Transfer posting and provision for doubtful receivables (F103, F104, FAGL_104)
Transfer posting and provision for doubtful receivables (F103, F104, FAGL_104)
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F103 - Transfer postings for doubtful receivables
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Created by Annamaria Klemencz on Sep 18, 2015
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Program name : SAPF103
The program reads open items in a customer account and transfers doubtful receivables to a special G/L account.
If the balance per invoice reference number is greater than zero and the transfer posting deadline is reached, the program clears the item and posts a new item with the specified special G/L indicator.
Example
STEP 1 : Customer invoice document is posted on 01.01.2015. The invoice is due on 31.01.2015.
STEP 2. Run F103 transaction for key date 31.05.2015
According to provision method „SAP” the invoice is due longer than the transfer posting period (1 month) => F103 will select the item and post to special G/L account.
STEP 3: Batch input session is created.
Transaction SM35
STEP 4: SAPF103 posts a new item with the specified special G/L incicator ("E")
The baseline date (ZFBDT) must be entered in transfer postings. The field helps to determine the amount of provision .
Original invoice number can be found in Assignment field.
STEP 5: The invoice item is cleared.
CREDIT MEMOS
If credit memos were posted without invoice reference to the account, the program also makes a transfer posting for them to reduce the provisions already made.
The transfer of the credit memo reduces the amount of doubtful receivables.
Example
Invoice amount: 100 EUR
credit memo : -20 EUR
Transfer posting is done with 80 EUR.
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Rudra Prasanna Mohapatra
January 3, 2014 2 minute read
Doubtful receivables & Bad Debt
191425,684
Doubtful receivables & Bad Debt
Product Companies/Service Providers, using SAP, have a large customer base . Out of them some may delay or default for payment, after the invoicing is done.
This leads to doubtful receivables and ultimately, if not payed , a bad debt.Lets understand this with the below example.
A company has done a credit sale to a customer. Suppose the customer has gone bankrupt or has been liquidated.In that case,first of all the
Company would classify the receivable amount as doubtful receivable.
Then after a particular time frame, it will create a provision for a certain percentage of the
receivable or the entire receivable . After this, there are 2 possibilities.
1. Customer will pay the money back
2. Customer wont pay the money back.
In each of the cases, the receivable amount needs to be cleared.
SAP provides specific functionality to map and handle this entire scenario.Given below are the detailed steps.
1. Setting up a Special GL indicator and creating and assigning a particular GL account to it.
t code: FBKP
Maintain a Special GL indicator(say D) , which is to be maintained as the special gl account for BAD Debt provisioning.
Then maintain special GL Account against the recon account.
2. Define Provision method, timeline for reclassification and also the timing and percentage for the reserve creation
t code:OB04 .
Define the Receivable Provision Methods.
In Per, maintain the month .
If 3 is maintained there, it would mean after 3 months of the item is due, this
item is due for being reclassified to a Special GL Account
In Months,maintain a value and in Perc 1, maintain a percentage.
Is 3 is maintained in Months1 and 50 is maintained Pec1, it would mean after 3 months of the item is due,
50% of the due amount can be maintained as a reserve.
Same would apply for Perc2 and Perc3
3. Define the Debit and Credit accounts for Provision for Doubtful Receivables
t code : OBXD
maintain the Bad Debt expense account in debit section and a Provision Account in Credit section
3. Now run F103 .
It will create transfer posting , with the above provision method entered on selection screen . Lets see the accounting entries created for the same.
Initially, during the credit sale
Customer Dr 8000
Sales Cr 8000
Now if this has crossed the time line and is due for reclassification
F103 will run and this will post as below
Special GL Account Dr 8000
Customer Cr 8000(it will clear the customer item of step 1)
4. Now run F104
If number of days in arear ,has crossed the time line and is due for provision posting
F104 will run and this will post as below
Expense Account Dr 8000
Provision Account Cr 8000
5. After this, there are 2 possibilities.
a. Customer may pay the money back
Cash Account Dr 8000
Customer Account Cr 8000(it will clear the Special GL account item of step 2)
Then run F104 again. It will reverse and clear the entry of step 4.
