Identifying Customer Transactions in the Receivables Management and in the General Ledger

Linda realized that each Customer receives its own account within the system. Now she wants to navigate to the postings she made. This is where she realizes that the outstanding posted invoices can be analyzed on each separate Customer account within the receivables management work area. However, she remembers that each Customer transaction also needs to be represented within the General Ledger, because General Ledger is an overview of all company’s financial operations. She dives into the system and realizes that Receivables Management and General Ledger are connected via reconciliation accounts.

Customer invoices may or may not originate from a sales order.

If we create customer invoices from a sales order, it means that our company has sold some stock that needs to be tracked in our balance sheet.​​

In the receivables management, the Customers and their balances are listed separately. In other words, every Customer has their own account, ​where the gross invoice amounts are debited. These amounts also need to be represented in the ​General Ledger. ​​

Receivables are summarized or reconciled on a receivables reconciliation account in the General Ledger. The reconciliation account comes from the Customer master record and is mandatory for each Customer. You cannot make postings directly to a reconciliation account.​​

The output tax amount travels directly to the output tax G/L account.​

With or without sales order in place, the invoice net amounts are posted as revenues.​

After learning about reconciliation accounts and their role in connecting Receivables Management and General Ledger, Linda would like to discover where can she find its Customer transactions in the Bike Company’s financial statements, like balance sheet and profit and loss statement. She needs to do that to make sure that Bike Company’s external reporting is consistent.

Your​ gross invoices amounts always get debited to the receivables reconciliation account, which is found on the assets side of the balance sheet. The structure of the balance sheet and the names of the balance sheet items may differ depending on the ​financial statement version you are using, which depends on the underlying accounting principle.​​

​The net amounts need to be recorded as revenues directly in the Profit & Loss Statement. Depending on the revenue type, it may be credited to one or the other relevant revenues account.​​

​The structure of the profit and loss statement and the names of the profit and loss statement items also may differ depending on the financial statement version you are using, which ​depends on the underlying accounting principle.

Working with many Customer invoices every day you might want to have a Big Picture view on you company’s Customer operations. Linda thinks this as well. After processing multiple Customer invoices, she would like to generate a few reports with the most important Customer-related key performance indicators (KPIs). Luckily SAP provides functionality that Linda is looking for.

SAP provides several valuable apps with embedded analytics functionality that deliver important insights on the company’s operations.

In the Receivables Management there is a central app that showcases all important receivables management KPIs – Accounts Receivable Overview. With this analytical overview app, you can monitor important accounts receivable indicators and access further accounts receivable analytical apps. This is a central entry point for the receivables management accountant or a receivables management manager to get a holistic big picture overview on one screen.

From this app you may navigate to further analytical apps for more detailed information. Apps like:

• Days Sales Outstanding: The representation of an average amount of days your customers take to pay their invoices
• Receivable Aging (Aging Analysis)
  • The representation your outstanding invoice’s lifetime since the posting date
  • Can be represented as an overdue or not yet due report

There are also many more analytical apps not included in the accounts receivable overview. One worth mentioning would be the Overdue Receivables app. With this app you can check the amount of your customers’ overdue receivable amount. You can monitor the status of the overdue incoming payments for critical customers in your area of responsibility. You can also find out about the potential risks and notify the responsible persons to take action.

Linda learned a lot of fundamentals about Receivables Management. She is able to describe all main functions of this work area including Customer master data creation and invoice posting. However, this is just the beginning. Linda will continue exploring Receivables Management to expand her skills and knowledge. But already now she is ready to tackle new challenges as a receivables management accountant.