Management of Payment discrepancies

4. Payment discrepancies

The objective of this procedure is to clarify the accounting treatment for each payment difference that results in residual postings on customer accounts.

4.1 Partial payment

This chapter describes how to proceed when a customer does not pay the total amount of an invoice. The reason of a partial payment can be, a credit note expected, VAT that is missing, payment plan, a price dispute, a problem with the goods or non-commercial reasons.

4.2 Banking fees

Sometimes there is a difference between the payment's amount and the invoice's amount, which is relatively small. Different explanations are possible and one of them is that this difference can be banking fees.

This section describes how to record banking fees during cash allocation process.

The SAP system will automatically consider and accept a discrepancy as banking fee if under limit displayed on customer master data.

If the system cannot match the amounts due to a missing reference on the bank statement, OTC AR is allowed to settle the invoice and post manually the difference as banking fee following below steps:

1. Check payment method of the invoices paid by the customer

• If payment method K – (Cash against document) > Customer has to pay full amount of invoice to get the document and the goods. Therefore the difference can be allocated as banking fees without requesting confirmation.
• If payment method J – In this case it is related with Letter of credit   payment method. linda.vanhoorn@solvay.com, Laurence.BOULLOT@solvay.com or the Bank will send to AR mailbox the documents with the information's in advance. The information should be updated in FBL5N (text field) so that when payment arrives, it can be accepted as banking fees.

If no email is received, send email to Linda Vanhoorn (Solvay Chemical) or to Laurence Boullot (Rhodia Operations) asking information's regarding the payment

 Letter of credit - A commercial letter of credit is a contractual agreement between a bank, known as the issuing bank, on behalf of one of its customers, authorizing another bank, known as the advising or confirming bank, to make payment to the beneficiary. The issuing bank, on the request of its customer, opens the letter of credit. The issuing bank makes a commitment to honor drawings made under the credit. The beneficiary is normally the provider of goods and/or services.

2. If payment method different from K and J - check customer history:

• If recurrent > AR to accept as banking fees and request to Team Leader or to Process Specialist L2 the change of masterdata accordingly. If not, the bank statement should be analyzed to check if the amount is mentioned. If it is mentioned, it can be accepted as banking fees.
• If not recurrent > AR to request Collections to contact the customer. We would need to understand if customer paid the total amount of the invoice. If yes, we would need to request the payment proof to be sure we can accept that amount as banking fees.

The disputes should stay with WJ-3SAR as processor with status "Parked".

4.2.1 Recording banking fees

This section describes how to proceed with the allocation of a difference that should be posted as banking fees.

There are two different types of banking fees:

• FA – Banking fees above the tolerance

In this case, the amounts are higher than the ones defined on masterdata. Thus, they should be previously justified by Letter of credit documents (if pmt method is J) or upon confirmation of Collections with the customer that customer paid the total amount of the invoice. 

4.3 Overpayment

This chapter describes how to proceed with an overpayment from the customer (amount of the payment higher than the amount of the invoice due to a payment mistake from the customer).

The SAP system will automatically consider and accept a positive discrepancy as banking fees until 10 Euros.

If the system cannot match the amounts due to a missing reference, OTC AR is allowed to settle the invoice and post manually the overpayment as banking fee until the agreed value.

If the overpayment is above the agreed value, we should first request confirmation from Collections that it is really an overpayment. In this case, three possibilities can occur:

1. Use overpayment to compensate partially next invoice due
2. The remaining amount stays on customer account to be deducted on next payment
3. Customer requests a refund. In this case transfer the dispute to Collection with status "Call by collector"

4.4 Write off

This chapter describes the situation in which we receive instructions from Credit Managers/Business to post a difference as profit or loss (credit note or credit residual as profit or invoice or debit residual as loss) 

For customers not assigned to WARP, a cost center will be requested. See below:

For the cost center field for WP1, we can use the following file:

https://docs.google.com/spreadsheets/d/1TD7tjzABrAuybKEwR4UVOwiA0fqZ1Xcu8xPwEdhwvA0/edit#gid=0

In case of doubts or if you cannot find the cost center, please send an email to CAM according to the list below:

http://teamsites.solvay.com/sites/DCFI-CC-GAC/Lists/List%20of%20Companies%202008/AllItems.aspx 

4.5 Discount

Some customer invoices have cash discount in their payment terms. This is defined on the invoice by a % of reduction on the amount to pay if the customer pays within a corresponding period of time (before due date) or according an agreement with the business. In case of such early payment the customer can deduct cash discount.

This section describes how to process it.

Possible Matching Scenarios:

• SAP will automatically match the invoice and the payment if the reference of the document could be identified on the bank statement and the discount conditions have been respected by the customer (percentage of deduction and discount taken before the due date A discrepancy of 4 days is accepted by the system.).
• In case the payment terms defined on the invoice are not respected or if the reference of the invoice is not found by the system, it will not be automatically posted.
• If the payment terms defined on the invoice are respected but the reference of the document cannot be found, OTC AR is allowed to settle the invoice manually and accept the discount.
• If the percentage of deduction is respected but the discount is taken after the due date + agreed margin, post the discount with an "AR" code and create an undue discount for all items that had undue discount.
• If the amount received from the customer is different from the discount conditions defined, we should accept the amount of discount defined in the payment terms and create a residual and an undue dispute for the remaining amount of the payment asking Sales Manager the confirmation if we can accept it.

