Processing Automatic Payments

Objectives

After completing this lesson, you will be able to:

  • Upload incoming payment files in SAP S/4HANA
  • Process incoming payments from payment files
  • Explain the posting steps in automatic incoming payments
  • Post-process of unmatched incoming payments

Incoming Payment Files

Introduction

The majority of invoices of Bike Company are paid using the upload bank file functionality of SAP S/4HANA. Consequently, it is important for Michael to understand the process for incoming payments, how to review the status of post-processing, and to how manually clear unmatched payments. Finally, he should be able to browse the system to view the customer's payments and see which invoices they were cleared against.

Michael soon finds out that the majority of incoming payments are usually uploaded from a bank statement file. He has learned about the manual incoming process and will apply that knowledge to the processing of incoming payment files, especially the accounting entries that take place, and the handing of payments that have to be post-processed.

Incoming payments are usually handled differently depending on the bank or institution; therefore, standard predefined bank formats might not be applicable for all incoming payments.

When it comes to electronic bank statements, the following internationally recognized formats exist:

  • The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is an institution that provides financial services around the world. The network is widely recognized as a secure way to handle bank transactions and integrates in many cases with SAP ERP software. The message types for bank statements typically used in the SWIFT environment are MT940, MT942, and MT950.
  • In the course of the SEPA implementation across Europe, not only was the outgoing data transfer from enterprises towards banks reworked, but also the bank-to-customer side. The SEPA Cash Management Message Types (SEPA CAMT) was therefore implemented in due course. Message types for bank statements typically used in the SEPA CAMT environment are CAMT.052, CAMT.053, and CAMT.054.
  • In the United States, the BAI Format is used. In short, the BAI2 format is a cash management balance reporting specification developed by the BAI (Bank Administration Institute). From experience, the BAI2 format is widely used in the US and is globally supported by most of the major global banks, but outside of the US and with local banks, corporates might find that the BAI2 format has limited availability. Message Types typically associated with the Bank Administration Institute are BAI or BAI2.

For incoming payment files that do not meet the standard bank format, SAP S/4HANA accommodates this by allowing the uploads of CSV or TXT files which contain remittance advices.

During the upload, the system first checks the file format to confirm whether it aligns with the accepted structure. Moreover, it checks the compliance of the data with the payment medium format, payment method, including the validation of each field - their sizes, types, required, optional, and so on.

A log will appear to show if the upload has been successful or not.

In case there are any errors in the file, the system will provide a detailed log highlighting the issues which need to be corrected.

Always ensure that the payment file is in the correct format as specified by the application to ensure a successful upload. In addition, the availability of these options might change as per the security permissions assigned to the user.

After the concept of importing bank statements was explained, this figure describes how potential post-processing steps are integrated in the process of clearing open items.

Note

To learn more about how to upload a payment file in the SAP S/4HANA Cloud public edition system, consult the video in the following demonstration, How to Import Payment Files.

How to Import Payment Files

Choose the Play button to learn about uploading a payment file in SAP S/4HANA Cloud public edition system.

Explain the Posting Steps in Incoming Payments

When you have uploaded your incoming payment files to SAP S/4HANA, the following steps are taken to post the data:

Clear Incoming Payments

When your validation is successful, the system begins the automatic clearing of open items. At this point, the payment is considered "received". The system identifies corresponding open invoices against customer payments in the payment file and journal entries are created.

Post to Accounting

This is the final step where the posting to accounting takes place. All the accounts get updated accordingly and the system creates accounting entries for the incoming payments in a two step process; it directly posts it to the bank clearing accounts, and in a second step, posts and clears the payment to the customer’s account. Final details of the postings are saved in the finance area of the application.

If the payment difference is immaterial, SAP S/4HANA may process it automatically by performing the following steps:

  • Adjusting the cash discount up to certain amounts
  • Writing off the payment difference to a general ledger account
The figure describes the two steps that taken on incoming payments to finally clear open customer items. First a posting to a bank account against a bank sub-account is done, second a posting to this sub-account against the customer account is done to clear the respective open items.

Error Handling:

If there are any errors at any step, they are logged, and the user is informed. Errors may occur due to various issues like incorrect details, format discrepancies, or mismatches in amount. These must be corrected before the payment can be processed successfully. This is referred to as post-processing.

Remember, the availability and settings of these options can vary based on an organization's customizations and system settings.

Explanation of Post-Process of Unmatched Incoming Payments

Unmatched incoming payments are those payments for which the system cannot automatically identify a corresponding invoice or business transaction. In SAP S4/HANA, there is a systematic approach to handling such payments:

Identifying Unmatched Payments
When the system has processed the incoming payment file and cleared payments against known or matched invoices, the remaining payments are marked as unmatched.
Manual Review
These unmatched payments then need to be reviewed manually. Finance staff can view the list of unmatched payments in a separate view or report it within the system.
Manual Matching
During the review process, the finance team will attempt to identify the corresponding invoices or transactions for these payments. This could involve research or communication with customers or other departments, depending on the information available.
Posting and Clearing
When the correct transaction has been identified, the payment can be manually matched to that transaction. The system will then clear the invoice and post the payment against the appropriate customer account.
Creating Payment Advices
If the invoice related to the payment cannot be found, a payment advice note can be created. This note serves as a placeholder until the proper identification is made and the payment can be allocated to the correct invoice.

The goal is to reduce the volume of unmatched payments, and therefore manual work, as much as possible by improving the quality of the data in the system and the precision of auto-matching rules and algorithms.

After the uploading and post processing steps are complete, we analyze customer open and cleared items using the following steps:

  1. Check the Customer Open Items: Go to the Receivables work center. Under Customers, choose Open Items. Here, you can see the list of all open items for each customer. You can filter this list based on specific customers, items, amounts, dates, and so on, to analyze more precise data.
  2. Analyze the Cleared Items: Go to the Receivables work center. Under Customers, choose Cleared Items. Here, you can see the list of all items which have been cleared, that is, for which payment has been received. This list can be filtered and analyzed the same way as open items.
  3. Use Reports: SAP S/4HANA also provides reports for open and cleared items. These reports provide a more detailed and holistic view of the status of your receivables, including total amounts, aging information, and trends.
  4. Download Data: If you need to analyze the data in more depth, you can download it to a spreadsheet format. This will enable you to use powerful data analysis tools to investigate further and potentially identify issues or opportunities.

How to Post-process Customer Payments

In this demonstration, you will learn how to post-process incoming payments.

How to Analyze Customer Line Items

Choose the Play button to watch the following video. In this demonstration, you will learn how to analyze customer line items in SAP Public Cloud edition.

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