Accounts Receivable (AR) closing
At the start of the new fiscal year, or shortly before the new fiscal year, the balance carry forward is run for all ledgers. This ensures that the balances of the G/L accounts are carried forward to the new fiscal year. When the central balance carry forward program in General Ledger Accounting executes, the balances of the customer accounts are also forwarded to the next fiscal year.
The system performs a balance carryforward automatically two weeks before the start of a new fiscal year. Therefore, you do not normally need to perform any manual activities for the balance carryforward. If there are difficulties, you can trigger the balance carryforward manually. To do this, you must schedule the corresponding job. Then use the Schedule General Ledger Jobs app with the Balance Carryforward job template.
To display the status of the balance carryforward, you can use the Balance Carryforward Status app. With this feature, you can view details about a balance carryforward, such as the status or when it was run.
The posting periods of the old fiscal year are then blocked and the special periods for closing entries are opened. After this, the following closing operations are carried out:
- Foreign currency documents are valuated.
- Value adjustments are carried out for overdue receivables.
- Accounts receivable are reclassified into short-term and long-term categories for the financial statement.
The special periods can then be closed.
Foreign currency valuation
A foreign currency valuation is necessary if supplier accounts contain open items in a foreign currency. The amounts of these open items are translated to the local currency at the time they are entered using the exchange rate that is valid on the posting date.
The exchange rate is different at the time of closing (period or year-end) so the open items must be re-evaluated. Using the new exchange rate, the Perform Foreign Currency Valuation app re-evaluates the open items and enters the valuation difference in the valuated line items.
The app creates the following valuation postings:
If there is a loss, then debit the account expense from foreign currency valuation and credit the balance sheet adjustment account.
If there is a gain, then debit balance sheet adjustment account and credit the account for revenue from foreign currency valuation.
As exchange rates and valuations might be handled differently in different accounting principles, you must enter the valuation area in the app. This tells the system which rules to follow for which ledger to update and how to post the document. The SAP S/4HANA Cloud system comes with a preconfigured set of valuation areas for each country.
Individual value adjustment
Doubtful receivables are written off as an Individual Value Adjustment (IVA) during year-end closing. The special general ledger method is suitable for this procedure because the transaction is entered in the customer account and is also posted to a special G/L account, Individual Value Adjustments for Receivables.
After you have ascertained that the debt is irrecoverable or that the receivable has been paid, the individual value adjustment is reversed. If the debt is irrecoverable, the receivable is cleared from the customer account and the amount is posted to the account for depreciation of receivables. The sales tax is adjusted in the posting.
During financial statement preparation, open overdue customer items are valuated. In addition to the foreign currency valuation, you can also calculate a flat-rate individual value adjustment for unsecured or overdue trade receivables. For this periodic task, you can schedule a valuation run.
In the above figure, you can see a list of apps available to manage customer accounts.
Analytical apps give you a role-based insight into real-time operations of your business by collecting and displaying key figures directly in your browser. Analytical apps combine the data and analytical power of SAP HANA with the integration and interface components of SAP S/4HANA. They provide real-time information on large volume data in a simplified front end to carry out analysis of important accounting data such as the following:
- Overdue Receivables
- Dunning Level Distribution
- Days Beyond Terms
- Open Disputes
- Total Receivables
The description provides real-time insight into the accounts receivable situation with a set of important key performance indicators and supports managing the AR and collection team.
Capabilities include the following:
- Filtered KPIs for the user's area of responsibility
- Drill-down to customer level for root cause analysis
- Collaboration via e-mail
- Virtual data model providing harmonized data access to accounts receivable analytical data