Clearing Functions in General Ledger in SAP FICO

The following functions are available for manually clearing items:

Posting transaction	Example business transaction	Menu sequence
Incoming payment	Credit memo for a check deposited in the bank	Document entry ® Incoming payment
Outgoing payment	Debit memo for a drawn check	Document entry ® Outgoing payment
Post with clearing	Clearing the GR/IR clearing account	Document entry ® Post with clearing

The following information is based on the Post with clearing function. The various clearing functions have different screens for entering posting data, but the screens for processing open items are the same.

Certification Questions

Clearing

Clearing Functions

Clearing Open Items

Clearing Functions in Accounts Receivable in SAP FICO

The following functions are available for manually clearing items:

Posting transaction	Example business transaction	Menu sequence
Incoming payment	Customer payment	Document entry ® Incoming payment or Payment fast entry
Outgoing payment	Debit memo procedure Cash payments	Document entry ® Other ® Outgoing payment ® Post
Outgoing payment with printed form	Immediate payment by check	Document entry ® Other ® Outgoing payment ® Post + print forms
Internal transfer	Invoice posted as credit memo due to quality defects	Document entry ® Other ® Intern.transf.psting ® With clearing
Online check	Automatically generated check was damaged during print	Document ® More functions ® Print payment forms

The system also provides the following additional functions for automatically posting incoming/outgoing payments and clearing open items.

Automatic Functions for Posting Incoming and Outgoing Payments

Example Business Transaction	Procedure Country	Menu sequence
Customer payments	POR Switzerland	Cash Management menu Incomings ® Payments ® POR procedure (CH)
	Lockbox USA	Cash Management menu Incomings ® Lockbox
	Check deposit transaction with check posting and generation of a check deposit list for the bank	Cash Management menu Incomings ® Elec check deposit
Incoming, outgoing payments	Electronic bank statement with Multicash	Cash Management menu Incomings ® Electronic bank statement

See the FI - Treasury documentation, FI - Electronic Bank Statement, or the program documentation for more information on these automatic functions.

Clearing Functions in Accounts Payable in SAP FICO

The following functions are available for manually clearing items:

Clearing Functions in Accounts Payable

Posting transaction	Example Business Transaction	Menu sequence
Outgoing payment	Debit memo procedure	Document entry ® Outgoing payment ® Post
Outgoing payment with printed form	Immediate payment by check	Document entry ® Outgoing payment ® Post + print forms
Internal transfer	memo due to a product defect	Document entry ® Others ® Posting With clearing
Incoming payment	Refund from your vendor, e.g. annual quantity discount	Document entry ® Others ® Incoming payment

The SAP System also supports the automatic entry of bank postings for outgoing payments by importing bank statement data using the Electronic Bank Statement function. For more information about this function, see the FI Treasury and Electronic Bank Statement (FI) documentation.

Account Payable

Account Posting

Archiving

Clearing Functions in SAP FICO I

The following topics explain the different requirements and features for clearing open items in the R/3 System.

Introduction to the Clearing Functions

Self-Defined Clearing Procedures

Payment Differences

Automatic Postings for Clearing Procedures

Clearing Open Items Across Company Codes

Bank Sub-Accounts

Facilities for Processing Open Items

Introduction to the Clearing Functions in SAP FICO

Open items are in fact unfinished transactions. For example, a vendor invoice that has not been settled remains in the vendor account until it is paid.

The open items of an account can only be cleared once you post an identical offsetting amount to the account. In other words, the balance of the items assigned to each other must equal zero as shown in the illustration below.

When these items are cleared, the system assigns them a clearing document number and the date on which they were cleared. Invoices in a customer account, for example, would then be marked as paid, while items in a bank clearing account would be marked as cleared.

In order for you to clear items from an account, the account must be kept on an open item basis. Customer and vendor accounts are always kept on an open item basis. This lets you monitor your outstanding receivables and payables at any time. The open item management option, however, must be set for general ledger accounts. You would set this option, for example, for bank sub-accounts and clearing accounts in order to be able to track whether the business transactions posted to these accounts are closed yet.

