Sales Order Down Payment Process Integrating with FI-AR
Down payment, a type of payment to improve your liquidity situation
In a make-to-order process, down payment is an effective way to secure a close relationship between supplier and buyer. Buyer may be required to pay an amount in advance before the goods are delivered.
This process is used to create requests for down payment, record the receipt of the down payment, create a final invoice after the deduction of the down payment received and a receipt of the final amount due on the invoice.
Step 1. Configuration & Customizing on Billing Plan
Configuration expert firstly select value-based down payment request (Date Category = 04) or
percentage-based down payment request (Date Category = 03).
Step 2. Create a sales order with down payment related billing plan
When internal sales representative creates a sales order, the item category of material should be billing-related. In such case, the billing plan tab can be shown on item detail.
Usually, a final invoice billing plan appear together with down payment.
Additionally, on Status tab, a field named “Down Payment Status” on item has been displayed. On item level, the status is determined by the billing plan status for particularly item. On header level, there is also a status “Down Payment Status” which is determined by all the item statuses. There are four statuses assigned for down payment status, “Not Paid”, “Partially Paid(Missing Payment)”, “Partially Paid(Missing Amount)”, “Fully Paid”.
I summarized the status change condition as below:
- “Not Paid”———>”Partially Paid (Missing Payment)”. There are several billing plan items assigned to one item (On 6/21 customer needs to pay $10; On 6/28 customer needs to pay $20). If the customer only pays the bill of $10 on 6/21, the status will change to “Partially Paid (Missing Payment)”.
- “Not Paid”———>”Partially Paid (Missing Amount)”. There is one billing plan item assigned to one item (On 6/21 customer needs to pay $10). If customer only pays the bill of $5 on 6/21, the status will change to “Partially Paid (Missing amount)”.
- Only all billing plan items are fully paid, the status will change to “Fully Paid”.
Step 3. Create billing document based on down payment request
In order to proceed to billing procedure, internal sale representative needs to remove the billing block of down payment on sales order.
Then billing clerk can create billing document.
Once billing clerk has created billing document for sales order, internal sales representative can see the document flow on sales order.
Step 4. Post the down payment from customer
From step 3, the billing clerk has created the billing document of receivable down payment, then customer can make the payment. Once received the customer’s payment in the FI-AR system, the accountant can post the down payment.
Step 5. Check logs on sales order.
Once accountant has confirmed and posted the payment, the delivery block on schedule line will be removed automatically. Also, the system has recorded the behaviors and messages on sales order for information transparency.
Click “Log” button on sales order to see the detail information
Check “Down Payment Status”.
So far, the standard process of down payment integrating with FI-AR has been completed. You can now proceed to create outbound delivery and create the final invoice.
There are in fact many ways to enable down payments in sales activities, this blog focuses on the billing plan as a voucher for down payments. This method can be integrated directly with the sales order, making the billing plan more transparent and visible to the customer and the supplier.
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