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Author's profile photo Susheel Tiwari

Two Different payment Term for one vendor in External Procurement

Business Case:

We have  a business requirement to have two payment term in external Procurement where same vendor is supplying regular materials as well as consignment Material.

Liability is raised as soon as Material is received by receiving site in case of regular procurement of Material but liability in case of consignment procurement is only booked when Material is consumed. So payment duration to vendor in both case will be different, demanding two different payment term for same vendor.

Payment term in Purchase Order is defaulted from vendor Master purchasing view where We can have only one payment term in vendor master purchasing view.

Business requirement is different payment term should default during payment without any development.

Proposed Solution:

As we know that consignment liability is booked via MRKO transaction where system does not refer to consignment PO but consumption Material Document and liability for normal procurement is booked via MIRO transaction where PO is generally referred as reference document. So Payment term in MIRO will flow from PO and Payment term in PO will come from vendor master Purchasing view so we will maintain payment term applicable to normal procurement in vendor master Purchasing view. But Payment term applicable to consignment procurement will not fetch from vendor master Purchasing view as system does not refer PO during MRKO and accounting document is created during settlement so payment term will be taken from accounting view of vendor master  so consignment related payment term will be maintained there.

Process Involved:

I will demonstrate one consignment procurement process as well as one normal procurement process followed by booking of liabilities via MRKO and MIRO
transaction where payment term will play its role.

Pre-requisite: There should be all master data in well placed before we create external procurement document-Contract/Purchase Order. There are following master data needs to be maintained.

    1. Material Master: All required views are to be maintained in Material master.
    2. Vendor master: We need to maintain purchasing as well as Finance view. Payment term applicable to consignment
      procurement needs to be maintained under FI view and payment term applicable to all normal procurements will be maintained under purchasing view.
    3. Purchase Info Record: We need to maintain standard as well as consignment PIR
    4. Source List: We need to maintain condition record for source list if provision for source list has been maintained in configuration and material master

              We have maintained payment term N0 for consignment and N60 for Normal PO in vendor master in accounting and purchasing view respectively


Now we will create 2 PO- one for consignment and one for normal Procurement. We will see that Payment term in PO always
comes from vendor master purchasing view. Post PO, we will consume the material
for consignment process followed by MRKO and will run MIRO for normal PO. System should fetch payment term as N60 in MIRO and N0 in MRKO.

Creation of Consignment PO:

Consignment PO.jpg

Settlement of consignment PO via MRKO:

Now run MRKO to book liability based on consumption for consignment procurement

Consignment Settlement.jpg

So we can see that settlement has not been done. Now we shall run MRKO again and select settlement option to settle consignment liabilities.

Settlement.jpgAccounting doc-consignment.jpg

So we can see that Payment term N0 has defaulted in accounting document which was expected.

Now we shall see process for Normal procurement.

Creation of PO:

Normal PO.jpg

Payment term N60 has defaulted from vendor master purchasing view in Purchase order. Now we shall book liabilities on company for material received from vendor. System should fetch payment term as N60 which has appeared in purchase order which is different from consignment payment Term.



So we can see that N60 payment term is appearing in MIRO document as well as accounting document which was requirement of business.

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      Author's profile photo Former Member
      Former Member

      This is a very informative and detailed document to manage different payment terms in the vendor for managing different procurement scenarios.



      Author's profile photo Former Member
      Former Member

      Simple logic for everyone to understand. Good document! Thanks

      Author's profile photo Muhammad Fahad Raza
      Muhammad Fahad Raza

      Excellent Sir, Quite informative.

      Author's profile photo GIRISH RAMRAKSHANI

      Meeting business requirement without custom development. Very good! Thanks

      Author's profile photo Former Member
      Former Member

      Excellent - but I had a query on this. If we had a 2 scenarios where the payment terms comes from Purchase order. For Eg: Normal procurement with payment term 1 and for subcontraing with payment term 2.

      Then in this case, how do we go ahead.

      Thanks and regards


      Author's profile photo Susheel Tiwari
      Susheel Tiwari
      Blog Post Author

      Dear Ravi

      Thanks for raising question.

      Post is for scenario where same vendor is working as regular stock provider as well as consignment stock.So same vendor will have different payment term.

      But in your case - Is same vendor supplying normal stock as well also working as subcontractor.

      Normally payment term is same if liability is booked as soon as material or service is rendered for same vendor.Payment term may be different for different vendor for same scenario.

      In your case I believe that vendor is different so we can have different payment term. If vendor is same we can have different payment term via vendor subrange.

      Author's profile photo Sudhakar Chaganti
      Sudhakar Chaganti

      Good doc



      Author's profile photo Maheswara reddy BOMMIREDDY
      Maheswara reddy BOMMIREDDY

      Hi Susheel,

      Just now gone through your document it was nice explanation.

      But I have a query in general KON is the transaction key for    Consignment procurement but in the above screen shot there was KBS transaction key for consignment process..

      I am little bit confused can you please clarify me


      Mahesh B