FI-AR Configuration

First of all, these are the topics which we are going to see. 

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Then let us go through the business process. The general business process in a manufacturing company, it doesn’t mean it’s the same process everywhere, but 90% of the cases. Say, for example, we are going with the Doc Reddy Labs.

When we are going with the Doc Reddy Labs, say, suppose they have their head office at one place, and they have their plant at another place. And they have the regional marketing offices, I’m calling it RMO. RMO, say Hyderabad, Vijayawada, Bangalore, Chennai, something like that. Regional marketing offices are responsible for making the sales. It’ll be headed by one regional manager and supported by the sales officers. And the stocks are going to be kept in different warehouses. And each warehouse is going to be headed by or led by one sales officer.  And say, for example, for Hyderabad region, okay, what are the customers? So, sales officer will approach, collect the, what you call, the sales orders. And here, sales orders will be given in the warehouse to the warehouse manager. Then the warehouse manager is going to dispatch the goods to the customers as per the details given by the sales officer. And once we are here in the warehouse, as soon as whether it’s SAP or non-SAP, I’m speaking about the general sales process. In case SAP is there already, then what are we going to do? As soon as warehouse dispatch is made, as per the delivery. As soon as delivery is made, then they’ll raise a billing document. Here, as soon as billing document is raised in the warehouse, accounting entry will be flowing into the financial module. So, all this process is the sale from sales side. Like that each and every regional office will have, say, different warehouses. Each warehouse will again be connected to a sales officer. Sales officer will be making sales from these respective warehouses. And whatever the orders that he’s going to get from different locations, different customers, he’ll give the sales order to the warehouse manager. From here, it is going to be dispatched. As soon as goods are dispatched, billing documents will get generated. As soon as billing document get generated, then the data will be flowing into financial accounting. Like, customer account data to sales.

Like this so this is a small scenario. And when coming to the, from SAP perspective, say, whatever the sales that we are going to make, say, the sales can be divided into sales to domestic customers, sales to foreign customers, some miscellaneous sales. Miscellaneous sales here mean, whatever the sale products we have to the domestic customer because we want to account separately for domestic and international and miscellaneous customers. Here, miscellaneous customer means nothing but any sales other than the product sales. See here, you have scrap sales and any plastic material, gunny bag sales or plastic bag sales. So, what are the scrap that you have, even the furniture, the scrap furniture sale, whatever it may be, we’ll also be selling it. But that sales is not real sale, it’s only a miscellaneous sale. That’s why we create a separate group because if any outstanding amount is there, that should be only for the product you can have outstanding, but not from a miscellaneous sale. So that’s why we are classifying customers into different types of customers, so these things can be classified. Let us go through the accounting process.

Now coming to the accounting process. So, in case of sales, what is the accounting entry when we are going to make sales? When we are going to make sales, the customer account is debited to the sales account. Generally, if you make a cash sale, then the bank account returns to customer. And here, what we are going to do is, we are going to create a GL account. Whenever I say customer account is debited, say, for example, here take customer account. I’m going to create a customer account. 

Say, customer account that are 2 sales, say, 1 lakh 22,000, 1 lakh 33, 1 lakh 44 like this. Right? The total is going to be 3 lakh 99,000. Similarly, say here customer number 2, 50,000. See, 60,000. 70,000. A total of 180000. Now this customer, 399 and 180. Together is 579. Total 579 lakhs is the outstanding amount. Say, now I have to show in the balance sheet. If I have 100 customers, in the balance sheet, outstanding amount from the customers should be shown as asset, sundry debtors will be shown as assets, and any amount that is going to be received from the customer, is the current asset. And how I’m going to show that current assets under the head of sundry debtors. But we cannot unless you maintain a sundry debtor account, you cannot show because here we are maintaining a customer base. If I have 100 customers, customer 1, 2, 3, 4, up to 100, I’ll maintain. But each and every customer is holding some outstanding amount. So this outstanding amount, are you going to show, like, individual customers wise in the balance sheet? No. All totals all customers total put together and that will be reflected in the balance sheet, that is sundry debtors mix with different data. So that sundry debtors has to be shown in the balance sheet, the total amount. 

