Automatic Posting for Cash Discount Granted

[gajit_kumar]

Cash Discount:

What is the meaning of Cash Discount?

Cash Discount is a reduction in the price of an item for sale, allowed in those cases when payment is made within a stipulated period.

In general business scenario, the cash discount will depend on the payment terms agreed with the customer. Generally, in the invoice a payment term may be mentioned. For example, if the payment term mentioned in the invoice is "2/14, Net 30", this means that the customer is entitled to a 2% discount if the payment is made within 14 days of the delivery of goods. If the payment is being made beyond 14 days of the delivery of goods then full payment is expected. In any case, the full payment is expected to be made within 30 days.

General Process flow of Cash Discount in the case of Sales:

• Payment terms are agreed upon with the customer.
• Goods are sold to the customer.
• Invoice is posted for the goods sold.
• Payment is received from the customer before the due date for net payment.
• Customer is entitled to Cash Discount which is posted to the Cash Discount Account.

Business Scenario for Cash Discount:

A cash discount is a strategy applied to incentivize customers to make prompt payments for the purchases made from the vendor.

The contractual agreement between a vendor and customer usually contains the details of the cash discount terms.

For example, the vendor may issue invoices to the customer with a standard payment term of thirty days. The payment term would also include the condition that a discount would be provided to the customer if the payment is made within ten days of the date of issue of the invoice. The extent of the cash discount the customer is entitled to would also be mentioned in the terms of payment. Hence, if the customer makes the payment within ten days of the date of issue of the invoice, he would be entitled to the cash discount as mentioned in the payment terms.

Cash Discount process in SAP:

In SAP the following steps would be involved in the entire cash discount cycle:

• The cash discount terms are configured in the terms of payment.
• General Ledger account would have to be assigned for posting the cash discount.
• The terms of payment configured above are assigned to the customer master.
• Invoice is posted against the customer when sales are made to the customer. The terms of payment maintained in the customer master would default to the invoices from the customer master. If the defaulted terms of payment needs to be changed another terms of payment can also be manually entered in the invoice.
• If the payment is received from the customer within the date till which the customer can avail cash discount as per the terms of payment, the customer would be entitled to cash discounts.
• 

Step 1:

SAP Configuration - Maintain Terms of Payment:

Description	Transaction Code
Maintain Terms of Payment	OBB8

As per the contractual agreement between a vendor and customer, the terms of payment would have to be configured in SAP.

For example, the screen shot above shows the details of the payment term – 0002.

• The parameters of the payment term mean that the customer is entitled to a 2% discount if the payment is made within 14 days of the baseline date.
• If the payment is being made after 14 days from the baseline date then full payment is expected.
• As per the terms of payment the document date is defaulted as the baseline date which can be modified. If the defaulted date is not modified while entering the customer invoice the document date will be the baseline 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 19^th 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 19^th of October 2011, and hence the baseline date for the invoice is also 19^th 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 19^th 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.