero

q minimum account assignments including document date, posting date,document type, posting key, account number, and amounts have beenmade

q all required fields, as defined during system setup, are filled

For credit memos and transfers, entry transactions are available where sup-porting functions can be used similarly.

All documents can be entered in any currency. A local currency is assignedto each company code. Up to two other currencies can be indicated. Theseparallel currencies are handled and updated like the local currency. Thesystem stores the amounts found in the documents in the local and docu-ment currency. An exchange rate tablecontaining daily, accurate currencyexchange ratesis used to convert between local and document currencies.However, the exchange rate can also be indicated directly during posting.You control whether the local and document currencies (or only the docu-ment currency) are open for input during document entry. Either way, bothcurrency amounts are visible in the document display. A document musthave a zero balance in both the local and the document currency to beposted. Small rounding-off differences, that can arise in many lines due toconversion, are automatically taken into account. The transaction figures inthe customer area are kept only in local currency. The receivables fromgoods and services reconciliation account is kept in local currency and in allposted foreign currencies.

You are supported by a wide range of additional functions when entering in-voices and credit memos. Techniques are provided for automated invoicereceipt.

Entry tools

Currencies


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Payments

Incoming payments processing consists of the following two actions:

q posting payments

q clearing open invoice line items with payment line items in the customeraccount

These two steps can be performed manually with paper-based payments:

q check

q transfer

q bill of exchange

For extended bank and treasury functions, fast entry techniques significantlyreduce manual processing. These include:

q manual account statement

q manual check deposit list

These can also be done automatically:

q electronic account statement

q lockbox (USA)

q check deposit transaction with a check scanner

q POR procedures (Switzerland)

If the debit memo procedure has been agreed to with the customer, all in-voices can be automatically collected according to their due date, using thepayment program. Similarly, refunds to customers can be transacted auto-matically (by check or transfer). The payment program is described in detailin the Accounts Payable Accounting chapter.

For manual receipt of payments, the document numbers of the in-voices/credit memos to be cleared are indicated on the existing transfer slipor on the corresponding payment advice note. The following data must thenbe entered:

q bank G/L account number

q amount of payment

q any bank charges

q document numbers of the documents to be cleared

If the totals of the indicated invoices (after any deduction of cash discount)agree with the input payment amount, then the document is posted and thepayment is cleared with the invoices. The cleared items now contain thenumber of the incoming payment document and the clearing date.

Incoming Payments

Manual Receipt of Payments


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If inadequate information is available regarding the invoices to be cleared,paid items for the customer can be determined using search criteria. Anydocument-specific information can serve as the search word. You can com-pile the desired information.

The following are some examples:

q reference number

q posting date

q amount of invoice

You can to specify intervals or individual values in the search. You can alsoremove items from the list of results or add additional items through a newsearch. The list of open items can be sorted according to various criteria. Youcan search for individual documents or groups of documents in the list toidentify line items that must be cleared. The list of results can be preparedaccording to any criteria. You can display all the data or the entire documentfor a line item.

Once all items to be paid have been found, they can be posted. Minor diffe-rences are automatically added to the cash discount paid or to a separateaccount. The maximum amount of difference accepted by the system is de-termined by customer and user-specific tolerances.

If a complete assignment of the payment amount is not possible or no allo-cation notice is found, then a payment on account is posted in the same ope-ration. If invoices are to be paid only in part, then the invoice is cleared. Anew item in the amount of the outstanding receivable is generated. Anotheroption is having a partial payment posted containing an internal reference tothe invoice that remains to be paid.

The items can also be selected automatically (without entering search crite-ria). The system attempts to determine the line items that come closest to thepayment amount, or alternatively, to distribute the amount of money accor-ding to the due dates of the items.

