Vendor down Payments in SAP – Process Flow

Facility to effect Vendor Down payment in SAP and recovery of the same after receipt of material or after availing desired services as per purchase order.

Vendor down payment in SAP is a business process which should facilitate the followings:

  1. Facility to provide advance payment clause at the time raising purchase order.
  2. Facility to effect down payment to Vendor against Purchase Order.
  3. Management of Vendor Account showing details of Down payments in special general ledger. This facilitates reconciliation of down payment to Vendors.
  4. Facility to recover down payment after availment of services or receipt of material as per terms of purchase order.
  5. To recover TDS at the time of advance payment.

Vendor down Payments in SAP - Process Flow

Vendor Down Payments Process Flow in SAP

  1. Down payment to Vendor is affected based on the request by concern buyer against Purchase Order Payment Terms.
  2. These are affected using Transaction Code F-48. While effecting a reference of Purchase Order is mentioned in Payment document of SAP.
  3. These are accounted in special general ledger ‘A’ in Vendor Account to whom such payment is effected.
  4. Facility is provided to recover TDS at the time of effecting advance payment if applicable.
  5. Facility is given to view open down payment line items in Vendor account as special G/L Transactions. This facilitates in keeping track of advance payments made to Vendor.
  6. This process is used to enter bank debit advices against Letter of Credit on due date, advance payment of custom duty, Such bank debit advices are cleared against invoice verification document by using clearing document T Code: F-51.

Vendor Down Payment – Transaction Code – F-48

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).

Vendor Invoice

On receipt of invoices from the vendor, the posting needs to be carried out in the normal way. Invoice can be coming from MM thru Logistics Invoice Verification (MIRO) or can be directly booked in FI – discussed in detail under respective ‘Business Processes’.

Transfer posting

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.

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]

Clear open items with payment

Alternatively, the vendor down payment can be transferred manually. In this case,its cleared via a credit posting of the same amount. This reduces the amount payable to a vendor. Consequently, the amount is no longer displayed on the balance sheet as a down payment made.

Manual Payment of open items

It is possible to pay open items in vendor account manually and pass necessary accounting entries. Also it is possible to make manual down payments to vendors. Separate document types are proposed for manual payment and automatic payment. Basically this will help to distinguish automatic payments from manual ones.

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