Contents Introduction .................................................................................................................................................. 2 Features .................................................................................................................................................... 2 How to create a payment guarantee document in SAP (Eg: Letter of Credit) .......................................... 4 Using payment guarantee’s in sales orders .............................................................................................. 7 Covering only a percentage of sales order value by a LC ................................................................... 10 Process Flow ............................................................................................................................................... 11 Configuration .............................................................................................................................................. 12 Documentary payments.......................................................................................................................... 13 Define financial document type .......................................................................................................... 13 Define Bank functions ......................................................................................................................... 14 Define Texts for financial document ................................................................................................... 14 Define Documents to be Presented .................................................................................................... 15 Define Reasons for Change ................................................................................................................. 16 Define Indicators for Financial Documents ......................................................................................... 17 Define Bank Indicators ........................................................................................................................ 19 Assign Documents to Financial Document Indicator .......................................................................... 20 Specify Control of Banks in Financial Document ................................................................................ 21 Specify Financial Document Control ................................................................................................... 22 Define Forms of Payment Guarantee ................................................................................................. 23 Define and Assign Payment Guarantee Schemas ............................................................................... 24 Activate Documentary Payments per Item Category ......................................................................... 27 Activate Document payment procedure for customer master .............................................................. 28
Introduction “Documentary payments” section under “Foreign Trade/Customs” enables you to create a master record for a "letter of credit" and assign it to a Sales order in SAP. This financial document is not only used for letters of credit. But it can also be used to represent documents against payment or documents against acceptance. The Documentary Payments component is completely integrated in the Sales and Distribution (SD) Credit Management component to ensure that financial documents are harmonized with other forms of payment security such as payment cards. As an example of this integration, if the value of a sales order exceeds the value of its corresponding financial document, Credit Management will block the sales order.
Features
Creates and maintains financial document master record data Manages different types of LOCs, such as revocable and irrevocable documents Proposes payment guarantee procedures Supports the input of multiple banking partners involved in a documentary payment transaction Ensures accurate financial document master records by requiring two authorized users to activate financial documents Assigns financial documents to SD documents Simulates the assignment of financial documents to sales documents Proposes a payment guarantee type in SD documents Performs consistency checks (completeness and plausibility) of FT data in customer master records Verifies SD document data against financial documents and blocks SD documents if discrepancies exist Includes financial document data in printed documents required for an export transaction Monitors financial documents allowing the display of financial documents currently in the system, blocked documents and sales documents assigned to the financial documents Displays graphics that show the proportion of a financial document’s value already assigned to SD documents Now let’s see how this works by taking an example in to consideration. Eg: A new customer “3600000005” was created with a credit limit of 1000 RUB. Therefore my credits master (FD32) will look as follows. No sales value is assigned yet as no sales order is created in the system.
If I create a sales order for this customer below 1000 RUB, system will allow me to create the sales document without any problem. But if my order value exceeds 1000 RUB, system will block the sales order using the credit management component. (Provided the automatic credit control is configured for the risk category of the customer and the credit group of the sales document type) Eg:
In this case, it is not possible to allocate/deliver this sales order as it is credit blocked. Now the credit master record will look as follows. (Sales value is exceeding the credit limit)
But if customer provides a payment guarantee (Eg: Letter of credit), we should be able to process the sales order, as payment is guaranteed by the corresponding bank.
Eg: Let’s say customer is providing a payment guarantee worth of 5000 RUB, we need to create a financial document in the system to represent that value and attached it to the sales document. Please note, this financial document will not change the credit limit of the customer neither it will post any value in the FI. Important: As soon as the financial document is attached to a sales order, system will not consider that sales order value for credit calculation. It will be totally handled under the financial document management component.
How to create a payment guarantee document in SAP (Eg: Letter of Credit) Transaction: VX11N Menu path:
Select relevant values from the initial screen
Eg: The financial document category indicates whether the document is, for example, revocable or irrevocable.
Add below data like, issuing bank, value of the LC, currency, sold to party
You can maintain the validity periods under the tab “Dates/Delivery dates” tab
Under “Banks” tab, you can maintain the opening bank, confirm bank, bank charges, etc
Under the tab “Status” you need to maintain the relevant status of the financial document. Eg: In order to use the LC document in sales orders, we need to have the status “D - Document is available and can be used” attached to the document.
