credit note in an LC transaction

[Former Member]

I have a dilemma in applying the credit note in an LC transaction? This is my first time to encounter this type transaction. How it is done? Hoping for your quick reply. Thanks!

[Lakshmipathi]

We normally issue credit note against any rejections from end customer and this being the case, I am at a loss to understand your requirement. Can you explain the Business process as to why you are looking for LC functionality in Credit Note process?  I am sure, you should be knowing what is L/C means, how it works. 

G. Lakshmipathi

[Former Member]

Actually I am the Buyer through LC transaction. I received the goods and there are items missing upon receiving the items. We will request for a credit note from the supplier and upon issuance we will record in our books for the said CN. But the problem is the bank has already paid the whole amount in favor of the supplier. How will they apply it to the LC transaction?

[former_member182378]

Mark,

As I understand, there are two things here -

1. Bank has paid the money, in the LoC to you (the buyer). You want to record this in SAP.

2. Did bank pay you, for all the quantity (not only what was missing, but for all)? Then why do you want to create a credit note? Your company already has the money. Correct?

[Lakshmipathi]

But the problem is the bank has already paid the whole amount in favor of the supplier. How will they apply it to the LC transaction?

Since you are the Buyer, you can ask your Supplier to issue a credit note.  Though your Bankers have already released payment to Buyer, still this can be adjusted in the books of your account, based on the credit note.  Speak to your Finance team who can handle this.

G. Lakshmipathi

[Former Member]

Thanks to all your response. I have already recorded the said Credit Note on our books but how will the bank record it against the LC that they have already paid? Will we write them to adjust for the said CN issued?

[Lakshmipathi]

 but how will the bank record it against the LC

Though this is out of scope from SAP point of view, from my experience what I can tell you is your bankers would not adjust any value against this processed L/C.  It is now between you (Buyer) and the Seller to decide how they are going to settle you.  If the supplier is regularly supplying to you, then couple of options are there:-

• Give a credit note and adjust against future supplies
• Give free of charge delivery

If you prefer the first option, then when you receive the next shipment, you can release the payment less the credit note value.  If you prefer the second option, it is upto buyer who are suppose to despatch the goods on free of charge.  Of course, for both these cases, you can negotiate with your buyer that the shipment should be executed against non-L/C terms.  You need to have a detailed discussion with your Top Management and arrive at a mutual conclusion.

G. Lakshmipathi