Open item management ensures that all items that have not yet been cleared are available in the system. Only after every open item in a document is cleared can a document be archived.

You can track open items in line item display or document display. In line item display, you can see the last three digits of the clearing document number if you choose the standard line layout variant. You will want to view clearing documents to find out how the open items were cleared.

There are two functions you can choose from to clear open items: Account Clearing and Posting with Clearing. These functions are described in more detail as follows.

Account Clearing in SAP FICO

Using the account clearing function, you choose and match those open items from an account that balance out to zero. The system marks them as cleared by assigning them a clearing document number and the date on which they were cleared (clearing date). The clearing date can be the current date or a date that you enter yourself. The clearing document number is the number of the most recent document involved in the clearing procedure.

Since postings do not have to be made during account clearing, documents are usually not created. However, the system might have to make clearing entries if line items from different business areas are part of the clearing procedure as shown in the illustration below. In this case, a document is created, and the number of the clearing document is set in every item cleared.

Conditions for Clearing

Generally speaking, you use the account clearing function for bank sub-accounts and clearing accounts. You use the check number to select, for example, an item in your account for incoming checks, to clear it against the cashed check.

Automatic Clearing

Instead of clearing items manually, you can also use a program to clear them automatically, provided no new items have to be created to clear the open items. For more information on this, see the Clearing Program.

Posting with Clearing in SAP FICO

Using the posting with clearing function, you enter document line items and then select the open items that are to be cleared. Once the total amount of selected open items equals the amount of the entered line items, the system clears the open items by creating one or more offsetting entries.

A customer pays for several receivables amounting to 5,000 USD with a check. You enter the amount of the check payment in the Checks Receivable account (see step 1 in the illustration below). To clear the receivables in the customer account, you choose the open items (see step 2 below). The amount you enter and the items you select must balance to zero. When you save your entries and selections, the system posts the incoming payment (automatic offsetting entry) to the customer account (see 3 below) and marks the open items as cleared (see 4 below). All four steps are performed in one procedure.

In this clearing procedure, the system generates a clearing document comprised of the items you entered and the offsetting entries it created to balance the document to zero.

The system marks the items as cleared and sets the clearing date and clearing document number in the open items you selected and in the offsetting entries it created. The clearing date is usually the posting date. But if the items you select for clearing have a posting date that comes after the posting date of the clearing document, the system uses the most recent posting date as the clearing date. The following illustration shows the item that the system posted automatically in the above example. The open item is cleared, and the document line item it is matched to contains the clearing information.

There are three functions you can choose from for posting with clearing. With a basic function, you can process any type of business transaction in which items need to be posted and cleared. The two other functions are specially designed for incoming and outgoing payments.

Options when Clearing Open Items

You can:

• Clear several accounts and account types
• Clear items in any currency
• Post differences that result from assigning items to each other
• Enter any number of line items (such as bank charges)

Automatic Clearing

You can also execute posting with clearing automatically by running the payment program. Normally, you will run the payment program to pay vendor invoices. You can also use the payment program if you and your customers have agreed on a debit memo procedure (collection or direct debiting procedure).

Some special G/L transactions, such as bills of exchange, are cleared using special functions. You can find additional information on special G/L transactions in the FI - Accounts Receivable and Accounts Payable documentation.

Clearing Procedures in SAP FICO

The standard system contains a clearing procedure for each clearing function that creates documents. The clearing procedures are:

• Incoming payment
• Outgoing payment
• Transfer posting with clearing

A clearing procedure represents a business transaction that carries out a clearing. To clear items against an incoming payment, you would use the Incoming payment clearing procedure. To post a payment you make to a vendor, you would use the Outgoing payment clearing procedure.

There are two separate transactions specially designed for each of these clearing procedures: incoming payment and outgoing payment. They both use special entry screens that make it easier to process open items. The fast entry function enables you to quickly enter payment lots. The fast entry function for incoming payments uses the posting key that was set up for the "Incoming payment" clearing procedure.

Self-Defined Clearing Procedures

Procedures for Posting with Clearing

Procedure for Account Clearing

Defining and Maintaining Clearing Procedures

Self-Defined Clearing Procedures in SAP FICO

In addition to the incoming and outgoing payment functions, the system offers a general clearing function that you can use in posting with clearing. You can use it to clear any type of transaction. Once you access the function, you can choose the transaction you want to process as shown in the illustration below.