So, whenever you are going to make any sale, in SAP, what we are going to do, a customer account is debited. Whenever we receive payment from a customer, it is going to be credited. But at the same time, whenever we post any accounting entry, the system will post simultaneously into sundry debtors account. Sundry debtors account is going to reflect the total balances of all sundry debtors. So, whatever the entry that you post, system will post even here. So, in order to show a total figure, we are maintaining a sundry debtors account. And here, whenever we are going to post an accounting entry, customer account data to sales, system will post directly to sundry debtors also. Generally, in financial accounting, it is double entry bookkeeping, 1 debit, 1 credit between 2 general ledger accounts. But customer account is a sub ledger, not a general ledger. General ledger account means all ledgers, all account that are maintained in the general ledger and sub ledger is nothing but it will have all customer accounts, the customer sub ledger, vendor sub ledger, asset sub ledger, like that. So here in case of customer sub ledger, you’ll find all customer accounts. The totals of all these customers’ accounts will be reflected in the sundry details. This is a general ledger account. The total of sundry data is reflected in your balance sheet. So, this is the accounting concept. And, in case of SAP, we are going to establish a link between customer accounts and Sundry Debtors. Automatically, whenever you post any entry to a customer, it’ll be posted to Sundry Debtors. And you cannot post entry directly to a general ledger because in SAP, we call it a recon account, means reconciliation account. The reason for calling it as a reconciliation account is, at any given point of time, the total of balances of customers is going to be reconciled with the S. DRS Account total. And this will be reflected in the balance sheet and this is called a reconciliation account.

Anyhow, before we start, let us create the basic settings. So, we are going to create account groups like this: domestic customer group, foreign customer group, business customer group. In the domestic customer group, I’m going to have so many customers, not 1 or 2. So, what we need to do? We need to give some number range. Again, just like our document number range in our GL accounts, right here also, we are going to give number range to the customers. Say, 500101, 500200, 500201, 500300. So we are going to assign some number range to this so that the system will create customers because I’m going to create a number of customers. If I have 100 customers, right, 1, 2, 3, 4 I need to create. Where is the system is going to take numbers? We are going to give a number tag and from there the system is going to give. Anyhow, all these things we’ll see in the configuration settings. And here, basic settings in IMD, one by one it is given. 

So, go to SPR0. Financial accounting new, Accounts receivable and accounts payable, Customer accounts, Master data, Preparations for creating customer, preparations for creating customer master data, Define account groups with screen layout tool (customers). 

So here we are going to create account groups. So, I’m going to create domestic customer group, foreign customer group, and a miscellaneous customer group, different account groups. T-code is OBD2. 

Here standard customer groups are there. Sold-to-party, goods recipient, payer, bill-to-party, like that. Let me create our own group.

In real scenario, sales and distribution consultant will create these things. Main sales. Business sales etc. we have, we are going to create. But anyhow, since we do not have sales and distribution consultant, some work we need to do it, there is no other way. So, our company code Doctor Reddy Labs. So DRDC means Doctor Reddy Labs Domestic Customers.  And here, I’m creating a group. But in this, when we are going to create a customer group and we are going to create customer master data. So, there are 2 types of data. One is master data, second one is transaction data. So here, we are going to create customer master data. But when we are going to create customer master data, what are the fields that you want? See in case of general ledger, in case of GL, in OBC4, we have controlled the fields. The field like business area field or text field, all those things we have controlled from OBC4. Similarly, even here from this screen, you can control the fields of the customer master data. So here it will have general data, company code data, other things. So, we can control the fields and we can make it a required or suppressed, something like that. So double click on general data. 

