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Technical Articles

Micheal Mathews
December 29, 2020 | 9 minute read

“Alternative Payee” vs “Alternative Payee In Document”

vs “Permitted Payees”, how are they different ?

Follow  24  35  30,473

Understanding this feature provided by SAP

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 When it comes to making payments to our vendors SAP has given us an option to make the payment to the vendor or to
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make the payment to another person (Alternative Payee) which is maintained in the Vendor Master Record. This feature is
provided to promote flexible payments so that if requested by your vendor you the buyer can directly make the payment to
that person to whom your vendor owes the money.

If an alternative payee has been maintained for a vendor the system would always make the payment to the alternative
payee and not the original vendor. This is because the payment program will always access the name, address and bank
account details of the alternative payee.

When we create a new vendor master record in SAP the vendor master details are divided under 2 sections

1. General Data
2. Company Code Data

Now it is important to remember that an alternative payee can be defined under General as well as Company Code data. If
you specify an alternative payee in both areas, the alternative payee mentioned in the company code area has priority.

Screen 1 below showcases the General Area of the vendor master record where an alternative payee can be maintained.
We can see that vendor ‘5200’ has been assigned an alternative payee which is ‘1014’.

Please click on the images below to view them in better clarity.

Screen 1
 T-Code XK03

Screen 2 below showcases the Company Code Area where an alternative payee can be defined. We can see that vendor
‘5200’ has been assigned an alternative payee which is ‘3510’.

Screen 2
 T-Code XK03

Now as per the explanation given above when alternative payees are defined at both General and Company Code Level the
system will always select the alternative payee which is defined at the Company Code Level.
The screenshots posted below will corroborate this understanding:

We create an FI Invoice of 580 EUR against vendor 5200. The important thing to note in this screenshot is that the SAP
system has selected the vendor as 5200, however if you observe the bank account details you will notice that the bank
details are of the alternative payee which is maintained under the company code section in the vendor master for vendor
5200.

The system did not select alternate payee ‘1014’ as it was defined under General Data category in the vendor
master.Alternative payee ‘1014’ will only be selected by the system if i would make this invoice in any other company code
but 1000

Screen 3
 T-Code FB60

Showcasing the banking details of alternative payee ‘3510’ defined under company code for vendor ‘5200’. We can see that
the Bank Key, Bank Account Number and Bank Name are accurately being displayed in the vendor invoice raised above for
vendor 5200.

Screen 4
 T-Code XK03

We now run the payment proposal for the sample invoice

Screen 5
 T-Code F110

We noted that the payment was made to vendor 3510 who was present as an alternative payee for vendor 5200

Screen 6

Payment Output from T-Code F110

Now that we have understood what alternate payees are and how they function let us understand, what is an ‘Alternative
Payee In Document’ ?

Alternative Payee In Document is a field available in the general data selection criteria in the Vendor Master. If this field is
enabled the payment technically can be made to anyone who may or may not exist in the Vendor Master. This function
gives the invoice processor the authority to change payment details which are automatically selected by the system for
payment.

For ease of understanding, I will walk you through a sample transaction using the same vendor 5200, however this time
the only configuration that has changed is that, I have enabled the field ‘Individual Spec’ under ‘Alternative Payee In
Document’ for vendor 5200.

Screen 7
 T-Code XK03

Created a new invoice of 700 EUR against vendor 5200. Till this point nothing has changed as compared to the previous
invoice which we processed. System still selects the bank details of the alternative payee ‘3510’ which is defined in the
vendor master. We now save the Invoice and the document number is ‘1900000002’

Screen 8
 T-Code FB60

We now execute T-Code FBL1N and search for document number 1900000002 which is created under Vendor 5200.
Please observe the blank space highlighted in the image.

Screen 9
T-Code FBL1N
Now an alternative payee can be ‘Individually Set’ for this invoice.

Screen 10
 T-Code FBL1N

Now on this page bank details of any person can be entered and when the payment proposal will be executed the payment
will be made in the account which is mentioned below. In this case the payment will go to sample bank account ‘778899’.

Screen 11
After the new banking details are saved the ‘Individually Set’ field gets populated with the details which have been entered
manually by the invoice processor.