You can define your own clearing procedures for this general function to make it easier for users to post and clear items. Your accounting clerks can then use the procedure that best suits the business transaction they are processing.

Procedures for Posting with Clearing in SAP FICO

The following overview lists the clearing procedures in the standard system and the functions used to post them.

The system has to make clearing entries for each function apart from account clearing (see Account Clearing and Posting with Clearing). To do this, it requires posting keys that suit the corresponding clearing procedure.

The required posting keys are already defined for these procedures in the standard system. You will have to change the standard settings or make new settings if:

• You change the
posting keys delivered with the standard system, or you do not want to use the predefined posting keys. You will then have to enter the new posting keys for the clearing procedures.

• You want to change the
name of the procedure. In this case, simply enter a new name for the clearing procedure.

• You require
more procedures. You must define these procedures.

The following illustration shows the clearing procedures defined in the standard system (see 1) and the options for choosing one of the procedures in the general clearing function (see 2).

Posting Keys for Clearing Procedures

Each procedure contains the following debit and credit posting keys per account type:

• Customer and vendor accounts are assigned posting keys for the clearing entry, the residual item balance, and special G/L transactions.

• G/L accounts are assigned only a debit and credit posting key. No further distinction is made for the posting keys for G/L accounts.

When defining your own procedures, you should maintain all posting keys for each account type. The illustration below shows the posting keys that were maintained for the incoming payment procedure.

In posting incoming payments, the system requires a posting key to generate the offsetting entry for open items you select from the customer account. To generate this offsetting entry, it uses the customer credit posting key that is specified for the clearing entry. All the other posting keys are used for special situations that may occur when posting an incoming payment:

• The customer debit posting key specified for the clearing entry is required if an incoming payment is posted across different business areas. If you select, for example, an invoice and a credit memo from different business areas during the clearing procedure, the system has to make a debit posting to clear the credit memo as well as a credit posting to clear the invoice.

• Vendor posting keys are required so that offsetting entries can be made to the vendor account when open items are cleared between a customer and vendor.

• Posting keys are required for special G/L transactions (for example, down payments) if you want to clear, for example, an invoice and a down payment in a single clearing procedure.

The system can also deal with payment differences when you post and clear items, but requires a posting key to do this. You can process payment differences as follows:

• If you post a payment as a
partial payment, the original receivables remain on the account. The system does not mark the open items you selected as cleared. The partial payment is posted to the customer account with an invoice reference that allows you to track which invoice the partial payment was matched to. For partial payments, the system uses the posting keys you define for clearing open items. The posting key defined in the standard system for customer partial payments is posting key "15".

• If you post any outstanding receivable as a
residual item, t he original receivable is automatically cleared from the account. To post the residual item, the system uses the posting keys specified for the residual item balance.

The posting keys you specify for the Transfer posting with clearing procedure are used for the general clearing function and, if the system has to make internal transfer postings, for the account clearing function as well.

The payment program and the special functions for outgoing and incoming payments use the posting keys defined for the Incoming payment and Outgoing payment procedures.

You cannot delete these three procedures.

Posting keys for the invoice and credit memo fast entry function are defined separately in the system.

Procedure for Account Clearing in SAP FICO

Normally you will use the Account clearing function without posting an item. However, the system may have to automatically make transfer postings in some cases.

You want to clear items in a clearing account that were posted to different business areas. When clearing the items, the system has to generate a document for the clearing entries between the business areas as show in the figure below.

For account clearing, you would specify an account, account type, a clearing currency, clearing date and, if necessary, a special G/L indicator. The document type and posting keys that might be required for any clearing entries that have to be made are predefined in Customizing for the Transfer posting with clearing procedure.

The standard system is delivered with a standard document type set up for all account types (see table below). If the system has to generate documents for account clearing, it assigns them a number from the number range set up for this document type.

