Item interest calculation in SAP

This documents explains the customization and how system calculate interest when we select the check box Open and all cleared items and open items and items cleared with a payment.

Intoduction:

Every company has their own pre-defined policies/terms and conditions towards the collection of the debts from the customers. These policies/terms and conditions depend upon the legal environment that exist in the countries where the company carries on its operations. One of the prominent policy/terms and condition would be to have an interest clause in the sales invoice to levy interest on the receivables.

The purpose of this document is to communicate to the readers the process of charging such interest on the receivables to the customers and posting an accounting document on the customer accounts.

The process followed for calculating the interest calculation on customer accounts would be to execute the interest calculation run for a defined period for defined accounts. The system would calculate the interest based on the customization maintained related to interest indicators. The calculation run can be executed further to post an interest document in the customer accounts. For correspondence with the customers, the same run can generate an output document (like invoice) which contain the amount of interest charged and the receivables towards which such interest is charged.

Interest can be calculated on customer and vendor accounts in two ways:

Account balance interest calculation: This calculation type calculates interest on the balance of the customer on the interest calculation day. If the customer has a debit balance (receivable) then the debit interest rate will be taken into consideration and if the customer has a credit balance then the credit interest rate will be considered for calculation.Account balance

Item interest calculation: This calculation type calculates interest on the line items for a customer. A customer may have open line item as well as cleared line items. Interest can be calculated for both open and cleared line items or only on the open line item.

Customization Transaction Code and Path given below

1. Interest calculation customization done at client level
2. Assigning interest calculation to customer master data at company code level

T.CODE OB46 Define Interest Calculation Types

Define time dependent interest terms T.Code OB81

The below Setting done in transaction code OB82

Selected interest term with Open and all cleared items.

Once all the customization comleted assig at customer master data .

Same interest indicator we use at dunning customization :

At dunning this indicator only becomes effective if there is no interest calculation indicator entered in the master record. Otherwise the indicator in the master record has priority. If there is no indicator at either level (dunning procedure or master record), i.e. 'BLANK' is entered, then no dunning interest is calculated by the system

Invoice Entry posted

Interest run executed on 31.07.2013 in test mode

UN check Test run and post the document

Check the customer balance and customer master data

Last key date updated

Case Two:Credit memo posted

Now customer having negative balance

Interest executed in test run  mode on 31.08.2013

Even though the customer having negative balance , interest will be calculated on open line items as per customization.

Case 3:

Changed the customization from Open and all cleared items to open items and items cleared with a payment.

With this option you will come to know what happen when partial payment received and how system calculate interest.

Now posted incoming payment with 215.59 and clearing the invoice document EUR 115 and interest document EUR .59

Current balance:  credit memo value 200 EUR+ 100 Excess payment received = 300 EUR

Interest executed in test mode on 31.08.2013

In the above case system correctly calculating interest on 115 EUR from 01.08.2013 to 15.08.213.

System calculates the interest even the customer having total of negative balance.

Case 4:

1. Posted invoice with EUR 400 on 29.08.2013
2. Clearing posted with EUR 400 with total credit amount EUR 300 29.08.2013

Customer balance

Now  Clearing of invoice 400 with excess amount received of 300

After clearing the Current balance of that customer is 100 EUR

Executed interest and document posted 31.08.2013

Case 5:

Changing customization once again to Open item and all cleared items. and removing the check box option only calculate interest on debit item.

See now how system display interest.

Credit memo Invoice posted 01.09.2013

Interest executed on 30.09.2013

in the above case you can view interest calculated on credit line item 3% and debit line items with 8 % as per customization.

Hope with you learn how system calculate interest on credit and debit line items of the customer .