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What is Tolerance?

Minor differences between the Invoice amount and the amount received from the customers/amount paid to the vendors are a very common occurrence.

In such scenario, the following options can be adopted:

  • The receipts/payments can be posted by partially clearing the invoices and creating a residual item for the difference, if the amount of difference is beyond a certain limit and is hence material

  • The receipts/payments can be posted by clearing the invoices and creating a separate entry for the difference amount, if the amount of difference is within a certain limit and is hence immaterial

The above mentioned limit which controls whether a difference amount is material or immaterial is determined by the tolerance limit defined in the SAP system.

Functioning of Tolerance in SAP:

The way SAP system handles such a scenario can be controlled by carrying out relevant configurations and master data maintenance.

Step 1 – The main activity to be done for using the concept of Tolerance in SAP is:

  • Analyzing the requirement for creating tolerance group

  • If as per the business requirement there is a need to provide for tolerance in case of payment differences, then tolerance groups would have to be created as required
  • Grouping together customers/vendors who should be assigned same tolerance limits

  • Creating as many Tolerance Groups as there is a need to classify customers into different groups entitled to different tolerance limits

If there is no need to classify the customers/vendors into different groups, who are entitled to different tolerance limits, the requirement to assign tolerance group to customers/vendors can be met by creating blank tolerance group (as shown in the screenshot below).

Thus whenever any customer/vendor master is created the tolerance group in the master data can be left blank.The blank tolerance group would become automatically applicable to the customer/vendor.

Step 2Define Tolerance Group:

The tolerance limits would have to be defined by way of tolerance groups.

Tolerance Groups contain the details that control the way the system processes the cash discount and payment differences.

Further, the tolerance limits can be defined:

  • Either as an absolute amount

  • Or as a percentage of the amount received/paid

But the applicable tolerance limit would be the lower of either the absolute amount or the amount arrived at by calculating the percentage.

Tolerance Group would have to be created for Customers/Vendors and Users.

Step 3Assignment of Tolerance Group:

The tolerance limits would have to be assigned to the customers/vendors for each company code separately.

The tolerance limits would have to be assigned to the employees/users.

Determining the Tolerance Amount Applicable:

The tolerance which would be applicable in any scenario would be the least of the following:

  • Either the absolute amount or the amount arrived at by calculating the percentage of the amount received/paid up to which payment differences are allowed to be posted for the customer/vendor as specified in the tolerance group applicable for the customer/vendor

  • Or the absolute amount or the amount arrived at by calculating the percentage of the amount received/paid up to which payment differences are allowed to be posted by the user posting the invoice specified in the tolerance group applicable for the user

The maximum amounts would have to be defined separately for revenue as well as expenses.

Posting of Payment Differences:

The way the payment differences would be posted would depend upon whether:

  • The payment difference amount is within the allowed cash discount tolerance amount and is a gain or
  • The payment difference amount is within the allowed cash discount tolerance amount and is a loss or

  • The payment difference amount exceeds the allowed cash discount tolerance amount

If the payment difference is within the maximum discount adjustment for gain/loss from payment differences, then the difference amount would be posted to the Cash Discount Adjustment account.

If the payment difference exceeds the maximum discount adjustment for gain/loss from payment differences, then the difference amount would be posted to the Payment Difference account.

Step 4Automatic Determination of G/L Accounts to be posted to:

The payment differences irrespective of, whether it exceeds or is within the permitted payment difference as per the tolerance groups, would have to be posted to G/L Accounts.

The G/L accounts to be posted to in both the abovementioned scenarios can be automatically determined as per the configuration settings in the SAP system.

Step 4 A – Account to be posted to in case of payment differences beyond defined cash discounts:

Description Transaction Code
Maintain FI Configuration Automatic Posting – Accounts OBXL

The General Ledger Account to which the payment difference should be posted in case it exceeds the permitted payment difference amount is assigned here:

Payment Difference Account.PNG

Step 4 B – Account to be posted to in case the payment difference gain is within defined Maximum Discount Adjustment Amount for Gain from Payment Differences:

Description Transaction Code
Maintain FI Configuration Automatic Posting – Accounts OBXU

In the scenarios where the payment difference is a gain and should be adjusted to the Cash Discount Gains account, the General Ledger Account to which it should be posted is assigned here:

Cash Discount Received Account.PNG

Step 4 C – Account to be posted to in case the payment difference loss is within defined Maximum Discount Adjustment Amount for Loss from Payment Differences:

Description Transaction Code
Maintain FI Configuration Automatic Posting – Accounts OBXI

In the scenarios where the payment difference is a loss and should be adjusted to the Cash Discount Loss account, the General Ledger Account to which it should be posted is assigned here:

Cash Discount Expense Account.PNG

Step 5Specification of Customer/Vendor Tolerance Group:

Description Transaction Code
Customer/Vendor Tolerances OBA3

For each company code, the specifications for the tolerance groups for customers/vendors would have to be configured, which would control:

  • the permitted payment differences in terms of either absolute amounts for gains or losses or
  • the permitted payment differences in terms of percentages for gains or losses and
  • the limit till which the cash discounts can be adjusted for gains or losses for customers/vendors

Tolerance Group for Customers Vendors1.PNG

Step 6Specification of User Tolerance Group:

 

Description Transaction Code
User Tolerances OBA4

For each company code, the specifications for the tolerance groups for user would have to be configured, which would control:

  • the permitted payment differences in terms of either absolute amounts for gains or losses or
  • the permitted payment differences in terms of percentages for gains or losses and
  • the limit till which the user is authorized to adjust the cash discounts for gains or losses

Tolerance Group for Users.PNG

Step 7Assignment of Tolerance Group to Customer:

 

Description Transaction Code
Create/Change Customer Master Data FD01/FD02/XD01/XD02

The tolerance group configured above shall have to be assigned to the customer master.