Fees charged by the bank are entered with the cash receipt amount. The sy-stem automatically generates a separate document line item for the feecharge. Manual payments are possible in any currency. Any exchange ratedifferences are posted automatically. The payment settlement can also con-tain down payments and take vendor line items into account. Multiple cu-stomer accounts can be cleared at the same time. Clearing of multiple com-pany codes is also possible. A separate clearing document is generated foreach company code.

The use of payment advice notes permits an automatic search and as-signment of open items during payment clearing. A payment advice note iscreated in the SAP system in various ways:

Document Not To BeCleared Completely

Payment Advice Notes


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q A payment advice note that already exists in written form can beentered manually.

q A payment advice note can be generated automatically while processingaccount statements, check deposit transactions, or lockbox data. It con-tains detailed information if direct clearing of open items is not possiblebecause of differences.

q The current processing status of the items can be noted in the form of apayment advice note during manual processing of open items as part ofa receipt of payment.

q A payment advice note can be transferred to the SAP system using EDI(electronic data interchange).

Instead of selection information and subsequent processing of the openitems, only an indication of the payment advice note number is required. Ifthere are differences between the payment advice note and the open items,the system automatically creates residual items and payments on account.These can be canceled if the difference is to be assigned manually or postedas a total.

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The manual check deposit and manual account statement features makethe processing of incoming payments substantially easier. Instead of exten-sive posting records, only incoming checks (check, check number, amount)have to be entered. Payment is posted to the bank and customer account andthe payment is settled, all automatically.

The SAP R/3 System offers the option of handling incoming paymentsautomatically. There is no need to enter data or assign incoming payments tothe open items and clear them. The procedures for automatic handling pro-vide greater efficiency. It eliminates the need to manually enter and assign

Fast Entry Techniques

Electronic Banking


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incoming payments to the customers open items. Review is only necessarywhen payment differences occur and incomplete payment informationprovided. This option frees up resources to deal with truly complex anddifficult situations.

Data provided by the bank or post office on a data according to the SwissPOR procedure is easily transferred to financial accounting and posted there.

Payment transactions that take place in the USA through a lockbox are alsodepicted in R/3 FI. Payment is posted automatically and the open items arecleared.

Similarly, data provided by an external data entry system, such as a checkscanner, is posted in financial accounting automatically.

The electronic account statement offers the option of automatically depictingall flows of money in the system. The system reads in the account statementsand obtains information for clearing the payment from the note to payeefield. From there it reads the document number (for example, through whichthe incoming payment is assigned to the open item and cleared). However,the criterion that serves as clearing information cannot be the documentnumber. It can be an insurance number (with insurance policies) or any othercriterion. If you have special needs, you can add your own codings throughuser-exits without modifying the standard system.

It is also possible for a company headquartered in the US with subsidiariesin Great Britain and France to handle payment transactions through accountsin the respective countries and read in and post an English or French accountstatement. In addition to BACS (Great Britain) and ETEBAC (France), a largenumber of other international formats are offered:

q SWIFT MT 940

q MultiCash

q CODA (Belgium)

q CSB43 (Spain)

q FIDES (Switzerland)

q ZENGINKYO (Japan)

q Several formats for:

m Czech Republic

m Sweden

The system architecture is set up in such a way that new formats can be ea-sily integrated.

POR Procedure

Lockbox

Electronic Check DepositTransactions

Electronic AccountStatement


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R/3 FI supports automatic handling and clearing of incoming payments. Indi-vidual needs can be met without having to modify the standard system. Auto-matic posting of electronic account statements dramatically reduces manualentry work.

Special Operations

There are certain business transactions that should be posted to the customerbut not updated in the line item of receivables from goods and services in thegeneral ledger. An example of this is down payments. These are identifiedseparately in the balance sheet. Using a special G/L indicator, the system istold that a posting should not be actualized in the reconciliation accountfrom the customer master record. Instead, it is done in a G/L account spe-cially set up for that purpose.