Standard Document Types for Account Clearing Function

Account type	Document type	Description
D	AB	General document
K	AB	General document
S	AB	General document

If you do not use the standard document type in your system, you will have to specify one of your own document types. If a valid document type is not specified for clearing between business areas, the system cannot clear the items between the different business areas specified on the debit and credit sides. This means that you can also prevent entries from being offset automatically if, for example, your organization does not want its users to clear items between different business areas.

Transfer posting with clearing is set up as the procedure for account clearing in the standard system. It is not possible to use any other procedure for account clearing. You can, however, make changes to the transfer posting with clearing procedure. See Defining and Maintaining Clearing Procedures.

Defining and Maintaining Clearing Procedures in SAP FICO

You can change the clearing procedures that are delivered with the standard system. The functions for incoming and outgoing payments and the function for account clearing were both assigned to a separate clearing procedure. If your company requires additional procedures, you can define them for the general clearing function. To do this, you have to maintain the necessary posting keys and the text that is displayed for choosing the procedure on the initial screen of the general clearing function.

You cannot delete the procedures that are included in the standard system. You can delete only the procedures that you define.

For more information on how to create or change clearing procedures, in Customizing for Financial Accounting see the Define Posting Keys for Clearing activity .

Payment Differences in SAP FICO

Payment differences can occur when clearing open items if, for example, a customer does not pay enough or takes an unauthorized cash discount. If the difference is immaterial, you will usually clear the receivable and post the difference. You can determine how to post possible payment differences as follows:

• If the payment difference is immaterial, you can have the system automatically adjust the cash discount or post the difference to a separate gain or loss account. You have to specify the maximum amount of any differences that can be posted in this way by setting amount tolerances and percentage limits.

• If the payment difference exceeds the tolerances you set, you can process the payment as a partial payment or enter a residual item for the difference. When entering a partial payment, the system does not clear the receivable, but posts the payment with an invoice reference. When creating a residual item, the system clears the original receivable and posts the outstanding difference as residual item to the customer account.

See also:

Differences Within Tolerance Limits

Differences Outside Tolerance Limits

Reason Codes

Differences Within Tolerance Limits in SAP FICO

Differences within tolerance limits are posted automatically. The system can either adjust the cash discount amount or post the difference to a separate gain or loss account. When setting up your tolerance limits, you also specify how the system should post the differences.

You can set:

• The maximum amount for adjusting the cash discount. The outstanding difference is added to or subtracted from the cash discount.
• The maximum amounts or percentages for automatically posting any difference to a separate gain or loss account if the cash discount cannot be adjusted.

Tolerance limits are defined separately for users and business partners. The system checks both limits when clearing open items. The lowest limit always has priority.

For one of your customers you set a maximum amount of two USD for adjusting the cash discount amount when a payment difference occurs. For the accounting clerk that processes this customer account, however, you set a maximum amount of one USD. If differences occur when this clerk clears items from this customer account, the system can adjust the cash discount amount only up to a maximum of one USD.

Settings you make for tolerance limits are valid in the currency of your company code (local currency). The currency is always displayed when defining limits.

Defining Tolerance Limits

You set tolerance limits separately for your users and your business partners:

For the cash discount adjustment, you can set separate maximum amounts of permitted payment differences per gain and loss (see 1 in figure below).

Only if a cash discount posting exists and the cash discount amount allows the system to make an adjustment can immaterial differences be cleared by adjusting the cash discount.

If the payment difference cannot be cleared by adjusting the cash discount, the system posts it to a separate gain or loss account. For posting the difference to a separate gain or loss account, you also set a maximum amount for your users and your business partners. The lowest limit has priority in clearing procedures. You can set an absolute amount (see 2) or a percentage (see 3). The lowest limit has priority here as well.

To use only absolute amounts or percentages, simply enter greater values for the other limits. Limits can be set per gain and loss.

Grouping Business Partners

If you want to use the same tolerances for several customers or vendors, you can group them together using the tolerance group code. You simply define the tolerances under a tolerance group code and then enter that code in the master records of the customers or vendors that should be assigned those tolerances.

You can also define tolerances without specifying a tolerance group for them by leaving the tolerance group field empty. These tolerances will then affect all customers or vendors that are not assigned any tolerance group in their master records, that is, the field in the master record is left blank.

