Business Example
A small enterprise signs a contract with a telecom provider for a comprehensive package that includes high-speed internet, VoIP services, and corporate mobile plans for its employees.
The total cost of installation and the first year of service amounts to USD15,000. Facing initial budget constraints, the enterprise requests to pay this invoice through a 12-month installment plan.
This flexibility allows the enterprise to access critical telecom services immediately while managing its cash flow more effectively, and the telecom provider secures a long-term client with predictable monthly revenue.
Installment Plan: Interest Calculation
Installments in SAP Financial Contract Accounting (FI-CA) are designed to facilitate the structured payment of large receivables over a specified period. They offer flexibility for customers and improve cash flow management for businesses. When an installment plan is set up, the total outstanding amount is divided into smaller, more manageable payments, each with defined due dates.
These installments include portions of the principal amount along with any applicable interest or fees, based on the agreed-upon terms.
SAP FI-CA automatically schedules these installment payments and generates corresponding invoices and reminders, ensuring that both the organization and its customers are well-informed of upcoming due dates.
As payments are received, the system allocates them against the scheduled installments, updating the outstanding balance and keeping accurate financial records. If a customer misses an installment payment, predefined actions such as sending dunning notices or applying late fees can be triggered. The system also allows for renegotiation of payment terms if necessary.