Purpose Codes in Payment Media in SAP S/4HANA Cloud
When making a payment, purpose codes from both the house bank (sender) country and receiver bank country are required in order to comply with regulatory reporting requirements of banks or local authorities. The new field Payment Reason stores the necessary information that is later used to derive purpose codes. Purpose codes are then populated into the payment medium file and serve as instructions for the payee bank. During the payment run, the payment reason is transferred from the invoice using the Manage Automatic Payments app and based on the mapping specified in the Map Payment Format Data configuration step, it is inserted in the payment medium.
To make settings related to payment reason codes, a new configuration object was added to Configure Your Solution in the Manage Your Solution app. The new configuration step can be found under settings related to Payment Medium Formats and it is called Define Payment Reasons (105311).
This configuration step allows you to define payment reasons to classify the type of the payment transaction (such as salary payment, purchase of goods, purchase of services and so on) that you transfer from one bank to another. It is possible to send two different purpose codes (for example one on the credit side and the second on the debit side) while the maximum character limit is 70 (35 characters for each code). Go to this activity to specify the combination of the payment reason and the payment reason codes.
Define Payment Reason
On the Payment Reason Definition screen, define payment reason and its description.
Maintain Combinations of Payment Reason Codes
On this screen, assign data as follows:
- Choose an application area you entered in the payment medium format you are going to use.
- Assign the payment reason specified in the previous step.
- Specify the two-character ISO code of the sender and receiver bank’s country/region as follows:
You enter the ISO code of both the sender and the receiver bank. This means that for each payment transferred from then sender bank (in the specified country/region) to the receiver bank (in the specified country/region) the purpose codes entered in the further two columns (Payment Code of Sender Bank and Payment Code of Receiver Bank) are inserted. The sender and receiver bank’s country/region can be the same.
When the payment file is generated, these code combinations are called using the following priority order:
a) The system searches for assignments of both the sender and the receiver bank.
b) If no entry found, then the system searches for entries of the sender bank.
c) If no entry found, then the system searches for entries of the receiver bank.
You want to transfer payments from a bank in SK to a bank in DE because both banks require a special set of purpose codes. To identify the payment, the sender and the receiver bank require different purpose codes. You enter both Sender Bank Country/Region and Receiver Bank Country Region and the necessary purpose codes in the Purpose Code of Sender Bank and/or Purpose Code of Receiver Bank fields in this activity.
You want to transfer payments from the bank in SK to any bank in any country/region and because the bank in SK requires a special set of purpose codes you enter the purpose codes required by the sender bank in the Purpose Code of Sender Bank and/or Purpose Code of Receiver Bank field in this activity. The purpose codes are used for each payment from the sender bank to any receiver bank in any country/region.
You want to transfer payments from any bank to a bank in DE because the bank in DE requires a special set of purpose codes. To identify the payment, you enter the purpose codes required by the receiver bank in Purpose Code of Sender Bank and/or Purpose Code of Receiver Bank fields in this activity. The purpose codes are used for each payment from any sender bank to the receiver bank.
Whether you use Purpose Code of the Sender Bank or Purpose Code of the Receiver Bank or both depends purely on your business requirement.
Update the Payment Format
Change the Format Mapping
You also need to map the new fields where the bank requires purpose codes. In our example, we will map them both as atoms within <RgltryRptg><Dtls><Cd>.
Available fields are: FPAYHX-SND_CTRY_CODE and FPAYHX-REC_CTRY_CODE.
Updating the Payment Method
To test our solution, we will assign the payment format to the payment method we will use for testing (in our case that is payment method “Z”).
You can do that in configuration step Set Up Payment Methods for Each Country/Region for Payment Transactions (101972) under settings for Automatic Payments.
Updating Payment Reason in Vendor Master Data
To update payment reason in vendor master data, open the Maintain Business Partner App and go to a Business Partner in the role Supplier (Fin. Accounting).
Posting a Vendor Invoice with Payment Reason
Testing Our Solution
Vendor Invoice without Payment Reason
To test our solution, we will also post a vendor invoice without payment reason. For this invoice, we select the same Business Partners as the one where we updated Payment Reason on master data. To post a vendor invoice without payment reason we simply leave the field Payment Reason empty.
Tip: You can also display the Payment Reason directly in the Payment table:
Do you have any further comments regarding this topic? Do not hesitate to share them in the comment section below. You are also welcome to ask any questions about SAP S4/HANA Finance in the Community Q&A section.
Thanks for sharing! I'm interested.. but.. we are running S4H on premises 2020 :-(.
Is there a way we could benefit for the same?
I am sorry but this functionality was delivered only in 2021.
We have just upgraded to S4H 2021 SP02, but i don't find these options. Can you help ?
Hi Nilesh Sinha,
it is in the IMG
Or which settings are you referring to?
I see the option to maintain the payment reason in spro and I have maintained this. However despite the fact that the payment reason is an optional field in both the field status group for the reconciliation account and in the posting key this field is not displayed when I post an invoice.
Is this field only available in FIORI? or how can I make use of it in the GUI?