Once that is done, you can save the financial document in the system. It will give you a number based on the number range assigned.
Using payment guarantee’s in sales orders Now we can use the above created financial document (LC) in the sales order (Header level or item level) In the previously created sales order, you can go to header level or line item level billing tab. Attach the relevant LC document to the sales order line item
Now you should be able to save the sales order without blocked by the credit management. (As payment is guaranteed by the corresponding bank)
Now if you look back the credit master record of that customer, it will be as follows. (Compare previous FD32 screen with below) This is because my sales order was covered by a LC# 28, and therefore credit management component is not taking that value in to consideration.
Now if you look at the financial document master, you will be able to see the usage of the document against sales orders.
You can view same in graphical form as well.
Note: User can decide whether a particular sales order is covered by a LC or not.
Eg: If customer place another sales order (Which is not covered by a LC), then based on the sales order value, it will be blocked/unblocked by the credit management. Covering only a percentage of sales order value by a LC We can use the same payment guarantee functionality to cover only a certain percentage of the sales order value by a given LC. In that case, balance of the sales order value will be covered by the credit limit of the customer. We can use the field “Deprec” in the sales order billing tab for this purpose. If you didn’t specify a percentage there or specify 100%, system considers as total order value has to be covered by the assigned LC. As soon as you specify a LC and a percentage, percentage of the sales order value will be covered by the LC and balance will be covered by the credit limit of the customer. Refer below example for more information.
LC value – 5000 RUB Credit Limit of the customer – 1000 RUB Sales order value – 4700.71 RUB
When I assign the LC to the sales order, I stated 80% of the order value is covered using the LC (Which is 4700.71 * 80% = 3760.57). Balance of 940.14 RUB (4700.71 -3760.57) should be covered by the credit limit of the customer.
After assignment of the LC to sales order, my open LC value looks as follows; (5000 - 3760.57 = 1239.43)
Since 80% of the order value (3760.57) was utilized from this LC, open value is 1239.43 RUB.
Balance of 940.14 RUB (4700.71 -3760.57) has to be covered from the credit limit of the customer. Therefore FD32 looks as follows;
Process Flow To summarize what we discussed above, below are the typical example of all process steps involved in a financial document process. 1. A customer wants to buy goods from your company. Due to economic factors in the customer’s country, customer is required to provide a financial guarantee for this transaction. 2. The customer opens a financial document with his bank, and the opening bank sends the financial document to the advising bank in your country. 3. The advising bank confirms the validity of the financial document and sends the financial document to you. You create a master record for this financial document in the SAP system. To
have increased security, we can configure the system to have 2 user authorizations to activate a financial document in the system. 4. Create the sales order for this transaction and assign the financial document to the sales order. You can assign the financial document to the entire sales order or to selected items in the order. 5. System checks the sales order to ensure that it complies with the financial document’s terms. For example, the system checks that the sales order’s value does not exceed the financial document’s value. a. If there are discrepancies between the sales order and the financial document attached, system automatically blocks the sales order. Authorized users require to release this block using the Credit Management component. Transaction: VXA3 SAP Easy Access Menu:
b. If there are no discrepancies, the system updates the financial document master with the sales order amount. 6. Delivery for this transaction copies the financial document information from the sales order to the delivery. The financial document applies to the entire delivery. You cannot combine sales orders with different financial documents in to one delivery. 7. Posting of the invoice updates the financial document master record with the invoice amount.
Configuration Complete configuration required to activate this functionality is as follows.
Documentary payments IMG Path:
Define financial document type Here you need to specify required payment guarantee document types that you're going to use. Eg: Letter of Credit, etc
Eg:
Define Bank functions Under this configuration node, you need to specify the activities that banks are going to perform with the LC process. Eg: Open the LC, Notify, Confirm the LC,
Eg:
Define Texts for financial document Under this configuration node, you can configure the text determination for financial documents. it is same as the transaction NACE.
Define Documents to be Presented In this configuration node, you define the different documents that belong to a financial document and must be submitted with it to the bank. Eg:
Export billing document Export packing list Certificate of origin Shipping papers
Eg:
Define Reasons for Change In this configuration node, you define the change reasons due to which an already activated financial document must be maintained, such as typing error when you maintain a financial document.