By grouping your business partners under tolerance group codes, you can assign different tolerances to different groups of business partners. For instance, all your major customers could be assigned the same tolerances, which are more lenient than those assigned to new customers. Extraordinary business partners could be assigned special tolerances that are defined under a separate code.

Tolerance groups are defined per company code. This ensures that all tolerance settings you make are effective in the company code’s currency. It also lets each company define its own tolerances for the same business partners.

When defining tolerances, you can also make other settings that facilitate open item processing. See Facilities for Processing Open Items. For more information about setting tolerances, see the Define tolerances (vendors) or Define tolerance group for users activity in Customizing for Financial Accounting.

Differences Outside Tolerance Limits in SAP FICO

Differences exceeding the tolerance limits set for clearing them automatically may still occur during a payment procedure due to various reasons. Your customer could, for example, send you a payment advice note informing you of the items he or she is sending the payment for, but the amount paid may not be enough to match the amount of outstanding receivables.

In processing the customer’s open items, you can choose from one of the following options:

• You can post the payment as a
partial payment. In which case, the system does not clear the receivables, but posts the payment with an invoice reference by copying the invoice number to the Invoice reference field in the payment item. To determine the date that payment is due on, the system calculates the date on which the net amount of the invoice is due and enters this date in the Baseline date field for the payment. The payment is then included in the dunning program and in Cash Management at this date.
• You can use the payment to clear the original receivables and post the remaining amount to the customer account as a
residual item. The payment amount is noted in the line items of the original receivables.
• You can clear the receivables and post the difference to an expense account.

The system requires posting keys for each of these transactions. You predefine these keys in the system. For more information on this, see Posting with Clearing.

To post residual items, you have to specify what terms of payment you want to apply to these items. Per business partner, you can determine that:

• The terms of payment are taken from the invoice.
• The difference posting is always assigned predefined terms of payment. You can use a terms of payment key to do this. During clearing, the terms of payment defined under the key are used for the residual items.
• Cash discount should be granted only for the portion that was paid. The remaining cash discount is granted only after the outstanding receivable is paid in full and its payment deadline for cash discount is not exceeded. You should always choose this option if the terms of payment in the invoice are used for the residual items.
• Only certain dunning levels should be assigned the residual items. To do this, you can enter a dunning key that represents the highest assignable dunning level. In this way, you can ensure, for example, that legal dunning proceedings are not initiated for residual items.

Reason Codes in SAP FICO

To use the clearing document to find out why a difference existed, you have to assign reason codes to the line items. Using a key, you can define various reason codes in Customizing.

You can assign reason codes to:

• Partial payments made for open items.
• Residual items created for an open item. You can assign one or more reason codes if you split up the outstanding difference into several portions.
• Differences posted on account without making a reference to an open item.
• Each line item you enter in clearing open items, if the reason code field for the account is ready for input.

When you create residual items, the reason code also controls how the remaining amount is posted. The remaining amount can be posted to:

• The G/L account that is assigned to the reason code you enter.
• The customer or vendor account as a new open item if you do not enter a reason code or if the reason code you enter requires this.

Other features of reason codes:

• You can have the system create a payment notice for a customer if differences occur when clearing open items with incoming payments. You can determine what type of notice to create for partial payments, residual items, and payments on account in the tolerance group set up for the customer.
• The system can use the specified reason code to determine the type of notice to create as long as only one reason code is specified in the entire clearing procedure.
• When checking the credit limit of a customer, the total of the open items is one of the items checked. You can exclude disputed items from credit limit checks by assigning them a reason code.

Reason codes determine:

• How the difference is posted (as a new open item or to a predefined G/L account)
• What type of payment notice is created
• Whether an item is included in credit limit checks

· To define reason codes, see the following activities in Customizing for Accounts Payable and Accounts Receivable:

- Define reason codes (incoming payment)

- Define reason codes (outgoing payment)

- Define standard reason codes for clearing procedures

Automatic Postings for Clearing Procedures in SAP FICO

When clearing open items, the system can automatically post:

• Cash discounts paid or received
• Gains or losses from payment differences
• Input and output tax and withholding tax
• Bank charges
• Gains or losses from exchange rate differences
• Entries to clear the account for cash discount clearing in the net method of posting

To have the system post these items automatically, you have to define the accounts that are posted to. The following information explains the preparations necessary for automatically posting gains or losses from overpayment and underpayment and for posting bank account items and bank charges. Information on setting up other transactions can be found under the following two topics:

Gains or Losses from Payment Differences

Bank Charges and Bank Posting

Where are automatic postings explained?