If a customer makes a down payment, then a down payment request is ente-red in the system as a statistical posting. It is shown with the item display,but does not result in a change in the transaction figures of the customer orgeneral ledger. However, this down payment request can be dunned. Usingthe payment program, a down payment posting is generated per bank col-lection. When posting a down payment request, the system assigns the lineitems to a special G/L account. You can create a list of all expected downpayments at any time.

Down Payments


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Fig. 3-7: Special G/L Transactions

When posting the down payment, a gross or net display can be chosen in thecustomer account. Net means that the down payment account shows thedown payment minus the amount of tax. With gross display, the tax is in-cluded in the line item of the down payment account. An additional line isgenerated in the tax clearing account as a clearing entry. In every case, cor-rect display in the balance sheet is ensured. A note regarding existing downpayments appears during posting of the final settlement. These can then betransferred in full or in part. However, clearing against the invoice can onlytake place upon receipt of payment.

With integrated use of SAP cost accounting and financial accounting, downpayments can be assigned to accounts for projects, orders, or cost centers.

Bills of exchange are also handled in the system as special G/L transactions.These transactions are automatically kept in the subledger separate fromother transactions. They are posted to a special G/L account in the generalledger. This ensures that an overview of bill of exchange receivables andpayables can be generated at any time. As a rule, transfer postings for thebalance sheet display are not necessary.

For payment of invoices with bills of exchange, the original receivables arecleared. The process corresponds to that of a normal incoming payment.However, there is no posting to a bank account. Instead, a bill of exchangereceivable is generated for the customer. This bill of account receivable re-mains in place until the bill of exchange is sold (forfeited) or paid.

Bills of Exchange


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Paying is machine-supported using a presentation list. Another feature letsyou write off several bill of exchange receivables based on the input of a keydate for the bill of exchange due date. The bill of exchange list can also begenerated from the system.

In each company code, default values are set for the discount percentagerate, collection charges, and bill of exchange tax indicators. The chargesshould be posted to separate accounts. The amount charged to the customerfor a bill of exchange is generated automatically.

Statistical postings, refinancing notes and guarantees of payment are alsohandled using special G/L indicators. There are various functions availablethat make operation of the system safe and easy.

Furthermore, you can set up your own special G/L transactions in thesystem.

R/3 FI permits flexible posting, viewing, and management of special transac-tions. Special transactions are also updated in the general ledger.

How are business transactions depicted in accounts receivable accounting?

Business transactions are depicted automatically in financial accounting.Entry of business transactions is automated. It is done efficiently and safelyusing SAPs numerous tools.

Document and Account Processing

Document and Account Display

When business transactions are posted to an account, the system automati-cally updates the account balance. It also notes which items of a documenthave been posted to the account. Thus, the account balance and line items forany account can be viewed.

The account balance offers an overview of the transaction figures per period,separated into debits and credits. Similarly, sales per period and special G/Ltransactions such as down payments and bill of exchange payables for thefiscal year can be discerned at a glance. From here, you can go directly to thedisplay of items.

A line item display provides an overview of an accounts open and cleareditems. You can specify which information on individual items appears on thescreen. For example, one user could be interested in the terms of payment,while another could be more interested in the dunning data for the line items.

Account Balance

Line Item Display


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However, even with an item list that has already been prepared, the viewcan be changed dynamically.

Extensive totaling and selection features are available within the line itemdisplay. For example, a total can be called up for each document type to dis-play the line items for each document type separately. Search and total fea-tures are also available, making it unnecessary to display all items initially.

q Line item display features are available for the following areas:

q an account in a company code

q a group of accounts in a group of company codes

For example, it is possible to display a consolidated group that is represen-ted in different customer master records.

You can switch from the list of line items to the display of documents at anytime.

If it is necessary to display an individual document, then the documentnumber and company code must be indicated. Alternatively, there are searchfunctions that allow you to find a document using the posting date or docu-ment type. With transactions involving cross-company code postings, a listof the relevant documents is displayed. You then have a choice of displayingthe line items of the individual documents or all line items pertaining to atransaction.