Eg:
Define Indicators for Financial Documents As far as I understood, this is the most important configuration which you need to setup. In this configuration node, you define indicators for financial documents which determine:
The field control for fields in the financial document master The scope of checks in a sales and distribution document when a financial document is assigned to it The incompletion log in the financial documents The texts that you can assign to a financial document Whether the double check is activated for a financial document
Eg:
Define Bank Indicators In configuration node you define the indicators for banks which have been assigned to a financial document. A bank indicator is a grouping of bank functions which can be assigned to a financial document. Eg: Opening Bank/ Confirming bank, etc
Eg:
Assign Documents to Financial Document Indicator Under this configuration node, you have to assign the documents that must be submitted to a financial document indicator. (Those document types you defined under "Define Documents to be presented" Eg: Export billing document Here you can specify how many originals and how many copies of each document are required as well. The documents that you specify here will be proposed later by the system when you create a financial document with this indicator.
Eg:
Specify Control of Banks in Financial Document This configuration node is used to assign different bank functions (which you defined earlier) to a bank indicator. In addition, this assignment specifies:
How many banks with this bank function can occur in a financial document Whether a bank must be maintained in the bank table in "Financial Accounting" or whether you can also specify a 'one-time' bank Whether it is the opening bank - (Opening Bank - When you maintain a financial document, you can maintain this bank on the main screen without having to going to the "Bank" tab)
Eg:
Specify Financial Document Control Under this configuration node you have to assign the financial document indicator and the bank indicator to the financial document type and financial document category. This is to control;
Which fields are hidden, visible for input (optional) or required when you maintain a financial document Which checks will be run in the SD document when you assign a financial document of this type and category Which and how many banks for which bank function are proposed by the system when you maintain a financial document of this type and category Which documents that need to be submitted are proposed by the system when you maintain a financial document of this type and category Which special functions are activated
Eg:
Define Forms of Payment Guarantee Under this configuration node you define forms of payment guarantee. This controls how the payment for a SD document item is guaranteed, such as personal guarantee, payment card or financial document (such as an unconfirmed letter of credit or a confirmed letter of credit)). For the financial documents, you can specify the following regarding the form of payment guarantee:
Financial document type Financial document category
Eg:
Define and Assign Payment Guarantee Schemas Under this configuration node you have to define payment guarantee procedures. The payment guarantee procedure is determined according to the following factors:
Customer payment guarantee procedure This determines which payment guarantee procedure the system automatically uses if you enter a sales document for the customer. Document payment guarantee procedure This determines which payment guarantee procedure the system automatically uses for a sales document type.
This works as the famous condition technique used in SAP, where you have determination procedure, condition type, access sequence and condition table.
Define the Payment Guarantee Schema Select below option from the popup.
Define your own schema and enter the form of payment guarantee you defined in the earlier step.
Define Customer Determination Schema Just like the way you define a customer pricing procedure, under this node, you have to define a customer determination schema.
Eg:
Define Document Determination Schema In the same manner you define document pricing procedure, in this node you have to define a document determination schema.
Eg:
Assign Document Schema to Order Types Now you need to assign the document schema to sales document type.
Eg:
Define Payment Guarantee Schema Determination Now we need to define how the Payment Guarantee Schema should be determined based on the document determination schema and customer determination schema.
Eg:
Based on above configuration if I create a sales order with order type OR for a customer who has customer determination schema as "Z1", system will automatically determine the payment guarantee procedure in the sales order as "ZRU001". Activate Documentary Payments per Item Category Under this configuration node you can activate and deactivate documentary payments at item category level.
Eg:
Now you have successfully configured the Risk management component in SAP. But in order to use this functionality you will have to assign the "Customer payment guarantee procedure" to your customer master. Most of the time you will not see this in the XD01/XD02 screen. Therefore let's see how you can enable this field in the customer master. This is a setting in the account group level for the relevant transaction.
Activate Document payment procedure for customer master We need to enable the field “Payment Guarantee procedure” in the customer master billing tab. This field is suppressed using the transaction dependent screen layout configuration. Field in the customer master:
Where to configure this field: IMG Path
Enable the field for 3 transactions
Note: If you want to enable this field in VD01/VD02 and VD03 transactions, do same for "Create customer (Sales)/ Change customer (Sales)/ Display customer (Sales) as well.
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