Quantifying the Amount of Cash Discount Lost

Transcription

1 Quantifying the Amount of Cash Discount Lost Applies to: All Business organizations where the Financial Controller wants to analyze how much cash discount is lost due to non-adherence to payment terms when dealing with Vendors. Summary This article explains the Configuration and Process steps involved in quantifying the loss as per the management requirement. Author: Company: Sarma Subrahmanya Tadikonda Intelligroup Asia Pvt. Ltd. Created on: 12 August 2010 Author Bio Sarma Subrahmanya Tadikonda is working as a Principal Consultant with Intelligroup and has been part of FICO competency since February SAP AG 1

2 Table of Contents Introduction... 3 Objective... 3 Business Requirement... 3 Solution Configuration Related activities Create net document type Define Account for Net Procedure Define Accounts for Lost Cash Discount Classify G/L Accounts for Document Splitting Classify Document Types for Document Splitting Master Data Related... 7 G L Master Data Business Process... 7 Post an Incoming Invoice and Payment to the Invoice... 7 Disclaimer and Liability Notice SAP AG 2

3 Introduction In a situation where a business organization delays the payments for the outstanding line items to Vendors, and due to this the organization need to pay the full amount and thereby sacrificing the advantage of the payment terms. The organization should reflect on their strategy, should get some data from their system to evaluate & proceed with the best practice of optimizing on cash discounts and thereby reducing cash out-flows. Objective The objective of this article is to explain the configuration related activities to be maintained, Master data activities and the business process. Business Requirement To quantify the amount of cash discount lost for a period SAP AG 3

4 Solution This is broadly divided and discussed as - 1. Configuration Related Activity 2. Master Data Related Activity 3. Business Process 1. Configuration Related activities 1.1 Create net document type Use In this step, we define a document type that is to be used when system automatically deducts cash discounts from vendor invoices. Activities Create a Document type ZN with Net Document Type as checked in Control Data. Recommendation It is recommended to have a separate document type keeping in view of any custom developments that may be required in future. Also when you use this document type only the discounts are posted and the vendor liability is recognized after considering the cash discount. Procedure Access the activity using one of the following navigation options: IMG Menu Financial Accounting Accounts Receivable and Accounts Payable Business Transactions 2010 SAP AG 4

5 Transaction Code User Actions and Values OBA7 Select New Entries from the Application tool bar Area. Give Document Type ZN Give Number Range for the document type In accounts type allowed select Customer, vendor, G/L Account In Control data Check Net Document Type Negative Postings allowed Choose CTRL+S to save the document type Result Document type ZN is created. 1.2 Define Account for Net Procedure Procedure Access the activity using one of the following navigation options: IMG Menu Financial Accounting Accounts Receivable and Accounts Payable Business Transactions Incoming Invoices/Credit Memos Define Account for Net Procedure 2010 SAP AG 5

6 Transaction Code User Actions and Values OBXA Enter chart of accounts. Give the G/L account number. Choose CTRL+S to Save the entry. Note: The account should be a clearing account with Balance sheet type and Open Item managed. Name it as Discount Clearing account. Result Account for Net Payment procedure was defined. 1.3 Define Accounts for Lost Cash Discount. Procedure Access the activity using one of the following navigation options: IMG Menu Financial Accounting Accounts Receivable and Accounts Payable Business Transactions Outgoing Payments Outgoing Payments Global Settings Define Accounts for Lost Cash Discount 2010 SAP AG 6

7 Transaction Code User Actions and Values OBXV Enter chart of accounts. Give the G/L account number. Choose CTRL+S to Save the entry. Note: The account should be a P & L type. Name it as Material or Consumption account or the original purchase account to which you have booked the Purchase or you can flow the value to another account as Account for Cash Discounts Lost. Result Result Result Accounts for Lost Cash Discount defined. Movement types for LIFO/FIFO valuations were identified. FIFO Valuation areas were maintained 1.4 Classify G/L Accounts for Document Splitting In this step the Cash discount clearing account is classified as Cash Discount clearing and Cash Discount as Cash Discount (Expense/Revenue/Loss) Item Categories. 1.5 Classify Document Types for Document Splitting In this step the document type ZN is assigned with transaction variant 0300 with Variant Master Data Related G L Master Data You need to create Two GL accounts. 1. As a Balance sheet Item with Open Item Managed and Line Item Display to post values at the time of posting the Invoice. 2. As a P&L account type with Line item display to post the values when there is no cash discount is availed. 3.0 Business Process Post an Incoming Invoice and Payment to the Invoice Scenario 1: Post Invoice with payment terms as 0002 from SAP standard where in 3% in 14 Days and 2% in 30 days and 45 days net are the payment terms and clear the vendor outstanding amount with the due date to avail 3% full cash discount SAP AG 7

8 If you observe the above entry the discount of 3% was calculated at the time of posting it self and posted to a Clearing account and the vendor liability is shown for the entire amount that is payable as per the invoice. The expense is booked for a lesser amount as it has already considered the discount amount. Let s pay the invoice on or before the due date and see what happens. System calculates the discount amount and posts the discount to the discount clearing account with the processes Post with Clearing. Let s look at the Discount clearing account now using FBL3N SAP AG 8

9 Scenario 2: Post Invoice with payment terms as 0002 from SAP standard where in 3% in 14 Days and 2% in 30 days and 45 days net are the payment terms and clear the vendor outstanding amount with the due date to avail 2% cash discount. If you observe the above entry the discount of 3% was calculated at the time of posting it self and posted to a Clearing account and the vendor liability is shown for the entire amount that is payable as per the invoice. The expense is booked for a lesser amount as it has already considered the discount amount. Let s pay the invoice after 15 days but on or before 30 days of the due date and see what happens SAP AG 9

10 System clears the Cash discount clearing account with the full amount and the balance of 1000 that is lost is posted to a Cash discount account. Now let s see the FBL3N for the Discount clearing account SAP AG 10

11 The line items are cleared automatically. Now let s check the Cash discount account in FBL3N. The amount that is showing here is nothing but the amounts lost as discounts for non adherence to payment terms. Scenario 3: Post Invoice with payment terms as 0002 from SAP standard where in 3% in 14 Days and 2% in 30 days and 45 days net are the payment terms and clear the vendor outstanding amount with the due date of more than 45 days SAP AG 11

12 Let s pay the amount after 30days and see what happens. Now the system has considered the entire amount as loss on account of non adherence to payment terms and posted the loss to P&L account. Now let s run the FBL3N for the discount account Invoice-wise details on how the discounts are fore gone are detailed through the standard report are displayed which will supplement organization for suitable decision making. Note: This document assumes that other related configuration is in place to do this activity SAP AG 12

13 Disclaimer and Liability Notice This document may discuss sample coding or other information that does not include SAP official interfaces and therefore is not supported by SAP. Changes made based on this information are not supported and can be overwritten during an upgrade. SAP will not be held liable for any damages caused by using or misusing the information, code or methods suggested in this document, and anyone using these methods does so at his/her own risk. SAP offers no guarantees and assumes no responsibility or liability of any type with respect to the content of this technical article or code sample, including any liability resulting from incompatibility between the content within this document and the materials and services offered by SAP. You agree that you will not hold, or seek to hold, SAP responsible or liable with respect to the content of this document SAP AG 13