Other options for account analysis include:

q days in arrears (by number of days overdue)

q net/cash discount overview

q display payment history (customers liquidity)

q simulate payment history

q display credit limit (more information on this can be found in CreditManagement, later in this chapter)

The individual account display lets you locate all needed documents quicklyand efficiently .

Document Changes

Various features are available for changing documents that have alreadybeen posted. To make changes, you can:

q call up an individual document

q edit documents for a transaction involving cross-company code posting


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q request a list of all documents for a vendor and change specific docu-ments

q request a list of all documents for a vendor and perform a mass change(for example, release of payment) for certain fields

These functions are as easy to use as the display transactions.

Fields that have resulted in a data update can no longer be changed. Theseinclude:

q account numbers

q posting keys

q posting date

q amounts

q tax information

With many fields, the ability to make changes depends on the R/3 Systemcomponents installed in addition to accounting. Therefore, the cost centercan no longer be changed if the data are updated in cost accounting. Finally,there are other rules that have to do with the document status. Naturally,terms of payment can no longer be changed once the item has been cleared.

Apart from these fixed rules, you can stipulate for all fields whether andunder what conditions a field change can be permitted. For example, youcan stipulate that certain additional account assignments can only be chan-ged if the posting period of the document is still open for posting. If themonth has been closed for accounting purposes and data has been relayed toseparate systems for evaluation, changes to this data can be prohibited. Thisis set using system settings.

The functions for changing documents correspond to those for documentand account display. All search and sorting options are available. Withproper authorization, you can switch dynamically from the display to thechange function without losing the view that was just selected.

Documents can be adjusted quickly and easily depending on the your needs,ensuring accurate posting records.

How does the FI system support the editing of account assignment items?

The FI system supports you through a large number of display, search, andadjustment options. You can set up and use these functions however youwant.


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Dunning NoticesFrequently, customers do not satisfy their obligations on time and fall intoarrears with payments. Dunning notices are sent out to remind them of theiroutstanding debts.

Dunning is handled automatically by the dunning program. The programdetermines:

q accounts and items to be dunned

q dunning level of the account

q dunning notice based on the dunning level

Dunning notices are printed out and the determined dunning data are storedin the items and accounts.

Functions of the Dunning Program

The dunning program offers the following functions:

q Any number of dunning procedures can be defined. The dunningprocedure controls the dunning process.

q For each dunning procedure, multiple dunning levels can be establis-hed. Dunning levels are determined on the basis of the days in arrears ofthe open items. It can also depend on the dunning amount or a percen-tage (sales-relevant determination of dunning level). In addition, it canbe established on the account level that a dunning level is initiated onlywhen a certain amount or percentage is reached.

q Dunning can be performed separately according to dunning areas.Dunning areas are organizational entities that handle dunning within acompany code. The dunning area can correspond to a profit center orsales organization. You select a dunning area when posting an openitem. In this way, items can be later dunned separately according todunning areas.

q Dunning texts are selected in accordance with the dunning levels. Thetexts can be composed in different languages. In each case, the text is inthe language indicated in the master record for the respective businesspartner.

q The dunning program can be used to dun customers, as well as vendors.This is appropriate if the vendor has a debit balance because of a creditnote. If a customer is also a vendor, you can specify that the combinedbalance of the accounts serves as the critical dunning decision factor.

q Interest on arrears and charges can be applied optionally and a paymentdeadline for the due items can be printed out in the dunning letter.


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q Items and totals in the dunning letter are identified in the documentcurrency and/or local currency.

q Where there is a head office/branch office relationship, the dunningnotice is generally sent to the head office. Local dunning is also possible.

Procedure for Dunning

The dunning process is divided into three steps:

q generate dunning proposal

q edit dunning proposal

q print dunning letter

Fig. 3-8: Dunning Procedure

To initiate automatic dunning, you determine a key date for the maturitycheck and which accounts should be checked. The dunning program checksthe due dates of open items in the specified accounts.