A critical observation here is that system always uses the payee which is Most Specific. This means that when you enter a
payee in a document, it has priority over all payees specified in the master record. This will even supersede the alternative
payee which is mentioned in the vendor master at a company code level which in our case is ‘3510’ and which the system
was selecting until now.

Screen 12
We now run the payment proposal for the sample invoice. We can see that the payee which got selected is the one which
we entered to be a fake payee.

Screen 13

In the payment proposal output screenshot below we can see that the payment is processed in bank account ‘778899’
which was individually set by us in the document.

Thus in this case the payment has not been processed to any of the alternative payees mentioned in the vendor master
but to the payee which was manually entered by me i.e. the fraud payee.

Screen 14
Looking at what you have seen above you might want to audit your vendor master and check whether any vendor has been
enabled for ”Alternative Payee In Document”

Extract Table LFA1 and check field ‘XZEMP’. If this field is marked as X that means ”Alternative Payee In Document” is
enabled for that vendor.

Screen 15
 Table LFA1

Now in the event that you have found vendors where alternative payee in document is allowed the next step is to identify if
anyone has exploited this vulnerability in your system.

Extract Table BSEG

The input parameter should be the list of all vendors which have been identified above in the LFA1 table then search for
field ‘XCPDD’ and apply the filter as = X. This will give you the list of all documents where payee details have been manually
entered by the invoice processor.

Screen 16
 Table BSEG

In our output we can see that document 1900000002 that we processed above is marked as ‘X’ under field ‘Individually
Set’ (Technical Name ‘XCPDD’) because we entered the payee details manually in the document.

Screen 17

Now if you want to see what changes were exactly entered by the invoice processor you need to go to the document by
executing T-Code FBL1N and click on document changes.

Screen 18
T-Code FBL1N
A comparison can then be made between New and Old values.

Screen 19
Now that we have understood “Alternative Payee” and “Alternative Payee In Document”, so now what is a “Permitted
Payee” ?

From the very word permit, a permitted payee is someone you define in the vendor master to whom a legitimate payment
can be made. This is very different as compared to an “Alternative Payee In Document” because here the payment can only
be made to a specific Predefined Vendor and not anyone like in the case of “Alternative Payee In Document”.

Let me help you understand this with the help of an example. Here we have vendor 5200 who has a permitted payee
assigned which is vendor 3101.

Screen 20

Now when the invoice processor punches an invoice against vendor 5200 the system automatically selects the details of
the “Alternative Payee” defined for this vendor at a company code level which is vendor 3510 and this behavior is fine,
because this is how the system should be working.

Screen 21

So now the use-case of permitted payee is during invoice creation the invoice processor can change the payee details, but
only to the one’s which are pre-configured in the vendor master for that specific vendor.

Screen 22
In this case the payment can be processed only to two possible sources

i) The alternative payee assigned to vendor 5200 which is vendor 3510 and which the system is selecting until now

ii) The “Permitted Payee” 3101 which the invoice processor can select in the event he decides he doesn’t want the payment
to go to vendor 5200 alternative payee which is vendor 3510

Once selected we can see the payee details are updated in the invoice.

Screen 23
Below screenshot showcases that payee details of vendor 3101 are accurately reflected in the invoice screen above

Screen 24
Here are a few points to remember are when you are dealing with Permitted Payees:

In order to add a permitted payee to a vendor you first have to enable the ”Individual Spec” (XZEMP) which is actually the
alternative payee in document field. Only after that you can add a permitted payee to the vendor.

Once changes are done remember to reverse the setting and keep the field “Alternative payee in document” (XZEMP) as
display or on suppress. If you fail to do so alternative payee in document will stay active and then payments can be made
to anyone as showcased in the blog above.

System Configuration
All said and done ”Alternative Payee In Document” is a very critical configuration in the vendor master as enabling this
configuration gives Absolute Authority to the processor to manipulate invoices. In my personal opinion this field should be
set to suppress to avoid accidental enablement of this field.
This can be controlled by making changes in the Screen Layout for vendors.

Path: SPRO–>Financial Accounting New–>Accounts Receivable and Accounts Payable–>Vendor Accounts–>Master

Data–>Preparations for creating Vendor Master Data–>Define screen layouts for Vendors

The field which says “Alternative Payee Account” is referring to the alternate payee which is maintained in the vendor
master. This field in most cases would be set between optional entry or display depending upon your business
requirement.

