Down Payments to Vendors/advances to Vendors:

 Advances are known downpayments in sap. And downpayments are known as special gl transactions in
sap.

 special gl accounts are the accounts which are maintained parallelly with the general ledger. Example:
down payments, bill of exchanges guarantees etc.

 special gl transactions are identified with a spl. Gl indicator example: down payments-----------a bills of
exchange-------w

 in downpayments, ―advance to vendors ‘is known as spl. Gl account or alternative reconciliation

account.

 special gl indicator(a) is the link between ------ normal gl/ reconciliation a/c (sundry creditors) and spl.
Gl a/c / alternative reconciliation account (advance to vendors a/c)

 spl gl indicator-a is given while posting to a vendor which will differentiate the advance payment and
and normal payments to a vendor.

Configuration steps:

1.Create Special GL Account ‗Advance to Vendors (Reconciliation Account) ‘under Current Assets AT
FS00.

2. Link between S/Creditors and Advance to Vendors (OBYR) SPRO > Financial Accounting > Accounts
Receivable and Accounts Payable > Business Transactions > Down Payment made > Define Alternative
Reconciliation Account for Down Payments

3. Down payment Request (F-47) -End user () Accounting > Financial Accounting > Accounts Payable >
Document Entry > Down Payment > Request.

4.Down payment posting (F-48)- Accounting > Financial Accounting > Accounts Payable > Document
Entry > Down Payment > Down payment.

Down payments made to vendors need to be reported as asset in the balance sheet. To support this
requirement, these are posted as Special General Ledger transactions. When a down payment is posted to
a vendor account, the system carries that to an alternate reconciliation account (e.g., Advance to Vendor
Account) in lieu of the standard reconciliation account (Sundry Creditors Account).

Special General Ledger indicators enable the system to find out such alternate reconciliation account
automatically. These ‘Alternative Reconciliation accounts’ are displayed separately from ‘Sundry
Creditors’ on the balance sheet according to management’s requirement for disclosure.
A separate Spl General Ledger account (Alternative Reconciliation account) is created for each special
General Ledger transaction. It also enables keep separate track of all the special transactions with each
vendor via ‘Vendor Account’ itself (Spl GL transactions segment)

(29 A) - Vendor A/c Dr

(50) -To Bank A/c

5. Post Vendor Invoice Against Down Payment (F-43)

Post invoice for same vendor to which the down payment was issued in the previous step.

Inventory Of Raw materials A/c

To Vendor A/c

6. Transfer of Down Payment from Special GL Account to Normal item by clearing Special GL Account
(F-54) Accounting > Financial Accounting > Accounts Payable > Document Entry > Down Payment >
Clearing.

Generally, it can be cleared directly if the closing invoice is received. Alternatively, it can be transferred
manually.

 Transaction code is F-54

In this case, the down payment is cleared via a credit posting of the same amount to the same vendor as
normal item. Consequently, the amount is no longer displayed on the balance sheet as ‘Advance to
Vendor’ but represents a “payment made” in the ‘Payables’ account.

It is then important to clear this transferred amount when the invoice is paid, either manually or
automatically. However, unlike clearing, several postings are required when transferring a down payment.

7.Clearing Vendor
When goods or services, for which a advance payment was made, have been delivered and related invoice
has been received from the vendor, the down payments, existing if any, can be cleared against the
Invoice. Two methods for this

 Clear the Down Payment along with the final payment (Post with Clearing).
[T-Code- F-53]

 Clear the Down Payment with the related Invoice (Account Clearing)
[T-Code- F-44]

PAYMENT TERMS OR TERMS OF PAYMENT

 THESE ARE THE TERMS OF PAYMENT WITH A VENDOR/CUSTOMER

 THESE INCLUDE THE CREDIT PERIOD GIVEN BY THE VENDOR OR ALLOWED BY US TO A CUSTOMER

 THIS WILL ALSO SPECIFY THE CASH DISCOUNT GIVEN TO US BY THE VENDOR OR CASH DISCOUNT
GIVEN BY US TO THE CUSTOMER EXAMPLE: CREDIT 30 DAYS ---- 3% DISCOUNT IF PAID WITHIN 10 DAYS 2
% DISCOUNT IF PAID BETWEEN—11-20 DAYS 0% AFTER 20 DAYS TILL 30 DAYS INVOICE DATE—
01.04.2010 . . . . . . DUE DATE 30.04.2010.