Generate Dunning Proposal


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The program then generates a list of the accounts and open items for whichit proposes dunning (dunning proposal list).

You can edit the dunning proposal list. The dunning level of items and ac-counts can be changed. Items (accounts) can be released or blocked withregard to dunning. All changes are logged, so the result of the dunning runalways remains transparent.

The dunning proposal can be generated as often as necessary. This is pos-sible since dunning data is updated in the item and in the account only whendunning letters are printed.

If the dunning proposal has been accepted, dunning notices can be printed.The SAP system already contains sample forms which you can modify.Sample forms can be copied so that only relevant variables, such as addres-ses, have to be inserted. However, you can also specify the layout and text ofthe dunning letters using SAPscript (the SAP word processing program).

You can specify whether:

q you are using forms that are uniform for the entire group

q you are only using company code-specific data from specific text com-ponents

q individual company codes use their own forms

Besides dunning as a batch processing function, there are also provisions fordunning individual accounts. In this case, an individual dunning textwhich is different from the standard textmust be indicated.

Along with editing logs, the following logs are also generated:

q lists of blocked items and accounts

q lists of items with special dunning keys

q dunning statistics

With the financial calendar, periodically recurring functions, such as dun-ning runs, can be scheduled and assigned to the appropriate employee fortimely processing. This employee is notified at the proper time.

In this way, authorized employees can generate a status report on dunningruns at any time. They can also track and check on previous dunning runs.

Edit Dunning Proposal

Print Dunning Letters

Other Dunning Functions

Financial Calendar


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Fig. 3-9: Monitoring Dunning Runs Using the Financial Calendar

You can structure dunning notice generation according to your needs.

How does dunning proceed in the FI system?

You can set up the dunning procedure to fit your needs. You can intervenein the automatic process to structure the dunning proposal list in keepingwith your requirements.


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CorrespondenceAlong with dunning notices, other types of correspondence are generated bythe system. These include the following standard reports, which are mailedto customers:

q payment notices

q account statements and open item lists in letter form

q general letters

q balance confirmations

q document extracts

q bill of exchange charges statements

q interest calculations

You can request correspondence while processing accounts and documents.It can be generated automatically in a certain cycle or started manually.Written notices are generated in the language of the business partner.

The system automatically generates payment notices giving the businesspartner information on which open items have been cleared with their pay-ments. If differences arise during clearing, the business partner can be askedto clarify or pay these. If payments were made that have not been assignedto open items, the business partner is asked to clarify the payment. You cangenerate a reply slip to permit assignment to open items of payments onaccount. You can also do this for other non-assignable credit memos thatshould have been posted in the clearing procedure. The customers openitems are listed in this notice. They can identify the open items to be paidand provide further remarks.

The customer account statement is used for reconciliation and provides in-formation to the business partner. It shows:

q the balance carried forward

q all items for the selected time period

q the account closing balance

The open item list is a special form of account statement. It is sent to the bu-siness partner for reconciliation or information purposes. Occasionally, thelist is also used as a reminder. Open items, up to the desired key date, areidentified in the list.

Both types of notices contain the document number or another reference.These include:

q document number

q document date

Payment Notices

Account Statements andOpen Item Lists


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q document type

q currency

q amount for each item

q balance of open items on the key date

The account statement also includes the clearing document number, if appli-cable. If branch offices were included in a notice to a head office, their ad-dresses are listed at the end of the notice.

The layout of the notice is specified through a form. The notice can includethe days in arrears per item on the key date or other information, dependingon the form used.

The individual letter makes it possible to enter individual text when corre-spondence is requested. This text is stored separately. The system automati-cally determines information pertaining to the customer, such as the address.The individual letter is composed like individual text.