So first, general data fields. So, address of the customer, communication details, control, marketing, payment transactions. There’ll be so many groups of data. Double click on address. 

Let us make the name that is first name or last name. You can make it a required entry because without the name of the customer, you cannot create a customer master account. I’m making it a required entry. Go back to General data. Then double click on company code data, then account management group, double click on this. 

Here, makes reconciliation account required entry. So, I told you that reconciliation account is required. While creating my customer master, I have to make this reconciliation account field required entry because what’s going to happen you know here, in every customer account I’m going to link up to which sundry debtors account it should be posted to. 

Say for example here I say Recon account, Sundry debtors account. Number say 200301. See customer account, this is. 

Here, what does it mean? I’m creating a customer account and this will be linked to 20301 Sundry debtors account. Here, the Sunday debtors account is this, say, 200301. 

We are going to create this account and we are going to link up customer account to this compulsorily. So here, that’s why I’m going to do, I’m making reconciliation account a required entry. 

So, while creating a customer master record, I want reconciliation account to be mentioned because this is reconciliation account. So, I have to tell to the system in every customer master, 20301 is going to be a required entry here. So what is going to happen here is I’m going to link up for every customer account, 200301. So, what are the entries that I post here, that will be posted to 200301, that is reflected. And that total amount, whatever is available in this sundry debtors account will be reflected in the balance sheet. So, for that purpose here, I’m going to make reconciliation required entry. But even if you don’t understand at this juncture, don’t worry. When I create customer master data, I’ll tell you. But what I want to tell you here is this is going to control the fields of that reconciliation account field. I’ll show you when I create it. Right. 

Now domestic customer group we have created. Similarly, I need to create foreign customer group, DRFC. Say DRFC. Foreign customer group DRLB or DRL group itself for group level I’m creating. 

Similarly, general data, address, make required entry.

This is only as a sample I’m showing you, what are the fields that you want, you can make required entry. Come back. The general company code data. Account management, required entry. 

There are so many fields are there. Don’t make all the fields required entry because it is difficult for us at the time of creation. Foreign customer group. Come back. 2 customers we have created. 

I can create even VCS customer group also. Like that, we can create any number of groups. Okay. I’ve created only 2 groups now. Once we complete the creation of groups, now I want creation of number range for the customer accounts. Because whenever I’m going to create customer accounts in each group, I need to have some number range. 

Create number ranges for the customer accounts. Click on intervals.

And here, you’ll find so many number ranges here because this is client level. And when you are creating client level, all the number ranges, whatever that are there, that will be visible. But most of the people will eat away the number ranges. See, 5 cross to 59999 he has taken. Right. This is awful. That means no one can use again this number. See, even the person whoever has created this, right, cannot even use, a half a dozen when while practicing. That’s why don’t go more than 100 numbers. And here, there is a concept like internal number range and actual number range. Internal number range means if I give some number range here say, for example, I’m going to create my own number range here. See 7, 8, 910 is not available up to afterwards. So, I can create 9 and 10. Number range 9. 

From number range. What are the number range that is available for me that’ll be visible? If you click on this. 

Right. See this number range is available from 6021 onwards. Now what I will do is 610021. 

That is 610021 to 610100. It’s around 80 numbers I’m using. Similarly, 10 from number range. 6 lakhs 101. Here up to 100 I have given. 101 to 200, 9 and 10. 

