Doubtful Customer Open Item Transfer can be automated in SAP ERP, and the associated Provision can be created.
According to their own standards, the accounting department may decide to treat late customer open items as bad debts. The team responsible for accounts receivable performs several manual tasks to:
- Make a shaky customer transfer.
- Make a provision
The aforementioned closing periodic actions could be carried out automatically.
For this, the company should specify the factors that should be taken into account while transferring doubtful assets and creating provision.
1. Personalizing
Based on its own standards, the Business may elect to classify debt as bad debt. Let’s use the accounting department’s desire to implement the following guidelines as an example;
Create a provision method for this and complete as stated above. The steps listed below can be used to customise:
Remark:
The relevant account for the Doubtful Customer Transfer should be indicated by the Special G/L “E”. In the customising process, a provision account should be kept.
2. Method
After setting up the process as described above, the following business flow should operate. To understand better, let’s look at these two instances:
such as configured;
The customer’s open items that have been past due for six months will result in a 50% provision. A 100% of the amount due provision will be made for any customer open items that have been past due for a year.
You can transfer a doubtful customer using the Tcode F103, and you can create provisions using the Tcode FAGL 104.
Fortunately, it does occasionally occur that the company is paid for the transferred open objects.
Consider the two scenarios of full or partial payment.
2.1 The full payment for a customer’s outstanding items is required after a year.
If an incoming payment for the outstanding amount is received without using a recurring payment recovery service. You can use the Tcode F-28 or another in SAP to continue with the payment posting. It’s crucial to use the Special G/L “E” at this phase. This operation will clear the line item for the Doubtful Customer.
Following this, the provision posting is reversed and the Tcode FAGL 104 is relaunched with the right criteria.
Below is a process illustration.
Remark:
This example uses straightforward sums sans VAT to make the illustration simple to understand. In this instance, the provision is 100% with an open item that has been past due for a year.
2.2 Due since a year ago: Partial Payment for Customer Open Item
If you weren’t as fortunate as in the prior instance and only received an inbound payment for half the amount that was due. You can also use the Tcode F-28 or another in SAP to proceed with posting the partial payment. It’s crucial to use the Special G/L “E” at this phase.
After completing this step, a provision posting is modified and the Tcode FAGL 104 is relaunched with the necessary criteria.
Below is a process illustration.
Remark:
This example uses straightforward sums sans VAT to make the illustration simple to understand. In this instance, the provision is 100% with an open item that has been past due for a year.
It is crucial to pay off the initial open items with any partial payment using the remaining funds. Due to the remaining open items, the provision programme now creates new provisions.
3. Finalization
If you wish to lower the amount of bad debt and stay away from needing recovery services repeatedly. The financial department needs to create a solid Credit Management plan with several levels of oversight.
