Down payment, a type of payment to improve your liquidity situation

Making a down payment throughout a make-to-order process is a good approach to ensure a close working connection between the supplier and the customer. Before the items are delivered, the buyer might need to pay a certain sum in advance.

This blog mainly talks about down payment process in sales order which enabled by billing plan.

This procedure is used to produce down payment requests, track the receipt of the down payment, create a final invoice following the deduction of the down payment received and the receipt of the outstanding balance on the invoice, and record all of these actions.


Step 1. Configuration & Customizing on Billing Plan

In S/4 HANA, you can enable the down payment process for the billing plan type provided by choosing the checkbox.

In order to ensure that the down payment is received before delivery, you can set an automatic delivery block for the billing plan related to down payment.

Configuration expert firstly select value-based down payment request (Date Category = 04) or

percentage-based down payment request (Date Category = 03).

Billing Plan Type = 90; Date Category = 03/04


Delivery block code setting

Step 2. Create a sales order with down payment related billing plan

The item category of the material used to produce a sales order by an internal sales representative should be billing-related. The billing plan tab may appear on the item detail in this situation.

Item category should be billing related

Add down payment related billing plan for item

Usually, a final invoice billing plan appear together with down payment.

Now turn to Schedule Line tab, the delivery block has been automatically set

Additionally, a field labelled “Down Payment Status” for item has been added to the Status tab. The billing plan status for a specific item determines the status at the item level. Additionally, there is a state called “Down Payment Status” that is decided by all of the item statuses at the header level. For the down payment status, there are four designations: “Not Paid,” “Partially Paid(Missing Payment),” “Partially Paid(Missing Amount”),” and “Fully Paid.”

I summarized the status change condition as below:

  1. “Not Paid”———>”Partially Paid (Missing Payment)”. There are several billing plan items assigned to one item (On 6/21 customer needs to pay $10; On 6/28 customer needs to pay $20). If the customer only pays the bill of $10 on 6/21, the status will change to “Partially Paid (Missing Payment)”.
  2. “Not Paid”———>”Partially Paid (Missing Amount)”. There is one billing plan item assigned to one item (On 6/21 customer needs to pay $10). If customer only pays the bill of $5 on 6/21, the status will change to “Partially Paid (Missing amount)”.
  3. Only all billing plan items are fully paid, the status will change to “Fully Paid”.

Step 3. Create billing document based on down payment request

In order to proceed to billing procedure, internal sale representative needs to remove the billing block of down payment on sales order.

Remove billing block

Then billing clerk can create billing document.

Internal sales representative can view the document flow on the sales order once the billing clerk has prepared the billing document for the order.

Step 4. Post the down payment from customer

The customer can make the payment when the billing clerk creates the billing document for the receivable down payment in step 3. The accountant can post the down payment after they have the customer’s payment in the FI-AR system.

On app “Post Incoming Payment”, find the down payment request and post.

Post incoming payment

Step 5. Check logs on sales order.

The delivery block on the schedule line will be automatically removed once the accountant has verified and posted the payment. For information transparency, the system has also captured the actions and messages on sales orders.

Click “Log” button on sales order to see the detail information

Check “Down Payment Status”.

So far, the standard process of down payment integrating with FI-AR has been completed. You can now proceed to create outbound delivery and create the final invoice.

Additional Note.

In spite of the fact that there are numerous ways to allow down payments during sales activities, this article concentrates on the billing plan as a down payment voucher. This approach can be immediately integrated with the sales order, increasing the billing plan’s visibility and transparency for the customer and the supplier.