The field which says “Alternative Payee In Document” is the field which should be set to suppress to avoid any illicit
payments going out of the organization.

Screen 25
Assigned Tags

FIN (Finance)

FIN Accounts Receivable and Payable

I would like to thank you for reading my blog. I hope the information that I have shared will be put to good use and will help
FIN General Ledger you improve the information security controls in your organization. Also do let me know if I have missed out on something,
because a good auditor is always learning.
MM Invoice Verification

SAP Payment Engine Warm Regards

Michael Mathews
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24 Comments

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Sergey Pryanishnikov
January 1, 2021 at 8:24 am

Thank you for good material

Like 1 | Share

Micheal Mathews | Blog Post Author

January 1, 2021 at 5:07 pm

Thank you Sergey Pryanishnikov glad you liked it

Like 0 | Share
 Siva Prasad
April 16, 2021 at 1:11 pm

Thank you.. Good explanation

Like 1 | Share

Narayana NookaLa
June 6, 2021 at 2:19 pm

I have one small doubt sir.. How to display the screen no 6.. Sir.. So please reply the my question sir. I did try to week Sir..

Like 0 | Share

Micheal Mathews | Blog Post Author

June 6, 2021 at 2:30 pm

Hi Narayana NookaLa ,

Screen 6 is the output from Automatic Payments Program T-Code F110. By executing this T-Code you can process open invoices against
vendors, when payment is processed you can check the output file and identify to whom the payment is actually processed.

Like 0 | Share

Kalana Gunasekera
December 21, 2021 at 2:43 am

Hi Micheal,
Informative read!

I'm curious if in your example, 5200 and it's alternative payee 3510 are in different vendor account groups and/or tied to different reconciliation
accounts or the same.

I tried a scenario where the alt payee was in a different account group from the invoicing party and noticed that the alt payee doesn't get picked up
during the payrun.

Like 0 | Share

Micheal Mathews | Blog Post Author

December 21, 2021 at 4:55 am

Hi Kalana,

Yes vendor 5200 & 3510 are in different account groups and they have different recon accounts, however i don't think this should effect the
functioning of this feature, because the entire idea of this feature is to allow payments to someone other than the vendor himself.

Can you please check the following in your system

1. Check if bank details and configuration required for proper functioning of T-Code F110 is setup appropriately for the sample company
code
2. Select the right payment method in T-Code F110 and the same payment method should be present against the vendor in the vendor
master
3. Check if system configuration allows alternative payees
4. Check if the alternative payee is an active vendor and is not having a payment block in the Vendor Master
5. You also need to understand Screens 1 - 4 clearly in the blog above.

In your case if the alternative payee is not getting picked which payee is getting selected in FB60? Also let me know at what stage are you
getting an error?

If in T-Code FB60 you can see that your alternative payee is selected and the invoice is saved with the alternative payee details then during
payment your invoice is not getting picked up you need to check your F110 configuration.
 Let me know if you need any help

Regards,

Micheal

Like 0 | Share

Noor Hussain
August 4, 2022 at 4:18 am

I really appreciated this explanation. Nicely quoted. Thank you very much.

Like 0 | Share

Micheal Mathews | Blog Post Author

August 19, 2022 at 2:04 pm

Hey Noor,

Thank you for the appreciation.

Like 0 | Share

Gerardo Santos
August 4, 2022 at 2:22 pm

Thank you very much for this information.

I just have one doubt, is it possible to have a One Time Vendor with this alternative payee option?
In vendor Master data is possible to assign permitted payees but when we create the Vendor Invoice an error messages comes up when we select
one of the permitted payees.

Regards.

Like 0 | Share

Micheal Mathews | Blog Post Author

August 19, 2022 at 2:02 pm

Hey Gerardo,

I am not sure if i understand your question correctly, can you please explain your question in more detail.

Thank you

Like 0 | Share

Ganesh Doranathula
September 21, 2022 at 5:35 pm

Your detailed and clear walkthrough helped me to address my project requirement. Thanks a ton!!

Like 0 | Share

Micheal Mathews | Blog Post Author

September 22, 2022 at 6:54 am

Hey Ganesh Doranathula,

I am glad this helped you, actually 2 years back i was working on a similar project and i was unable to find any concrete understanding of this
concept on the web. Finally i decided i will test every possible scenario and get this right, which was frustrating and fun at the same time.
 I wrote this blog, because in the past various other blogs helped me a lot in my projects, so i decided to give something back to the SAP
community by writing this blog.

