Payment terms change - best practice

[former_member354754]

Hello friends,

I have a request to recommend the best approach to handle situation where Payment terms need to be updated after the Billing Document/ Invoice has been created. There are 2 possibilities here.

1. Accounting document for the Invoice NOT cleared

2. Accounting document for the Invoice cleared

Can anyone tell me the best practice approach if any to handle the above situation? I understand from some posts that the way to tackle this would be to cancel the invoice, reverse PGI, delete the delivery and recreate the entire process after updating the Original Sales Order with the right Payment terms.

Is there any other way than the above described approach?

many thanks in advance for your help.

[VeselinaPeykova · Accepted solution]

1. If an invoice is cleared already, why you need to update payment terms for it?

This business transaction is completed.

2. Do you use prices based on payment terms?

If the answer is yes, and a customer was billed incorrectly, this means to use your regular procedure for complaints processing - credit/debit memo, invoice correction for example.

Even if you don't have special prices per payment term, but the customer does not accept the invoice (the information on the invoice  is incorrect, it is not a good idea to reverse everything.

It might not be even possible if the period is closed.

Even if the period is not closed, you will create dummy documents, which affect your reporting.

[sez41 · Accepted solution]

As an addition to Veselina's comments, I may add: Even if you cancel the invoice, you do not need to reverse PGI and delete the delivery document in order to update payment terms. Payment terms are copied directly from sales order to billing document, so cancellation of a billing document and changing payment terms in sales order will be enough for this case.

[former_member354754 · Accepted solution]

Hello Veselina and  Kıvanç: thank you for your reply.

I am new to OTC space but to your point about pricing based on Payment terms, I agree that going the credit/ debit memo route is a  good practice as opposed to Invoice cancellation. For example, the customer was billed for $120 instead of $100 due to an incorrect payment term on the sales order. For instance lets say I cancel this Invoice. I now have to update the Sales order with the right payment term. My questions is how to I get to determine the right payment term to add to the Sales Order so that the customer is billed for the correct price?

[VeselinaPeykova · Accepted solution]

Usually the payment term in the order is determined from the customer master data and order entry clerks do not need to change it. There are exceptions from the rule, if different terms were agreed with the customer for a specific transaction - for example payment will be done in advance or at the point of receiving the products to minimize risks of a delivery above the credit limit. Such payment term change for a single document is probably documented somehow in your company (the orders are blocked for critical fields change and somebody reviews them before release).

If you have received a complain from a customer about wrong payment term printed on the invoice, he would have stated which one he thinks is correct.

In this scenario somebody should check the claim against the company policy (most likely done out of the system) and then make a decision how to proceed.

[former_member354754 · Accepted solution]

Thanks Veselina.

A follow up question on your explanation.

Lets say, there is a payment term that applies discount for a particular customer based on when the payment is made; for instance, Payment term XX01, 14 days 3%, 20 days 2%).

If the above payment term is applied to a certain Sales Order for a certain customer, where can I validate that the discount has been applied? Is this something that comes up in Pricing conditions tab? If yes, that makes me think - how can pricing calculate the discount as it is dependent on "If customer pays within 14 days or 20 days". As far as the sales document flow is concerned, I am not sure how to find the above information in Invoice or any other document?

One last question would be - Is it possible that Payment terms can affect Sales Order Pricing at all? Can you provide me with an example?

many thanks in advance for your help.

[VeselinaPeykova · Accepted solution]

From your questions I can see that you are very new to order-to-cash process. It is probably not a good idea that you take on the responsibility to advise your client on cross0functional topics such as payment terms, pricing, cash discounts etc. Maybe you need to ask a more senior colleague to take part in the meetings with you and help you out, if you are not confident in your expertise in this area.

As a start, you can search the forum with criteria "cash discount"+SKTO and read the wiki pages, then proceed to reading the SAP help. Here is a nice link, that you can use for searching in the help site (enter your criteria and then filter out the results by content, solution,version, language and so on) : https://search.sap.com/

After you finish all that, read also the sap notes, mentioned in the wiki.