 PAYMENT TERMS CAN BE DEFAULTED AT VENDOR MASTER SO THAT THEY WILL APPEAR
AUTOMATICALLY WHILE INVOICE POSTING OR PAYMENT TERMS CAN BE MANUALLY GIVEN WHILE
INVOICE POSTING

 PAYMENT TERMS GIVEN WHILE INVOICE POSTING HAS PRIORITY OVER WHAT HAS BEEN DEFAULTED IN
THE VENDOR MASTER BASELINE DATE THIS IS THE DATE FROM WHICH THE PAYMENT TERMS ARE VALID
OR PAYMENT TERMS COME IN TO EFFECT. THE BASELINE DATE CAN BE  DOCUMENT DATE----- >Manu’s>
>Manu’s> 89  POSTING DATE---------  ENTRY DATE------------  NO DEFAULT-----------

Define Terms of Payment

Terms of Payment mean the conditions agreed upon between the business
partners (be it the customer or the vendor). The conditions define the due
date of the invoice and the discount offered for the payment of the invoice
within the predefined time. In other words, the Terms of Payment determine
the due date of the invoice and calculate the discount applicable on the
invoices.

For example, suppose AXON private limited had purchased goods worth Rs
800000 from vendor SAM. Now, this vendor, SAM offered a cash discount of
10% if the payment is made within 5 days and a 5% discount if the payment
is made within 10 days and no discount after 10 days. These conditions
mentioned here are nothing but the Terms of Payment.

Steps to create Terms of Payment:

Step1: In the SAP Command field enter Transaction code OBB8.

Or

In the Command field type SPRO-> SAP IMG-> Financial Accounting->

Accounts Receivable and Accounts Payable-> Business Transactions-
> Incoming Invoices/Credit Memos-> Maintain Terms of Payment
Step2: On the Change View “Terms of Payment”: Overview screen
select the New Entries field.
Step3: On the New Entries: Details of Added Entries Screen enter the
required information:
Here we are creating the Term of Payment for 30 days.

Payment terms: AX30 (enter here any four digits it may be numerical or
alphabet)

Day Limit: 30 (the due date, in this case, is 30 days)

Own Explanation: Payment term 30 days (In this field, we give a detailed
explanation of the payment term. If you do not define the payment term the
system will automatically define it based on the cash discount and due date
given).

In the Account Type work area tick,

the Customer and Vendor checkboxes because we are using the payment
term for both the customer and the Vendor. It means at the time of cash
received the due date for cash received is 30 days and at the time of cash
payment, the due date is 30 days. In this way, it is valid for both customer
and vendor.

Base Line Date Calculation

a. Fixed Day: It works for base line field. If you put 1 in fixed day field, it will work
as base line date will always be 1(first day of the month) irrespective of your posting
and document date.
Example, your posting date and document date is 20.09.2016, system will bring base
line date as current month’s 01.09.2016. The due date will be 30.09.2016 (+30 days)
as per above screen shot.

Block Key: Select the Block Key if you want to block the payment term
otherwise keep it empty.

In the work area Default for baseline date select Document Date (it is
the date available in the invoice). It means the due date is calculated from
the Document Date.

No Default in this case the system allows the user to enter the base date
manually during document entry.

Posting Date is the date when you're posting the invoice in the system.
Entry Date is the same as the Posting date.

5. Payment Terms:
a. Instalment Payment: If you are using as instalment payment then this tick must
be there. Against this payment term you can assign multiple payment terms in OBB9.
Instalment payment terms are put to customer and vendor master or invoices.
b. Rec. Entries: Supplement from master: This indicator controls whether the terms of payment
in a recurring entry are to be taken from the customer or vendor master record, if no terms of payment key
have been entered in the recurring entry original document.
c. Terms: There can be three slabs. Discount can be given up to 2 slabs and 3 third
is due without discount.
d. Percentage: Discount percentage is put
e. No. of days: number of days for three slabs
f. Fixed date: this fixed date works for due date (not for base line date). It always
considers next month date.
Example, if you put fixed date as 26 and you current posting date is 28.09.2016 and
your due date will be 26.10.2016. No of days for due date is adjusted.
g. Additional months: It works for due date (not for base line date)
Example, if you put fixed date as 2 and you current posting date is 28.09.2016 and
your due date will be 26.12.2016 (system will automatically put 2 months + 30 days
as per screen shot). No of days for due date is adjusted.
Press the Save button.

