Managing Self-initiated Incoming Payments

Michael has heard about self-initiated payments. He knows that they are used extensively in Europe and are an option in some other countries.

Note

In Europe, these payments are often referred to as SEPA direct debits.

Self-initiated incoming payments refer to the process where the company directly debits the amount due from the customer's bank account. The payment process is automated, reduces manual effort, and speeds up the collections process.

SAP S/4HANA allows for the configuration and management of this process using the Payment Program, Direct Debit, and Single Euro Payments Area (SEPA) mechanisms.

Here is how the process generally works:

1. Customer Agreement: For self-initiated incoming payments, there needs to be an agreement in place with the customer that permits the company to debit payments directly from the customer's bank account.
2. Setup Payment Program: In SAP S/4HANA, you need to set up the Payment Program with the necessary settings, such as payment method, bank determination, and house bank.
3. Direct Debit and SEPA Mandate: Direct Debit is a financial transaction in which one person (or organization) withdraws funds from another person's bank account. Formally, this person authorizes this action through a mandate. For transactions in the Eurozone, SEPA Direct Debit is used. This requires the setup of a SEPA mandate, which is a signed authorization given by the debtor (customer) to the creditor (company).
4. Execute Payment Run: The company then initiates a payment run on a scheduled basis. The Payment Program considers all open (due) items of the customers that are to be paid by Direct Debit, generates the payment advice notes, and initiates the transactions.
5. Confirm and Post Payments: When the funds are received, SAP S/4HANA allows you to confirm and post the incoming payment against the customer's account, thereby closing the open/due AR items.
6. Bank Communication Management (If in Scope): It oversees the communication with the bank, the management of the payment files, and the handling of the payment status messages that you receive back from your bank.

By using the Payment Program (Direct Debit + SEPA), businesses can ensure timely payments, improve cash flow management, reduce manual errors, and lower the risk of non-payment. Ensure that this process complies with your local banking regulations.