Posting Down Payments

In SAP S/4HANA Cloud, a down payment is a partial-payment made in advance for goods or services. It is recorded in the system as a special G/L transaction, separate from regular sales processes. This segregation enables greater visibility into cash flow as it clearly indicates which part of the payment is made before delivery.

A down payment request is a legal document to ask for an advance payment before the delivery of goods or services. It's an invoice that triggers a down payment and isn't based on a purchase order but other negotiated terms. Creating a down payment request doesn't lead to an accounting document, instead, it produces a noted item in the customer/vendor line items.

Noted Items in SAP S/4HANA Cloud are a type of special G/L transaction that act as statistical entries. These entries are used for reference or planning purposes for future financial transactions. They are, in essence, placeholders for future postings that may occur. Unlike actual G/L entries, noted items do not affect account balances or financial statements.

For example, let's consider a scenario where you send a customer a down payment request, but the actual money has not yet been received in the company's account. This could be recorded as a noted item. It doesn’t change the customer’s account balance but serves as a record that a down payment request has been made.

When the actual down payment is received, the noted item will be referenced in the actual transaction, thereby ensuring the down payment request is appropriately connected with its fulfillment.

Creating, posting and clearing down payments and down payment requests involves numerous specific steps on the SAP S/4HANA Cloud system.

1. Creating a Down Payment Request
   • In the SAP Fiori launchpad, locate and select the 'Create Customer Down Payment Request' app.
   • Select your company code, specify document type, and choose 'Down Payment'.
   • Input your customer, currency type, bank details, and desired payment method.
   • Under 'Payment Terms/Payment Block', select the payment conditions customized for your business.
   • Enter the amount for the down payment request, and then, on the bottom menu, click 'Save'.
2. Posting a Down Payment Request
   • Find 'Post Supplier Down Payment' on the SAP Fiori launchpad.
   • Identify the down payment request by the business partner or reference.
   • Select 'Post Down Payment', apply the necessary information (like company code, bank account, etc.) and select 'Special G/L Indicator' for down payment.
   • Choose 'Execute', and the system will post the down payment.
3. Clearing a Down Payment Request
   • Locate the 'Clear Customer' app on the SAP Fiori launchpad.
   • Select 'Clear Down Payment' using the business partner or reference.
   • Verify all details and post with the 'Clear Down Payment' button.
4. Creating a Down Payment
   • The same process as creating a down payment request applies. The only variance is choosing 'Down Payment' instead of 'Down Payment Request' under the document type.
5. Posting a Down Payment
   • Navigate back to 'Post Customer Down Payment'.
   • After filling in the relevant details, choose 'Execute' to post the down payment.
6. Clearing a Down Payment
   • This involves settling the down payment against an invoice. When an invoice is created in the system, the clearing function allows the invoice to offset the down payment.
   • Locate and select 'Clear Customer Down Payment' on the SAP Fiori launchpad.
   • Input the necessary business partner or reference to find the invoice and down payment.
   • Choose 'Clear Down Payment'. The system will display the open items to be cleared.
   • Verify the details and click 'Clear Down Payment' to offset the invoice against the down payment.

The procedure for making down payments for customers is as follows:

1. The down payment is requested.
2. The down payment is received.
3. The customer is invoiced.
4. The down payment is posted and cleared with invoice.
5. The payments are cleared.

Down payments create free offsetting entries. In SAP S/4HANA Cloud these refer to a type transaction used to handle extraordinary transactions that need to be separated from general accounts payable and receivable.

Typically, when a financial transaction is posted, it impacts a default reconciliation account. However, with free offsetting entries, the posting is directed to an alternative reconciliation account. This helps businesses track and manage unique financial transactions separately.

For example, a customer made a substantial down payment for an invoice due in the future. Instead of posting the down payment to the customer's regular account, it is posted as a free offsetting entry to a designated down payment account. This enables the business to easily track down payments separately from regular customer payments.

These entries are characterized as "free" because they are not tied to specific conditions that automatically trigger them (unlike the automatic offsetting entries we saw for the guarantees made). They have to be manually posted by an accountant based on the business requirements.