Assign Tolerance Group to Customer.PNG

Step 8Assignment of Tolerance Group to Users:

 

Description Transaction Code
Assign Users to Tolerance Group OB57

The tolerance group configured above shall have to be assigned to the User.

Assign Tolerance Group to User.PNG

Illustration of Functioning of Tolerance in SAP:

Illustration Step 1 – Post Customer Invoice:

 

Description Transaction Code
Post Customer Invoice FB70

An invoice is posted:

  • against the above customer who is assigned the Blank tolerance group

  • by the user shown above who is assigned the Blank tolerance group

Customer Invoice.PNG

Permitted Payment Difference as per Tolerance Group – Blank:

As per the tolerance group assigned to the customer master as well as the user, the following payment differences are permitted:

  • Payment difference of an amount upto 5 EUR(as per absolute amount specified)

   

  • Payment difference of an amount upto 10 EUR(as per % specified)

Hence the maximum permitted payment difference as per the tolerance group assigned to the customer master as well as the user is 5 EUR.

Illustration Step 2 – Post Incoming Payment with payment difference exceeding the permitted amount as per the Tolerance Group Blank:

 

Description Transaction Code
Post Incoming Payment F-28

The customer is entitled to a 2% cash discount which is EUR 40 as per the payment term assigned to the customer.

  • Amount of Invoice                                                      =  EUR 2000
  • Cash Discount entitlement as per payment term – 2%  =  EUR 40
  • Correct amount to be received for clearing the invoice   =  EUR 1960
  • Permitted payment difference                                     =  EUR 5

An incoming payment is posted against the above customer for EUR 1940 (with a payment difference amount of EUR 20, which is beyond the permissible payment difference amount or EUR 5, as per the tolerance group – Blank).

When the document is tried to be saved an error message is displayed:The difference is too large for clearing

Error Message - Exceeding Tolerance.PNG

Illustration Step 3 – Post Incoming Payment with payment difference within the permitted amount as per the Tolerance Group Blank:

 

Description Transaction Code
Post Incoming Payment F-28

Once again an incoming payment or EUR 1956 is tried to be posted against the same customer for the same invoice, but this time with a payment difference or EUR 4, which is within the permissible payment difference of 5 EUR.

The incoming payment is successfully posted against the customer, clearing the invoice.

Payment Difference within Permissible limit.PNG

Document Posted.PNG

Payment Difference posted to account.PNG

Conclusion:

Hence it can be concluded that:

  • if the payment difference exceeds the amount defined as maximum permissible payment difference as per the tolerance group assigned to the customer and user, the system will display an error message.
  • if the payment difference is within the amount defined as maximum permissible payment difference as per the tolerance group assigned to the customer and user, the system automatically posts the difference to the payment difference account configured in transaction code OBXL as described above.
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17 Comments

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  1. Former Member

    Very good document..Thanks

    As per your instruction I have replicated in Sanbox but I could see the accounting entry at the time of F-28, as I am getting the below error (screen shot).

    /wp-content/uploads/2014/04/1001_430802.jpg

    I have checked in the T.code OBXL and it has been assigned GL account. (See below)

    /wp-content/uploads/2014/04/1001_430802.jpg

    Kindly advise, where I am missing the settings ?

    Thanks,

    Mariks.

    (0) 
        1. Former Member

          Thanks for your suggestion.

          I have been followed as you suggested and it works for If the customer paid over payment but customer paid short amount it is not working,

          /wp-content/uploads/2014/10/2_572607.jpg

          and I am getting below message.

          /wp-content/uploads/2014/10/5_572606.jpg

          I have checked the below areas:

          OBXL

          /wp-content/uploads/2014/10/1_572608.jpg

          OBA3:

          /wp-content/uploads/2014/10/3_572609.jpg

          OBA4:

          /wp-content/uploads/2014/10/4_572619.jpg

          Kindly advise, where I need to change to process short incoming payment from customer ?

          Thanks & advance,

          Mariks.

          (0) 
          1. Former Member

            In OBA3 you have assigned INR 5 or 0.5%. The system takes the minimum of two.

            Now when you are underpaying by INR2 it is actually 1% of INR200 which is greater than 0.5% and hence system is throwing you the error.

            use a different example where you have invoice of INR1000 and you pay INR998. It should work.

            Regrads,

            Prateek.

            (0) 
  2. Former Member

    Hi,

    I am a fresher learning SAP FICO. I have a doubt regarding the above example from “Mariks”. He has configured in OBA3 under loss “5”, “0.5” and “2”. My Question is whether the 2% discount adjustment for a loss posting will be picked automatically or should we specify 2% explicitly? If the system picks up automatically that 2%, then I believe 2% discount should be allowed to customer, which is Rs.4 for Rs.200 and his posting of Rs.198 should have worked. And if we specify it explicitly then can we give a discount % more than 2% in this case?

    Please help in getting a clear picture of logic on how it works.

    Thanks.

    (0) 

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