Provision Account Dr 8000
Expense Account Cr 8000
b. Customer wont pay the money back.
Expense Debit 8000
Customer Credit 8000
In the above entry, we have to knock off the customer spl gl entry and debit an expense account.
Then run F104 again. It will reverse and clear the entry of step 4.
Provision Account Dr 8000
Expense Account Cr 8000
F103 and F104, can set up as monthly batch jobs to handle the monthly doubtful receivables and bad debts, if any.
This is how Doubtful receivables & Bad Debt are handled in SAP. Please provide your valuable comments and suggestions.
Regards
Rudra
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Assigned tags
FIN (Finance)
;
bad debt
doubtful receivable;
receivables;
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19 Comments
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narin kamuni
January 6, 2014 at 5:55 am
Good Document...
Regards,
Narin Kamuni
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Rudra Prasanna Mohapatra
Blog Post Author
January 6, 2014 at 6:15 am
Thanks Narin
Regards
Rudra
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Former Member
January 6, 2014 at 6:23 am
Hi Rudra
Crisp and clear document. Thanks for sharing.
As you rightly said, the Special G/L indicator might not always be 'D' which is used. It is dependent on the client preferences.
Also, the same settings apply to services as well, not only products.
Regards
Sowmya
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Rudra Prasanna Mohapatra
Blog Post Author
January 6, 2014 at 6:53 am
Hi Sowmya,
Thanks for the comments .
Yes, this is basically relevant in case of all receivables, which can be because of the sale of a product or service. I will Update the document shortly.Thanks again for pointing out.
Regards
Rudra
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Ajay Maheshwari SAP Trainer
January 6, 2014 at 6:42 am
Hi Rudra
A very nice document
Few comments from my side to improve the document
1) The Provision account - Is this a normal account or a recon account? And is it Open Item managed?
2) The accounting entries if customer pays the money back -
Does the Customer a/c needs to be manually knocked off against the Special GL? I think if you add this clarity in the doc, it would help
3) The accounting entries if customer does not pay the money back -
The scheme of entries is not clear to me.. What you gave is
Expense Debit 8000
Customer Credit 8000
Then run F104 again. It will reverse and clear the entry of step 3.
Provision Account Dr 8000
Expense Account Cr 8000
The Expense Debit has already been passed earlier when provision was booked and Customer Cr was passed when Special GL was booked
. In my opinion, the accounting entry should now produce Provision A/c Dr and Special GL Cr, because now it is confirmed that the customer wont pay.. Hence, the net impact would be Expense Dr and Customer Cr
4) Last, If PER = 3 and M1 = 3 and M2 = 6, what does this mean for Provision accounting?
It is clear that at the end of 3 months (PER), the entry is reclassified to Special GL
Whether the 1st Provision be booked at the end of 3 months or 3+3 months? Similarly, the 2nd Provision be booked at the end of 3+3 months or 3+6 months?
Br, Ajay M
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Former Member
January 6, 2014 at 7:59 am
The config for OB04 is both for F103 and F104.
The value in Per. is used for F103. So, if the item is due for more than 3 months, F103 reclassifies the document.
The next columns are for F104, the months item due and the provision made as explained by Rudra
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Rudra Prasanna Mohapatra
Blog Post Author
January 6, 2014 at 8:08 am
Hi AJay,
Thanks for the comments. Please find my responses below.I will get these added in the document.
1) This is normal Balance sheet account and is not needed to be open item managed.
2) Yes, it has to be manually knocked off.
3) when customer does not pay, we,in anyway, have to knock off the receivable entry sitting on the special GL indicator. So we will manually post the below entry
Expense Debit 8000
Customer Credit 8000
This expense account is not the same expense account maintained in the customization for bad debt provision(OBXD) . The idea is to knock off the Customer line item and show it as an expense, finally when we are sure customer is not going to pay at all.
and when we run F104 after the above posting, system finds that the special GL entry in customer account has been knocked off, and so it reverses the doc posted in step 4(and not in step 3).
...
