Discount and Payment Terms in SAP

Terms of payment are conditions agreed between business partners for the payment of invoices.

>> The terms of payment enable system to calculate the Cash Discount and due date for paying the invoice.

>> In order to do the a/m the system needs the fol data

i. Baseline date: date from which date starts
ii. cash discount terms
iii. cash discount percentage rates

>> When you process a doc you enter the terms of payment so that the system can calculate the required conditions of payment.

>> The terms of payment are:

i. Defined/entered in coy code segment, sales area segment or purchasing org segment of a customer/vendor master record.
ii. proposed when you post document
iii. entered manually

>> The terms of payment default when you post an invoice all depends on where the invoice was created, FI (terms defaulted from coy code seg), SD(terms defaulted from sales area segment) or MM ( terms of payment from purchasing organization segment are defaulted)- further copying of these terms from SD or MM to FI is done automatically.

>> Dunning & payment programs access these terms of payment

>> Generally no terms of payment are proposed at the time of creating a credit memo: There are however options to post credit memo:

o Invoice related credit memo :linked to original invoice, invoice and credit memo due on same date
o Non Invoice related credit memo with payment terms entered at time of posting documents, only if ‘V’ is entered the payment terms will take effect. These credit memos are due on baseline date

>> The day limit in payment terms is the calendar day to which the payment terms are valid, using day limit you can store single or multi part terms of payment in terms of payment key

>> The account type defines the subledger in which terms of payment can be used. If you want to use terms of payment for both vendors and customers, you should define these using separate terms of payment keys and then only use them for one account type accordingly. This prevents any change that you make in terms of payment for your customers to effect your vendors.

>> Using block keys which can be entered in line items or accounts, you can block line items or accounts for payment or collection .The block key can also be entered in terms of payment.

>> Payment method, predefined by systems for many countries, can also be entered in line items or accounts, like payment blocks, payment methods can be entered in terms of payment.

>> A block key and payment method defined in a payment term will be defaulted in line item when the payment term is used.

>> Baseline date is the starting date the system uses to calculate the invoice due date.

>> Possible default values for baseline date in payment terms are

o No default
o Posting Date
o Document date
o Entry Date

>> You can enter up to three cash discount periods.

>> To calculate cash discount, you enter a percentage rate in terms of payment. You also enter the no of days that % is valid.

>> The days and months specified in terms of payment are used in conjunction with the baseline date to calculate the correct cash discount amount for the payment date.

>> The day limit is the baseline date upto which the payment term version applies

>> Day limits enable date-specific terms of payment in one terms of payment key.

>> You can define several versions of terms of payment with each version having a different day limit

>> The following terms of payment require the specification of a delimit:

o documents with invoice date upto 15th of the month are payable on the last day of the following month
o Documents with a later invoice date are payable on the 15th of the month after.

>> An invoice can be paid over several months using an instalment plan, where the total invoice amount is divided into partial amounts due on different dates. The system carries out the split automatically if instalment payment is defined in the terms of payment. to do this select instalment payment and DONOT assign cash discount periods or cash discount percentage rates.

>> Define an instalment number, a percentage rate and terms of payment for each instalment.. The percentage rates specified must total 100%, the system creates a line item for each instalment specified. The line item amounts correspond to the percentages of the total amount, while the total of the line item amounts corresponds to the total amount.

>> For each coy code or tax jurisdiction code, specify which value the system is to use as a cash discount basethis setting belongs to the global parameters of a coy code.

>> The cash discount amount is entered either manually or automatically by the system using the rates in the terms of payment. You can still change the cash discount after you post the invoice.

>> When you clear an open item in a customer or vendor account, the cash discount is automatically posted to the account for ‘cash discount expense’ or ‘cash discount revenue’.

>> Incase of instalment payment, following steps are taken:

o create payment term without any cash discount%, only select instalment check
o define instalment number, a % rate and terms of payment for each instalment
o % must be 100%
o the system creates a line item for each instalment specified

>> Incase cash discounts are used in the gross procedure fol accounts are used

o Cash discount revenue account
o Cash discount expense account

>> If you post a vendor invoice with a document type for the net procedure, the amount posted to the expense or balance sheet account is reduced by the cash discount amount. The same amount is also posted to a cash discount clearing account to clear the posting.

>> When you use the net procedure the cash discount amount is automatically posted when the invoice is posted.

>> When the invoice is paid the system carries out a clearing posting to the cash discount clearing account

>> If the invoice is paid after the cash discount deadline the cash discount loss is posted to a separate account

>> THE CASH DISCOUNT CLEARING ACCOUNT MUST BE MANAGED ON AN OPEN ITEM BASIS.

>> Incase cash discounts are used in the net procedure fol accounts are used

o Cash discount clearing account
o Cash discount loss account

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