Thank you for your appreciation.

Like 1 | Share

Tatyana Kopat
September 23, 2022 at 8:05 am

Thank you Micheal Mathews!

Maybe do you know, how in Vendor master data (the Alternative Payee in document) to hide one of the checkboxes (XZEMP field "Individual
Specification") and leave the second ("Permitted payee")?
 SAP

Like 0 | Share

Micheal Mathews | Blog Post Author

September 23, 2022 at 10:08 am

Hi Tatyana Kopat ,
Yes if i am getting your question correctly, i feel you want to disable field "XZEMP" but you want the user to see the permitted payee for that
vendor ? Am i correct ?

Configuration in the image below shows that Vendor 5200 now has a "Permitted Payee" that is payee 3101. But if you notice my Individual
spec (XZEMP) field is disabled.

The Image below here shows you what the invoice processor will see in T-Code FB60. He can now process the payment to vendor 5200 or at
max select his "permitted payee" that is vendor 3101. He won't be able to process this payment to anyone else as field "XZEMP" is disabled.

Hope this helps 🙂

Like 1 | Share

Tatyana Kopat
September 23, 2022 at 10:36 am

Thank's @Micheal Mathews

No, not correctly 🙂

I want the field "Individual Entries' not to be displayed at all in the vendor card (transactions FK01/FK02/FK03).
Like 0 | Share

Micheal Mathews | Blog Post Author

September 23, 2022 at 10:59 am

Ok sure, then for that you can follow "Screen 25" in the blog above and then enable suppress on field which says
"Alternative Payee in Document".

Is it that you are finding it difficult to navigate to the configuration screen? Do you want the navigation path?

Let me know

Like 0 | Share

Tatyana Kopat
September 23, 2022 at 11:17 am

If you suppress the field as on screen 20, you will not see the Permitted payee field either.
 SAP2

Like 0 | Share

Micheal Mathews | Blog Post Author

September 23, 2022 at 11:43 am

Yes that is correct but what is the issue if you keep the field on "Display" it is as good as suppress because the user
can see the field but not make any entry and at the same time you can also set your "Permitted Payees".

Like 1 | Share

Ramamoorthy Balakrishnan
November 29, 2022 at 3:53 pm

HI Mike,
 Thanks for sharing the blog , can you share the Accounting Entry also which will be helpful.

R Balakrishnan

Like 0 | Share

Varsha Raikar
January 4, 2023 at 4:47 pm

Hi Micheal,

When we use alternative payee option and make manual payment through f-53 , how can can we verify whether in
the payment document that the payment has been made to the alternative payee ?

Thanks & Regards

Varsha

Like 0 | Share

Jamie Teshima
November 28, 2022 at 10:16 pm

Hi Mike -

I think this is relevant in ECC only. Have you played around with the configuration in SAP S/4 (lets say 1909+), I am not sure the settings alternative
payee configuration acts the same way. It seems like its restricted to just the vendor master level input only where you are now only allowed to enter
the permitted payee. I tried fooling around in a sandbox with a few different combinations and I haven't seem to open any backdoors yet at the
vendor master or in FBL1N (I am able to see the "extra / alternative payee" but haven't been successful in actually allowing the option to enter.
Would be interested to see if this actually works the same way in S/4.

Like 0 | Share

Micheal Mathews | Blog Post Author

December 4, 2022 at 5:08 pm

Hi Jamie Teshima

Yes this testing was done on SAP ECC but as far as i know SAP i think these features should work in SAP S/4 in a similar manner. In S/4 i
think the screen layouts have changed but the functionality is still the same.

I do not have access to S/4 to confirm this but what you can do is in your S/4 system go to table LFA1 and look for technical name 'LNRZA' if
this field is present it means you can add an alternative payee for a vendor but we still do not know the process for it. Let me know if you find
out.
 Like 0 | Share

Laura Tan
March 9, 2023 at 2:51 am

​Hi Micheal Mathews

If the permitted payee field is entered into the vendor after the invoice is posted, can existing invoices choose to pay to the new permitted payee by
changing the document?

Best regards,

Laura

Like 0 | Share
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