Function	Topic
Cash discount postings Tax adjustments and withholding tax	Terms of payment and cash discounts Taxes
Exchange rate differences	Foreign currency
Cash discount clearing with the net procedure	Terms of payment and cash discounts

Gains or Losses from Payment Differences in SAP FICO

If a payment difference during clearing is within the predefined tolerances, the system can post it automatically.

The system does not require any additional entries to clear a difference by adjusting the cash discount. To post it however to a separate gain or loss account, it requires special rules to determine the appropriate account to post to.

The accounts can be determined based on the following three criteria:

Debit or credit
Select the debit or credit criterion to have different accounts posted to depending on whether the difference is an overpayment or underpayment.

Tax code
Select the tax code criterion to have different accounts posted to based on the tax code specified in each line item.

Reason code
Select the reason code criterion to have different accounts posted to based on the reason code specified in each line item.

If you choose to differentiate accounts by tax code and/or reason code, you have to specify accounts for each tax code and each reason code.

The system also requires the posting keys to debit and credit G/L accounts for automatic postings.

All of these settings are already made for the charts of accounts included in the standard system. If you do not use these charts of accounts, you will have to make the necessary settings yourself.

Bank Charges and Bank Postings in SAP FICO

The functions for incoming and outgoing payments contain a field for bank charges, in which you can enter any bank charges that are part of the payment being made or received. For incoming payments, the system subtracts the bank charges from the clearing amount, while in outgoing payments, it adds the charges to the clearing amount.

The system posts the charges to an expense account. To do this, it requires a posting key and an account assignment, both of which are already defined in the standard system. If you are not using the charts of accounts included with the standard system, you will have to enter your own account specification for posting bank charges. The Relevant to cash flow indicator must be set in the master records of accounts that record bank charges.

For the system to make the bank posting, you have to specify the bank account and amount in the clearing functions. The posting keys for G/L account postings are already defined in the standard system. You will only have to change them if you are not using the standard posting keys to debit and credit G/L accounts.

If taxes have to be posted for bank charges, you have to set up the bank charges account as tax-relevant. When posting the bank charges, the system then determines from the account master record that tax entries have to be made for the charges, and displays a screen for users to make the necessary entries.

Clearing Open Items Across Company Codes in SAP FICO

You can enter cross-company code transactions in one step in the General Ledger, Accounts Receivable, and Accounts Payable application components. This function would be used, for instance, for centralized procurement or payment.

If all payments are made centrally, each company code enters its own invoices separately, while one company code pays the invoices centrally. When clearing the invoice open items, the system makes clearing entries between the company codes participating in the clearing procedure. This clears receivables and payables that exist between the company codes participating in the centralized payment process.

A separate document is created for each company code and assigned a common transaction number so that you can easily track the transaction.

The following defines the prerequisites for centralized payment transactions, if carried out manually. See also in the FI - Accounts Receivable and Accounts Payable documentation, the section on payments.

Company code 0001 processes its own incoming payments as well as those for company code 0002. The invoices are entered in the individual company codes.

The following invoices were posted in the illustration above:

1. An invoice for 100 USD was entered for company code 0001, and an invoice for 2,000 USD was entered for company code 0002.

Once payment is received, you clear the open items by choosing them from the customer account in company code 0001, since this company code is also responsible for company code 0002. The open items from company code 0002 are automatically selected for processing as well.

2. You clear the receivables for company codes 0001 and 0002 in the customer account. The payment for 2,100 USD is posted in company code 0001.
3. For each company code, the system creates clearing entries for amounts that are outstanding between the company codes and the company code-specific documents balance to zero.

See also:

Prerequisites for Clearing Across Company Codes