With a standard letter, specified text is already in place. This standard letteris called up for the customer whose account is being processed. The systemautomatically determines information, such as address, pertaining to thecustomer. For example, you can send a standard letter to customers if thereis a personnel change within the companys accounting department.

Balance confirmations are very demanding with regard to the variability ofthe selections. For example, customers with the highest balances will be de-termined first. Next, a balance confirmation is generated for these customers.Selection criteria and/or random selection can then be used to determine(from the remaining accounts) a representative quantity of accounts forwhich a balance confirmation is similarly generated.

With document extracts you inform your customers of a specific line item(for example, a credit memo) in a targeted fashion. The system recordswhich document line items are selected.

If a customer has paid off invoices with a bill of exchange, a bill of exchangecharges statement is generated. At the same time, a letter is automaticallygenerated informing the customer of what charges have been incurred.Forms are stored in the word processing program for all letters that are sentto customers or vendors. A language code in the respective master recordcontrols the language in which the forms are printed.

Correspondence relating to interest data can also be generated. This datarelates to:

q Item Interest Calculation:Interest is charged on items that have not yet been paid and are over-due, or that were paid only after the due date for net payment.

q Account Interest Calculation:Interest is charged on the account balance. This is used to calculate inte-rest on employer loan accounts, for example.

General Letters

Balance Confirmations

Document Extracts

Bill of Exchange ChargesStatement

Interest Calculations


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In both cases, cover letters are generated with the settlement information. Aform letter for this, which you can modify, comes with the system.

Fig. 3-10: Process for Generating Correspondence Requests

Internal documents allow you to generate complete documents with allfields that have been entered in the system. Internal documents of this kindare used as in-house documents if no original document is present. They canalso be used for documents intended for circulation within the company.

The bill of exchange list contains all open bills of exchange. As a supplement,cleared bills of exchange can also be displayed, upon request.

What customer-specific correspondence does the FI system create?

All important information from posting transactions can be logged in wri-ting and sent out in the form of notices.

Internal Documents


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ReportingR/3 FI offers a large number of standard reports regarding customers. Thesereports can be printed or displayed directly on the screen.

In principle, the reporting system is set up in such a way that all reports canbe run in parallel. When printing, you have the option of first storing thisinformation in a temporary file. Afterward, you can decide whether andwhere the data should be physically output.

Master Record Lists

Standard reports for master record information are available, along with anumber of selection criteria. Selection criteria include reports according topostal code or according to the reconciliation account. You specify the num-ber of fields to be printed in the lists. For example, a list can be generatedwith only customer address information. Another list can also contain bankinformation. You could also have a list with all the fields of the customermaster record. Sorting the list is also an option when the report is called up.

Customer Analyses

Reports are available that document customer items. For example, an openitem list for any key date can be composed (as long as the items are stillavailable in the system). There are reports with sorted open item lists, whereyou specify the sorting intervals.

Accounts

Many times, items cannot be left in the system after clearing because of me-mory considerations. To document all of an accounts items at year endwithout pulling in all the archives, the items are stored in a different file,separate from the documents. Only information from the customer line itemsis found here. In addition, this file is sorted in such a way that cleared itemsappear at the beginning of each account. Clearing transactions are sortedaccording to clearing date and clearing document number. This makes thecontext clear. Items still open on the key date are then listed at the end ofeach account. Reconciliation totals are output for each account and reconci-liation account, making it possible to coordinate with the other parts of theaccounting system.

How is the reporting feature of the FI system set up?

Numerous standard reports for customer data are possible. They supportprocessing and management of customer accounts. These reports can also beprinted.


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Customer Credit ManagementCustomer credit management offers the option of making order acceptancedependent on an assessment of a customers creditworthiness. This is donethrough a credit limit. The limit is checked in financial accounting and salesupon posting. If the limit is exceeded, the system issues a warning or anerror message, depending on setup. The document can be posted. Otheractions can follow. An example would be an examination of the customer ora block on the master record. The credit limit can be assigned on variouslevels. Credit limits are assigned and monitored using credit control areas."A credit control area consists of one or more company codes. If a credit con-trol area has been set up and a preset value has been indicated for a custo-mer, then the credit master record is automatically set up when a customermaster record is set up.