Click the tick button.

Here in the Change View “Terms of Payment “: Overview screen

payment term AX30 for 30 days is created.
Now we are creating Multi payment terms for discount calculation. All the
steps remain the same we are just required to make a few entries.

In the New Entries: Details of the Added Entries screen give the
information in the required field.

Payment Term: AX10

Day Limit: Leave it blank.

Own Explanation: Leave it blank system will automatically generate it

based on the discount percentage and days entered.

Account Type: Select Vendor and Customer

Default for baseline date: Select Document date.

Payment Terms: Enter the rate of percentage and number of days to

calculate the cash discount.
Percentage No. of Days

10 20

5 25

Explanations are generated by the system automatically in case it is not

defined in the Own Explanation section.

10% cash discount is generated if payment is made within 20 days.

5% cash discount is generated if payment is made within 25 days.

Press the SAVE button.

In the Change View “Terms of Payment”: Overview screen Multi

Payment Term AX10 is created.
How to create a Term of Payment for Immediate Payment?

When the Vendor or the Customer wants immediate payment in this case
the Day Limit is zero. It means this payment term is calculating the zero due
date we want to receive, or we want to pay immediately.

On the New Entries: Details of Added Entries screen enter the following
information.

Payment Term: AXI0

Day Limit: 0

Account Type: Choose both Vendor and Customer

Default baseline date: No Default

Press the Save button.

On the Change View “Terms of Payment”: Overview screen we can see

immediate payment term AXI0 is created.

 date.
Step 2:
SAP Configuration – Define Accounts for Cash Discount Granted:
Description Transaction Code
Define Accounts for Cash Discount Granted OBXI

In SAP, the standard transaction key SKT is used to determine accounts or posting keys for line items which
are created automatically by the system for Cash Discounts granted.
In this configuration step the G/L account number to which the automatic posting for the cash discount is to be
made is assigned.

Step 3:
Master Data maintenance – Assigning terms of payment in the customer master:
Description Transaction Code
Create/change Customer master FD01/FD02/XD01/
XD02
Payment terms – maintained in the company code segment of the customer master

Payment terms – maintained in the sales area segment of the customer master.
The terms of payment can be maintained in the customer master. If the terms of payment are maintained in the
customer master, while entering an invoice against that customer, the terms of payment maintained in the
customer master will default to the invoice. Like the baseline date, the terms of payment can also be modified
while entering the invoice, if required.
The terms of payment can be maintained in the company code segment as well as the sales area segment as
shown in the screen shots above.

Step 4:
Transactional data 1 – for illustrating the cash discount process:
Invoice is posted against the customer when sales are made:
Description Transaction Code
Enter Customer Invoice FB70
An invoice is posted against the customer with document date 19th October 2011.

When the invoice is posted against the customer upon the sales being made, the terms of payment maintained
in the customer master in Step 3 gets automatically defaulted to the invoice as shown below.
As per the terms of payment maintained in the customer master, the document date of the invoice is defaulted
as the baseline date.
The document date of the Invoice posted is 19th of October 2011, and hence the baseline date for the invoice is
also 19th of October 2011.
So as per the terms of payment if the payment is made within 14 days from the baseline date, the customer
would be entitled to 2% cash discount.
Both the terms of payment as well as the baseline date defaulted while entering the invoice can be modified, if
required.

Step 5:
Transactional data 2 – for illustrating the cash discount process:
Payment is received from the customer within 14 days from the baseline date:
Description Transaction Code
Post Incoming Payments F-28
When the payment is received from the customer on 19th of October 2011 (i.e. before the expiry of 14 days
from the baseline date), the customer is entitled to 2% discount. This cash discount of 2% is automatically
calculated and proposed while the incoming payment is being entered.
This 2% discount is automatically posted to the General ledger account – 4040010, assigned/configured
in the transaction OBXI above.