There are 2 different codes used to record a difference as a discount:

• AD - This reason code is used when discount is defined on customer payment terms or when we have instructions to accept a difference as discount

• AR - Discount deducted by the customer with a different amount than the one granted or discount taken after the due date. With this entry, the invoice is settled but a residual is created on the customer account for the unpaid amount (represented in the form of a positive DZ). Therefore, OTC AR should create a dispute for undue discount which will send automatically an e-mail to Sales that have to decide whether discount can be accepted or not.
  
  

4.5.2 Discount accepted

Normally, the system will match the invoice and the payment if the payment terms have been respected and if there are details on the bank statement regarding the invoice numbers. Nevertheless, it may happen that SAP cannot recognize the payment terms automatically, there are no invoice details that could enable an automatic matching or OTC AR receives instructions to accept a difference as discount which was not defined on the payment terms.

Afterwards, the code AR should be inserted in the "RCd" column.

The line "38, 85 EUR" corresponds to the discount shown with "AR" and is presented as a debit on the customer account. The contract involved by the discount is found in the "Ref. key 1" column.

Validate the transaction by clicking on the floppy disk  (at the top of the screen).

When the last message appears (warning), just do "Enter".

4.6 Confirming differences

All differences related with anticipated Confirmings should be accepted as discount. Therefore we should use reason code AD in the residual items column in order to charge this difference to the affiliate.

4.7 Exchange

This section describes how to proceed when the difference between the amount of the invoice and the amount of the payment is generated by a foreign exchange difference because the customer paid in another currency different from the one mentioned on the invoice.

Exchange rule

In order to find the exchange percentage, first we should divide the exchange difference ("Not assigned" field amount) per invoice (s) amount * 100.

• If the percentage is below 2% and the amount is less than 1000 EUR, OTC AR is authorized to accept as exchange difference. However a dispute on an open item of the customer should be created with status "Call by Collector" so that customer is contacted in order to have next payment being paid in the correct bank account/currency. 

• If the exchange percentage is higher than 2% or the amount is higher than 1000 EUR, we should clear the invoice, create a residual and create a dispute "Call by collector" requesting a payment of the difference to the customer. 

In the "RCd" (RCd = Reason of difference column), indicate "EX" (exchange).

In customer account in WARP, the invoice is totally cleared against the payment and the difference of 590,25 EUR is posted on g/l account 6540000090 Exchange loss (commercial).

4.8 Withholding tax

This section describes how to proceed whenever the discrepancy between the payment and the invoice is related to withholding tax A withholding tax, also called a retention tax, is a government requirement for the payer of an item of income to withhold or deduct tax from the payment, and pay that tax to the government..

This difference should be handled according the following principles:

• AR to clear the invoices
• Create a residual with reason code AR
• AR to create a dispute "Tax issue" which is to be transferred to Collections to contact customer to request proof of payment of WHT tax to authority local service (Status: Call by collector). In case of interco, AR should send manually an email to local contact to request payment proof and change dispute status to "Parked".
• Having the payment proof received, the difference should be cleared using reason code WT
• Add payment proof of payment of WHT to local authorities to the replicated posting in PF1 (2415000000) RCS (44700700)

Warning

When accepting WHT for several different contracts, proceed as below each amount per contract:

Then open the document and save it. This action should be done for all differences we have posted in WARP as WT for all systems (PF1, WP1 and RHO)

In the file below, it is listed the customers with WHT and the contacts in case of intercompanies.

https://docs.google.com/spreadsheets/d/1qAhvvX8-MnlnE5Fee0pz3Ju3f0AxJwRlZzBAPboj-00/edit#gid=1

4.9 VAT

This chapter is related to the VAT which Austrian customers pay directly to local authorities.

This difference should be handled according the following principles:

• AR to clear the invoices
• Create a residual with reason code AR
• AR to create a dispute "Tax issue" which is to be transferred to Collections to contact customer to request proof of payment of VAT to authority local service (Status: Call by collector). Having the payment proof received, the difference should be cleared using reason code VA
• Add payment proof of payment of VAT to local authorities to the replicated posting in PF1 (2451040043).

4.10 Payment in advance discrepancies

As soon as the invoice is released and available on customer's account, we should clear it with the E5 document. This chapter explains how to perform this clearing. The discrepancy should be analysed and in case of doubt, contact the Credit Manager to ask details.

Remark: A daily job is automatically executed to clear the payments in advance with the correspondent invoices (s) when the balance is zero (through assignment field). When the balance is not zero, a manual clearing should be done by OTC AR.

This section explains what to do in cases where the difference includes more than one type of discrepancy. It can be for example a mix between banking fees and discount.