Each company needs to pay its suppliers. It is usually payments for vendor invoices. And, of course, company needs to account for its liabilities and payments.
Of course, SAP is here to help. It has options to generate payments without invoice registration, even without creation of a vendor master record. But this is a rare case. More often, payments are generated against invoices, which are posted on vendor accounts.
There are several options to post an invoice into SAP. Are there several options to pay the vendor?
Yes, there are.
Let’s list them, more or less trying to keep the chronological order.
You may wish to pay the vendor in petty cash. These are usually small amounts, but some processes may still require physical bank notes and coins to be present on the table.
SAP gives you transaction FBCJ – Cash Journal to register petty cash transactions, both incoming and outgoing.
Cash Journal transaction was deliberately made simple by SAP. It does not have any clearing facilities in it. If you want to clear petty cash payment against an invoice, you need to do so separately as a consecutive step, for example with transaction code F-44.
Cheques (or checks like they call them in some countries) are now extinct in most of the countries where they were in use. But some countries like United Kingdom, India or USA fail to get rid of cheques time after time, because some of the wide variety of processes that people use in everyday life are dependent on cheque payments.
With SAP, you have the option to print out a cheque either with Automatic Payment Program (F110) or manually with transaction F-58.
When a cheque is generated, the vendor invoice gets cleared in SAP.
If you print out cheques from SAP, you are likely to need a printer of a special type with magnetic ink cartridge. Also, most cheques require a special MICR font to be used on them.
Letter of credit is a bank instrument that allows both parties to be sure that the vendor is only paid when he fulfills the contract conditions. It is especially important in bulk international trade, where contract conditions are complex and amounts are large. Letter of credit itself is issued by a bank and sent to the vendor. Vendor sends back to the bank a confirmation of contract execution, for example Bill of Lading, after which the bank makes the transfer and charges the customer’s bank account.
As you can understand from this, you cannot generate Letters of Credit from SAP. What you can do though is to mark the vendor or a specific document as eligible for LC payment, thus avoiding duplicate payment by more usual methods. Once the bank informs you about the payment made, you can clear the vendor invoice via transaction code F-53.
You can generate a payment order for the bank, which can later be physically sent to the bank for execution.
SAP can generate payment order forms and send them to the printer as a part of the Automatic Payment Program (F110) process.
Normally, vendor invoice is immediately cleared in SAP when a payment order is generated. But there is a special configuration of APP that allows generation of payment orders without postings, thus without clearing. Bear in mind that if a payment order is generated against the invoice, this invoice can only be searched in the usual clearing transaction via a reference to that payment order.
You may transfer money to your vendor account electronically using the on-line facilities of the bank. There is always an option to make an individual manual payment.
Of course, you need to record that payment in SAP. Transaction F-53 is the best way to do so. It also gives you an option to clear the invoices if they are paid.
Most banks nowadays are happy to accept payments via files. It gives you and the bank an opportunity to process payments in bulk.
You can generate payment files via Automatic Payment program (transaction F110). Similar rules to clearing of original invoice that we mentioned in the Paper Payment Order section above apply here. There are different file formats in use. Some of them are bank-specific, some of them are country-standard, and some of them are standardized by global organisations (SWIFT, ISO). You need to agree on the file format with your bank.
The agreed file format can be either one of SAP pre-configured, or you need to create your own DMEE tree for that.
Once the file is generated, you have several options of transmitting it to the bank.
Direct Debit is an option in some countries that allows vendor to charge customer’s bank account automatically. Of course, Direct Debit has to be set up first, thus informing the bank about customer consent for charges from that vendor.
If you set up Direct Debit for the vendor, you need to mark vendor master record or specific invoices from it so that these invoices are not picked up by a normal payment procedure. The most obvious way to do so is putting a Payment Block against the vendor or invoice.
Once direct debit is processed through the bank, you can clear invoice against the bank transaction using bank statement transaction FEBA or FEBAN, or using a universal tool like F-53.
Another option to deal with Direct Debits is not to register DD-relevant invoices in SAP at all, if your local legislation allows that. Once the charge is processed by the bank, you can allocate these charges directly to a P&L account.
IDOC also is a more advanced way to transfer information between the computer systems of the bank and bank’s customer. To a certain extent, IDOC is another file format. We discussed the way to generate files from SAP earlier. The same rules apply here, with the exception that you don’t have an option to upload IDOCs manually to the bank software. Instead, you need to configure a communication channel between your SAP system and bank systems.
Using IDOCs, you can send to the bank not only the electronic funds transfer information. Some banks give you an option to send information for the cheque payment, thus outsourcing the printing function.
PAYEXT is the most used IDOC message type that can be used for data exchange.
With this many options to pay vendors, which are in use in your company? Maybe you have something to add to the list?