Right? 21 to 100. Again, 101 to 200. There are 100 numbers I have given. Here, 80 numbers I have given. And why I’m giving means when I’m going to create my customers, I’m going to assign this number. And here, while creating the number ranges, you have 2 options. One is external number range, another one is internal number range. External number range means if you check this box (Ext column), so that will be externally, we have to manually give the number range whenever you are going to create a customer Master record. And or otherwise, if you leave it like that, it’ll be internal. So, one after the one, it will take. What are the numbering that you have given? You have seen in case of document number range. What are the document number range? That system, it takes one after the other. Even here also, system takes one after the other. If you want some customer numbers, some different type of numbers, maybe say half dozen digits. And in this, two numbers are going to be used for area code. Two numbers are for the product code. Something like that, they’ll define. In such case, I have to use maybe sometimes alphanumeric also, I maybe I may be using it. So, in such case, I have to use standard A to Z. Whenever you want to use alphanumeric and, here there is a checkbox. When you find the checkbox here, there is the external numbering. External numbering means nothing but externally whenever you are going to create a customer master record, externally you have to give a number. Like, system will not generate from inside. But if you don’t check this box, that will be internal number range. Whenever you are going to create just like document number range, that system generates. So, depending upon the client requirement, we use whether it is an external number range or internal number range. And one more thing I would like to tell you here, there is other terminology  onesI discussed already, Client level and the company code level. So, client level means in this client, 800 client, for every company code, same thing will be available. That is client level means in this client, see this number range customer number range is going to be available for everybody. Means whatever the number of company code company code that are there in this client, anyone can use any number. Even I have created, say, 9 and 10, I have created. But instead of that, I can use the standard number range. And whatever is available here, I can use it. Alright. Let me save this. First of all, we have created. For 2 groups, I have created 2 number ranges. Now what are the number ranges that I have created? Assign number ranges to customer account groups.

Now what are the customer group that I have created? I’m going to use this. See I’ve created domestic customer group DRLB. So here I’m taking, say, 09, 010, I can assign here or instead just drill down. 

See number ranges are available here. See 9 and 10, 

So what are the number ranges I have defined? So that will be when I’m going to create customer accounts here, system takes from here. What are the numbers that are available? From there, it will take right. 1, 2, 3, 4, system will take. And for international group, it will take from range 10. We’ll see that when you create. I’ll show you how system is going to work. So, we have created the customer account group, and we have created the number ranges. We have assigned the number ranges to the customer account groups. Next, I’m going to use my documents. Document and document number ranges. See here, I’m going to use different types of documents. See here, we are going to use documents like DG customer credit memo, DR customer invoice, DZ customer payment. Just like SA, we have used it for the GL document. And, so like that, now we are going to use DG, DR, DZ. For each document, again, I need to give number range. Number range is 6 lakh 1. 

And here, number range and number range interval. In fact, this is called number range. Right? This one is called number range, and, this is number range interval. So, number range, 1, 2, 3, 4. But here, this is standard 16, 18, 14, standard given by the SAP system. We cannot change that. Let us go there and we’ll see. And, these are the 3 types of documents that we are going to use. These are all standard documents. We have already gone to that documentation. Anyhow, let us go once again.Financial accounting and global settings. While we are going through the session, you may find some loose ends and some doubts, etc, will be there. But once we post the accounting entries and everything, again, we have to link it up, why we have done what we have done. And, that you’ll understand. Once you do it on your own, you practice it, then your so many doubts will get clarified. So that’s why here in SAP, unless you practice, you cannot get the subject. Those things which you cannot understand while I’m explaining to you, those things will get clarified when you actually practice in front of the system.

Right. Document types. OBA 7 is the T-code. Here, we have already seen. Let’s go here. OBA 7. Here we are going to use say DR, DG and DZ.

These three documents we are going to use. First of all, say DG, customer create memo. Whenever I’m going to create a customer create memo, system takes number range from here, DG. See, here you don’t find any company code. That means this is client level. Client level means now we are using, say, client 800. When you are using 800 client and we have so many company codes in this client. So, any company code can use any document. I have given you an example also. See, when you are using one system, used by 3 people in 3 shifts. But for everybody, separate user ID, password is there. Everybody will be logging in into the system. But the MS Office that is available for everybody, but MS Office is created at client level. So that’s why any user can use it. But if a user, if I’m creating a document and that will be stored in my login only, whenever I use login with my user ID password, then only I can see. And when you enter into the system, what are the document that you have created, only those things can be seen. But you and me and anybody can see the general programs that are available. Maybe the system programs, MS Office, other system programs that are available because they’re at client level. Means, generally, that has been defined. This one, that is called the company code level. So here, now in these documents are available across anybody. Anybody can use this document. That’s why this is called client level. But whereas documented number ranges which I’m going to create are company code level because specific to the company code I’m going to create. See this now. I’m going to use DG, customer create memo. Just double click on DG.

