SAP S/4HANA Finance

SAP Accounts Receivable in S4 HANA

SAP Accounts Receivable – The S/4HANA Receivables Management

SAP Accounts Receivable provides complete functionalities that integrate sub-ledger accounting through account receivable. We popularly call it Receivable Management in S/4 HANA.

It monitors and manages overdue receivables through dispute management, and collection management. It also set up rules to determine credit scores and credit limits for your customers.

SAP Accounts Receivable Integration

SAP Accounts Receivable establishes integration with sales & distribution with the general ledger for sub-ledger accounting. Additionally, it has comprehensive receivables management capabilities which include clearing open debits and credits posted to a customer account. It also includes automated cash applications and various receivable management processes such as dunning.

Brief on Dispute Management

Likewise, Dispute Management provides a comprehensive framework for creating and resolving customer disputes, which helps not only improves customer satisfaction but also reduces DSO.

Brief on Collection Management

Further, Collection Management provides an innovative and exhaustive set of related capabilities. Starting from the creation of worklists for collection specialists to the recording and monitoring of customer contact outcomes. You can create business-driven rules and integrate your system with credit agencies for business partner ratings that calculate credit scores and credit limits for your customers.

The Traditional SAP Accounts Receivable

SAP Accounts Receivables is traditionally a book of records containing customer transactions such as customer invoices, incoming payments or down payments and credit memos.

We have Accounts receivable in SAP since its earlier releases. It is integrated with the general ledger and Sales & Distribution in real-time.

Further, the accounts receivables management functionality has enhanced integrated accounts receivable with dispute management, collection management and credit management.

Core Processes of SAP Accounts Receivable in S/4HANA

Following are the core processes of Accounts Receivable in S4 HANA:-

  1. Posting accounting documents (customer invoice) for billing documents posted regarding a sales order in sales and distribution
  2. Posting accounting documents (customer credit memos) for credit memos posted concerning a sales order in sales and distribution
  3. Posting customer invoices or customer credit memos without reference to a sales order
  4. Creating correspondence to send invoices through various modes ( i.e PDF, email etc )
  5. Creating down payment requests for down payments to be received from the customer
  6. Posting down payments
  7. Clearing customer open debits and credits manually as well as automatically
  8. Posting incoming payments from customers and clearing invoices with payment documents
  9. Importing bank statements or lockbox files from banks into SAP S/4 HANA and applying cash to invoices automatically
  10. Performing dunning processes for sending dunning notices to customers about overdue/outstanding invoices
  11. Performing period-end processes such as bad debt write-off to close a period in accounts receivable
  12. Integration with other receivables management functionalities such as dispute management, credit management and collections management
  13. Intuitive SAP Fiori analytical apps provide information through various accounts receivable KPIs such as DSO days beyond terms ( DBT) accounts receivables ageing analysis
Image Credit: https://sap.com

Analysis of Credit Management

Credit Management is about Managing Credit and the associated risk. This process involves deciding when to stop sales to a customer. It carries several activities. Some of which are-

  • Credit management
  • customer complaints
  • Gathering accurate credit-related information about customers from internal and external sources etc.

What does it do in SAP Accounts Receivable?

In SAP S/4 HANA, the SAP system automatically updates the credit exposure and payment behaviour of a particular customer in the business partner master record. Such as DSO, last payment etc.

It also updates a customer’s credit limit in real-time using formulas. If the customer’s credit exposure is more than the allowed credit limit, then the customer is blocked in credit management. Also, you can block sales based on other criteria. Such as DSO, the document value, the oldest open item the dunning level etc.

Thus, even when the system has not breached the credit limit itself, you can block sales in credit management on these criteria.

Documented Credit Decision

When the sales to the customer are blocked, an authorized person can decide whether to allow an individual sales document to be released or blocked. This functionality is called a documented credit decision. In credit management, we use it to record detailed reasons for the rejection or approval of credit. This helps in future analysis instead of releasing or rejecting individual sales documents.

The Fiori apps

Many easy-to-use Fiori apps are available for credit management. A few examples include the Manage Credit Accounts, the Manage Business Partner Master Data, the Rebuild Credit management Data, the Analyze Credit Exposure, the Credit Limit Utilization, the Manage Documented Credit Decisions etc.

Analysis of Dispute Management

Disputed invoices indicate some element of customer dissatisfaction with your organisation. Short payments or no payment on dispute invoices, raises DSO and makes predicting cash flows difficult.

Key Drivers

The costs and time associated with manual dispute resolution are key drivers in Dispute Management. It includes system-driven and automated dispute management processes, both. This help finds the root causes of customer disputes and prevents similar disputes in the future.

Integration with SAP Accounts Receivable

SAP S/4 HANA dispute management is integrated with accounts receivables. SAP S/4 HANA enables you to create dispute cases from several accounts’ receivable transactions. You can also update the header fields and linked objects of an existing dispute case through various accounts receivable processes. 

Additionally, dispute management processes not only close a dispute case but also post a write-off document in accounts receivable. This is to credit customer accounts and debit and bad-debt accounts. One such example is Automatic write-off.

Dispute Case Structure

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Analysis of Collection Management

We need Collections Management to communicate with our customers about overdue receivables. It helps us receive payment on overdue invoices and reduce the incidence of customer default.

SAP S/4 HANA provides an innovative and comprehensive collections management process. These processes are for recording pay promises and creating dispute cases in integration with dispute management. SAP S4 HANA collection management framework including its processes reporting capabilities and KPI.

Finally, like other functionalities, SAP S/4HANA collections management is also integrated with accounts receivable.

Key Role

We first explain how customer master data integrates accounts receivable and collections management. SAP S/4 HANA business partner functionality entails different business partner roles and receivables management. Relevant business partner roles are:-

  • Financial accounting customer (FLCU00)
  • Collections management (UDM000)
  • Credit management (UKM000).

The first step is the assignment of collections management processes for that customer in SAP S/4 HANA.

Collection Management Process

Image Credit: https://sap.com

Conclusion

This article specifically focuses on the core processes of SAP Accounts Receivable in S/4HANA. It also covers a quick analysis of its key functionalities i.e. Credit Management, Dispute Management, and Collection Management. Further, it also explains the process flow of each function with the help of diagrams.

You need to understand this advanced version of SAP A/R i.e. Receivables Management in S/4HANA. Since it is based on future technology HANA. it is the most in-demand skill. You must possess as a S/4HANA Finance consultant. Also, a FICO learner needs to upgrade to this updated version of SAP Accounts Receivable to get the best SAP FICO career opportunities.

Thus, learn this subject in-depth with a practical orientation for complete knowledge.

Visit Course Page: SAP S4 HANA Finance Training

Pradeep

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