Fig. 3-11: Credit Control Areas

Assigning A Credit Limit

It is possible to assign a credit limit for a specific customer or for severalcustomers together. To classify customers regarding business risk and toinitiate corresponding checks, you can assign a risk class to the customer.The risk class specifies which checks are performed during order processing.In addition, customers can be combined into groups (industries, countries).


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Monitoring A Credit Limit

For each customer in a credit control area, the system calculates and displaysthe following data:

q receivables from sales, insofar as they are not identified as disputeditems

q receivables from special G/L transactions, insofar as they are identifiedas relevant to the credit limit (for example, down payments)

q order value, consisting of open orders, open deliveries, and openinvoices

q total liabilities (total of others)

Displayed total liabilities increase automatically when an invoice is postedand decrease upon receipt of payment. If the total liabilities exceed the creditlimit for the customer in the credit control area, the system provides a war-ning. However, it is still possible to enter the invoice. The date on which thecredit limit was exceeded is recorded by the system.

The credit limit is maintained in a separate credit limit currency, which isestablished for each control area. This currency is independent of the localcurrency (currency of a company code). The system converts the amounts forupdating credit limit data. This has no effect on the update of the transactionfigures or on posting.

Central data can be created in any currency, regardless of the currencies ofthe control areas.

Display and Analysis Functions

The system supports credit limit monitoring with a variety of functions. Youcan create an overview of the current situation at any time. You can displaythe following data concerning a customer:

q changes in the master record

q oldest due items

q customer order value, broken out into open orders, open deliveries, andopen invoices

q last payment

q line items

q dunning and payment data

If an accounting clerk notices critical data, an internal memo drawing atten-tion to the matter can be sent. The clerk can initiate an examination of thecustomer or a block on deliveries.


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To permit fast and flexible reaction, the system offers a variety of analysisoptions. Customers can be analyzed according to sales and payment history.You can move from credit management to the financial information system.There, due date analyses, further evaluations of the payment history, orcalculations of DSO (day sales outstanding) figures can be performed. Thestructure of the evaluations can be specified individually. Data is com-pressed or expanded at will (from the open item display to the credit mana-gement data of the customer). Evaluations can also be prepared and depictedgraphically.

Fig. 3-12: Due Date Analysis According to Country and Company Code

A credit master sheet can be generated for information or documentationpurposes starting with the line item display, the account analysis, and creditmanagement. The sheet contains the following data:

q address and communication data

q credit limit, date of last notice to the customer

q fields from the credit management master record

q total open deliveries, invoices, and orders

q balance, days in arrears, texts to the customer, and payment history

With integrated use of accounting and sales, sales documents are displayedand edited from credit management.


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Credit Control in Order Acceptance and Delivery

To ensure that a customers credit limit is not exceeded, credit checks arenecessary at the moment of order acceptance and then immediately beforedelivery of goods. With integrated use of the SD system, an automatic creditreview is available in which complex validation rules can also be depicted.

Depending on the risk class to which the customer is assigned, the followingchecks are performed:

q statistical credit limit checks

q dynamic credit limit checks, taking into account delivery deadlines anddue dates

Other information can be considered as additional input values for the creditreview. This includes:

q document value

q changes in critical fields such as terms of payment

q structure of overdue items

What are the characteristics of customer credit management?

Customer credit management offers a variety of options for monitoring andanalyzing a customers creditworthiness. This allows you to react to difficultsituations in a timely and appropriate fashion.

sap accounts receivable accounting

Documents

customer data records

accounting system

balance sheet accounts

balance lists

credit balance

accounts receivableaccounting

general ledger

cash management