System will give you 16. Don’t disturb this, because this is a standard number range given by system. Click on number range. And one more thing here, account types allowed. See, don’t disturb these things. Customer accounts and GL account. Because when I’m going to post an accounting entry, customer account data to sales. Sales is a GL account. Customer is a customer account. So that’s why only customer and GLR checked here. So, this document can be used for only customer posting. So, number range 16. Click on number range information. Here, I’m going to give company code. So, or DRLB. Click on intervals.

See here at the time of giving number range, system is showing me company code. So, for this company code only, this number ranges will work. For other company codes, what are the number range that you define for that company code that will be working. This is not common to all, this is only specific to company code. So that’s why I call this as company code level. So, document types are client level and document number ranges are company code level. So, this concept you’ll get throughout SAP whether it is a client level or company code level. Click on interval. Since system is asking me 16, I’ll use 16. Even here in the notes, And year take 2013. So, 16 lakhs 1 to 17 lakhs I’m giving. So 1 lakh number ranges. 

Remember that this is document number range. Earlier, we have given is that is only customer number range. Whenever you are going to create customers, that customer is the third step. This is the fourth step we are giving number range to the documents. Save. Similarly, go back to document types overview. DR means customer invoice.

System is showing 18. So, create company code DRLB. So here, 18. Here, 2013. 18 lakhs 1. 2. 19 lakhs. Save it. Similarly, third one is DZ. 14. System has 14 only. That’s why I’m giving here 14. Year 2013. From number range, 14 lakhs. See here, there is 14 lakhs 1.mThere’s no hard and fast rule. You have to give only like this. Just I’m giving like this. That’s nothing more than that. 15 lakhs. Some logic number range I’m giving. So, I’m giving like this. So now 14, 16, 18.

Right. 14, 16, 18 and different number ranges we have given here for 3 document types. Now whenever I’m going to create or raise an invoice, it will take numbering from here. When I’m raising, these are customer payments I receive on post accounting entries, it’ll take numbering from here. And if I’m going to raise any trade notes, system will take from here. Step number 4 is complete. 

Now step number 5. Here, we need to define the tolerance limits for the customer. Define tolerance group for customers. So, what is that? Let us see. Incoming payment. Manual incoming payments. Define define tolerances for customers.

Here, define tolerance group for employees. OBA4, we know this. We have already defined. Defined tolerance groups is OBA3. Here, this allows the, these are the tolerance group for the employees we have used. But whereas here define tolerances for customers. Let us see how and what we are going to define here. 

Go to new entries. Company code DRLB. I’m creating some tolerance group like DR01. Tolerance group. Customers. DRLB. What is this tolerance? What I’m going to tolerate here means I can tolerate up to 3 days of grace days.

