Personal Insights
SAP Retention Process
What is Retention Process?
Retention process is Holding back a portion of payment to vendors who works for your organization.For example, the retention amount is released to the vendor when certain expectations are met or on a specified date that your vendor has agreed upon.
An organization can have an agreement with the vendor that a certain percentage or amount will be retained from the total amount that needs to be paid to be vendor. The agreement can have a retention date on which the help back amount will be paid to the vendor or when certain expectations are attained.
The Purpose of this Blog is to Explain the SAP flow of the Retention process.
Functionality that needs to be activated is : LOG_MMFI_P2P via tcode SFW5.
Customization:
A new document type needs to be created for the retention process.
Tcode – OMR4.
Click on “Document types in Invoice Verification” tab.
Select the “MIRO” transaction code line and display its details.
The tab highlighted in yellow is where we maintain the document type for Retention process which will then flow while we are Invoicing the Purchase order.
The Steps to be done in SAP are given below:
Create Purchase order.
Tcode – ME21N
Enter all the relevant details such as Material, Quantity, Unit Price, Plant, Vendor and Retention category.
We will enter 10% as retention.
Save the Purchase order.
PO 4500000087 has been created.
Create GRN.
Tcode – MIGO
Enter the Storage location and tick on “Item OK” icon.
Click on “Post“ icon to Post the GRN.
GRN 5000000164 has been created.
Book the Vendor Invoice
Tcode – MIRO
Enter the PO Number, Invoice date and reference field and hit Enter.
Enter the Amount, Retention due date and Hit Enter. 
Click on “Messages” icon to view the message log.
Click on the “Simulate” icon
Hit Enter
Click on the “Post” icon to book the Invoice.
Document 5100000139 has been created.
Display Invoice document to check for the GL accounts that are hit in Retention process.
Tcode – MIR4
Enter the Invoice document and Fiscal year.
Hit Enter
This is the document we just posted via MIRO.
Click on Follow-On documents icon.
We have got 2 Accounting documents been generated here.
The screenshot given below is the subsequent accounting entries for Accounting document 5100000112.
Subsequent accounting entries for Accounting document 5100000113.
Note – Payment to vendor can be done via Tcode F-53.
Conclusion :
- LOG_MMFI_P2P functionality needs to be activated.
- Message M8_2303 needs to be activated.
- A special G/L indicator needs to be created for Retention process so that correct G/L accounts will be hit from the FI side.
- Two Accounting entries will be generated after booking the Invoice.
- Retention percentage and category in the PO and Retention due date in MIRO are a mandate.
I hope you liked the blog, and if you have any suggestions or questions please let me know.
Hello Gaurav,
Good Blog. Keep it up.
Thanks,
Santhosh Kolla.
Very helpful blog.
Since you have provided step by step screenshots, it makes the it easily understandable.
Regards.
Amar
Insightful to the Vendor retention Functionality.
Any Use cases or industry specific examples where we can use it?
Retention is common practice in certain areas, for example, construction.
In construction projects, it is standard to withhold a percentage of the invoices sent by contractors because, at the time of invoice, the quality of the goods cannot be assessed. Typically, about six months after construction projects are finished, quality issues appear and can be assessed. If no quality problems arise, the money that was withheld is paid to the contractor.
Good day Sir,
i will like to ask, when you post at MIRO an Retention is generated, DR & Cr generated on Vendor retention GL and and Retention GL, Now when you run your Vendor report via FBL1n with Normal Item it shows a Dr to the vendor as retention but when you go back and click crittera of Special GL and execute it generate a DR & Cr leg knocking itself out...
My Question how do you post your Invoice in order to capture the right Liabilty on the vendor upon posting the invoice ........
Civil and electrical works this come handy, as we need to see the performance of workmanship after the use and protect from warranty provided on material supplied to us.
apart from that in telecom all equipment DG, AC, Shelter, and other equipment, retention is kept to cover the risk of vendor defaulting on warranty part, in that case, the retention is used for repair and that will not be getting paid to the vendor. The retention period is generally 1 year.
Thank you! 🙂 That helps
Thanks For Sharing…Very Helpful Blog.
Hello Gaurav,
Very nice document. Thank you.
Can you please advise, if there are two Ratios of retention in one PO (10% and 5%), means two Retention documents should be created during MIRO? How to proceed?
Thanks.
Olga
2 Different ratios of retention in a PO means 2 PO line items.
So if you do MIRO for these 2 PO line items in a single go, Yes... 2 Retentions documents would be created.. 1 for each line item.
Thank you very much, Gaurav.
Actually, the company has a kind of gradual retention process, when two different rates should be applied to the single PO line... Do you have any advice?
Thanks.
Olga
oohh fisshh, sorry for the delayed response.
firstly, i did not understand how would you apply 2 different rates in PO for a single line.
Just an FYI, we can change the retention percentage while doing MIRO. i hope this helps you.
Good one Gaurav!
Hello Gaurav,
Is it possible to activate the retention in S/4 Fiori app (Mange Purchase Order App)?
Many thanks
Oren Gershon
Hi Gaurav,
My client wants round off retention amount in miro. For example the gross amount is 1250 in invoice and if the retention is 2.5% then retention amount will be 31.25. they want this amount round off to 31. Is there any configuration in sap to do that whenever system calculate retention it will automatically give the roundoff figure. And after that further calculation will be based on that. Please let me know if there is such a configuration.
Thanks
Hi Gaurav
When the Retention due date is reached. What is the process for paying the retained amount to the Vendor?
Many thanks, Gurav! Yes, Retentions are extremely relevant for the construction industry.
Question: we encounter return positions in POs. Looks like the setting does not cover them - the field for retention percentage is hidden. Retention sum is calculated incorrectly - any idea how to activate it?
Where to check assignment of retention indicator and special GL Indicator.
Very informative blog.... Gaurav.
If the retention amount is also required to be calculated on unplanned costs being entered during invoicing then how it can be achieved.
Thanks,
Divraj
Hi ,
Nice Document !!!!
I just want to know to where is a config. that system will generate different FI Document for Retention or we can split the amount in main FI document.
Sir,
I have doubt on after done Vendor invoice which includes Vendor adv 10%, Retention money and other deductions then if want to make payment (Via F110-APP) to vendor how system will pick net amount. is there any easy process to clear those line items and make payment to vendor.
Hi sir,
I have doubt on after done Vendor invoice which includes Vendor adv 10%, Retention money and other deductions then if want to make payment (Via F110-APP) to vendor how system will pick net amount. is there any easy process to clear those line items and make payment to vendor.
Dear Gaurav,
Its really good information.
Till creation of 2 separate documents ( one for gross invoice amount and one for retention amount ).
Request - Here I'm not clear about the settlement payment to vendor via F110, can you please provide the steps for payment settlement till clearing the retention amount as well.
Regards,
Ramesh Paluri