That means if a customer I sold some goods to the customer and payment term is say 15 days. Say, generally, the payment term is maybe immediate sale, 15 days sale, 30 days, 60 days. So, depending upon the needs of the company, needs of the product, their market conditions, they will define their own payment terms. So, our job is to only define the payment terms as per the requirement of the client. Even that will be done by the SD consultant in the real scenario. Over and above that, what I’m doing, I’m defining some grace period. Why should I define a grace period at all? This it doesn’t, doesn’t require for everybody or everybody. I need not give any 3 grace days or anything. Depending upon the nature of the market. Say, for example, say in case of a fertilizer company. A fertilizer company or a sales company, which is based on rains, especially in India. And say for example, certain areas are there which are prone to more rains where you do not have any problem. I don’t give any grace period there. But where some areas are mainly, drought prone areas wherein rainfall is very less, farmers feeling very difficult in making the payments. In such case, I give maybe 3 days or 5 days or 7 days. Their grace period is given more and above the credit terms. So, for that purpose, I can say for this group, DR01 group 3 days. DR03 7 days. DR04 0 grace days. Something like that I can define. That facility is there whether we use it or not. I’m just explaining to you the facility. Similarly, permitted payment differences, gain or loss. Say for example, if anybody, say 1 lakh customer has to pay. When he has to pay 1 lakh, if he says that, once for all, I’ll be paying, say, instead of 1 lakh, I pay 95,000. You see that that 1 lakh is written off. Say in such case, 5%. That is 5000 days loss. So, in such case whether you have any standard methodology for that, if standard methodology is there, are you going to accept payment differences of, say, 1% or 2% that we need to mention? Right? See, it is not that every time we have to mention here. I’m not going to mention anything here. If such kind of facility or procedure is there in the company, we can use it, otherwise not, automatically write off. Similarly, even here, any revenues or expenses. If any payment differences are there, automatically if you want to write off, if any so that payment differences that is showing in his account can be automatically written off. These things are practically we don’t use much, but maybe in the extreme cases, we use it. But, anyhow, so with this, my tolerance group, DR01 for this company code, I’ve created. Why I need to create means here after creating this DR01, I need to link up to my customer whenever I’m going to create because whatever the parameters that we define in this rule, that will be, working for the customer when I create customer master data. Save it. So, these are the 5 steps we are going to do. How this works? I’ll show you. 

 

Next is creation of GL accounts. So whenever we are going to make any sales So first of all, I need to have a sales account. So you know where I have to create GL accounts, FS00. So FS00 centrally. 

For DRLB, if I have to create my sales account, sales account, sales start with 3. So, 3 lakhs 1 to 3 lakh 100 I’m using. I’m creating 3 lakhs 1. Click on create. Sales. P&L account. Sales of pharma products. 

Control data. Line item display. Here, sorts the key. In the sales account, you can sort out the sales by, 031, you can take. Customer number wise. Date wise, anything you can use it.

Here, G001 one. So, what are the group that we have defined? Same way. Next, I want to create sundry debtors account. Because sundry debtors I’m going to post to the sundry debtors account. And, so those sundry debtors nothing but is a current asset, so that’s why we go to current asset. Sundry data’s 200301. 200301. Click on create. Alright. Sundry debtors. It’s a balance sheet account. Sundry data for domestic sales. 

Only balance is in local currency. Line item display, sort-key. Yes, sort-key can take this. And here we need to create recon account for account type. 

Customers. See this is sundry debtors account. I told you here. This is what we are creating now. Sundry debtors is a reconciliation account. Reconciliation account means there is a link between sub ledger and ledger. Whenever there’s a link between sub ledger and ledger, there is a recon account. That is nothing but what is link? Why I’m linking? Because I want to post any entry that has been posted to customer account should be posted to Sundry debtors account. So that’s why system automatically whenever I’m going to post any entry here, I want this entry to be posted even here also so that the total will be represented in single figure in the balance sheet. If I don’t establish a link, system will not post. And that too, any account entries to be posted to this account only through this. Whenever I post this, it will be posted to this automatically. Right? So how this works? I’ll show you. We are going to make create with sundry data that is customers. Whenever there is a recon account you need to use let us use G065. That is for all recon accounts. That is reconciliation accounts. G067.

Reconciliation account. Because respective fields will get activated there. Save it. And next, 200301, I’m creating 200302. Sundry debtors domestic. Here, Sunday debtors foreign or international sales.

So, I’ve created sales account. I’ve created the sundry debtors account. Next, I have to create customer master data.