Vendor/Customer Balances Netting off Process in SAP

 
It is not an uncommon practice that organizations deal with some Business Partners in both sales and purchase transactions, and therefore, those Business Partners become both Customers and Vendors respectively, in the books of those organizations. Consequently, at any point in time such entities may be having both Debits (Representing sales transactions) and credits (representing a purchase transaction) balances in the books of their Trading Partners.
 
For the sake of efficiency, your company may have a requirement to make a single payment to any such Business partner (representing the net amount of the two separate accounts), instead of two separate payment transactions. This is possible by making use of the SAP netting off concept.
 
In this week’s post we will discuss the end-to-end process of Vendor/Customer Balance netting off, by going through the necessary configuration settings and demonstrating the concept with end user sample transactions.
 
The following prerequisite settings have to be maintained for the netting off process to work:
 
1) Activating the Customer Field in the Vendor Master Data

This process will enable you to maintain Customer field during the Vendor Master Data Maintenance process. In order to maintain the customer number field during the Vendor Master Data creation, the customer field has to be activated in configuration for the affected vendor Account Group.
Follow the menu path below to activate the Customer Field in the Vendor Master Data:

IMG — Financial Accounting (New) — Accounts Receivable and Accounts Payable — Vendor Accounts — Master Data — Preparations for Creating Vendor Master Data — Define Account Groups with Screen Layout (Vendors)

 

 

Double click on the vendor account group that the affected vendor belongs to.
 

 
Double click on general data.
 

 
Double click on control group.
 

 
Set the customer Field to Optional entry and save.
 
2) Activating the “Clearing with Customer” Option
 
Activating the Clearing with Customer option will enable the clearing process to happen seamlessly if the option is flagged for your vendor, during the master data maintenance process.

Maintain the “clearing with customer” option in the Company Code Data as below.
 


 
Double click on the Company Code Data.
 

 
Double click on Payment Transactions.
 

 
Make Clearing with Customer an optional entry, and save.
 
3) Activating the Vendor Field in the Customer Master Data
 
This process will enable you to maintain Vendor field during the Customer Master Data Maintenance process. In order to enter the Vendor number during the Customer Master Data creation, the Vendor field has to be activated in configuration for the affected Customer Account Group.
 
Follow the menu path below for the activation of the Vendor field during the customer master data maintenance.

IMG — Financial Accounting (New) — Accounts Receivable and Accounts Payable — Customer Accounts — Master Data — Preparations for Creating Customer Master Data — Define Account Groups with Screen Layout (Customers)
 

 

Double click on the account group which the affected Customer belongs to.
 

 
Double click on general data
 

 
Double click on control group.
 

 
Set the Vendor Field to optional entry and save.
 
4) Activating the “Clearing with Vendor” Option.
 
Activate the “clearing with vendor” option in the Company Code Data- payment transactions, as below.
 

 
Double click on the Company Code Data.
 

 
Double click on Payment Transactions.
 

 
Make Clearing with Vendor an optional entry, and save.
 
5) Maintaining Customer Field in the Vendor Master Data
 
Now that we have activated the necessary fields in Configuration, we can proceed by maintaining these fields in the relevant vendor master data. For Vendor master data maintenance, you can use any of the following transactions (depending on whether you are maintaining the master data from the logistics module or from FI; creating a new master data or changing an existing master data) XKO1, XKO2, FK01 or FK02.
 

 
Input the Customer number (in the customer field above), during the master data maintenance of a Vendor who is also your Customer.

Save and exit.
 
6) Maintaining the “Clearing with Customer” Field in the Vendor Master Data
 
After activating the “Clearing with Customer” Field in configuration, you now have to maintain this field in the Vendor Master data (Payment Transaction Tab).

Use transaction FK01 or FK02.
 

 
Select the “clearing with customer” checkbox and save.
 
Note: It is important that the checkbox is flagged, otherwise, even with the necessary configuration settings, the automatic payment program will not be able to carry out the netting off.
 
7) Maintaining Vendor Field in the Customer Master Data
 
To maintain the Vendor field in the Customer Master Data use transactions FD01 or FD02 (depending on whether you are creating a new master data or changing an existing one).
 

 
Enter the Vendor number (in the Vendor field above) during the master data maintenance of a Customer who is also your Vendor.

Save and exit.
 
8) Maintaining the “Clearing with Vendor” Field in the Vendor Master Data
 
After activating the “Clearing with Vendor” Field in configuration, you now have to maintain this field in the Customer Master data (Company code data- Payment Transaction Tab).

Use transaction FD01 or FD02.
 

 
Select the “clearing with Vendor” checkbox and save.
Note: It is important that the payment method selected for both master data are the same.
 

9) Amending the KZ Document Type to pay Customer Invoice
 
In order for the automatic payment program to pick an open item with account type “D” (Customer) you have to check whether your payment document type is configured properly for this.

The document type for payment (KZ) should be configured to pay customer invoice in addition to Vendor invoice.
Follow the menu path below for this:

IMG — Financial Accounting (New) — Accounts Receivable and Accounts Payable — Business Transactions — Outgoing Payments — Outgoing Payments Global Settings — Make and Check Document Settings — Define Document Types
 

 
Double click on KZ document type.
 

 
Just make sure the Customer checkbox is flagged, or do sure if not flagged.
 

10) Create a Vendor Invoice
We now create a Vendor Invoice on Vendor 201033 by using transaction FB60. Display the invoice using FBL1N.
 

 

11) Create a customer invoice
We now create a Customer Invoice on Customer 1400005 by using transaction FB70. Display the invoice using FBL5N.
 

 

12) Run the payment Program

With the above settings the netting off process can work without the manual clearing of the vendor and customer open items.

Let us now run the payment program F110 to see how the netting off works.
 

 
You just need to enter only the Vendor Number, the system will automatically read from the settings the customer whose open item should be netted off against the open item of this vendor.
 

 
You can see that both the vendor and customer are selected by the system.
Double click on the item to drill down.
 

 
We can see both the Customer and the Vendor invoices selected by the payment program.
 

 
Payment program run successfully completed.

Click on payment to see the details of the payment.
 

 
We can see from the above that the payment program selected the two invoices (Customer and Vendor Invoices) netted them off, and paid the balance.
 
Additionally, we can see by displaying the vendor and customer line item reports (FBL1N and FBL5N respectively) that both open items are cleared with a single payment document.
 

 

 
 
 
 
Please share your thoughts on this topic. We would love to hear your comments and suggestions.
 
 
 
 
 
 
 
 
 
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7 thoughts on “Vendor/Customer Balances Netting off Process in SAP

  1. Thanks for sharing, really useful and interesting.
    Just a note: only one between points 5 (Maintain Customer field in Vendor master) and 7 (Maintain Vendor field in Customer master) is actually needed. In fact, if ‘Vendor’ field is updated in a certain Customer Master, then displaying the corresponding Vendor master you’ll already see the ‘Customer’ field populated with the respective customer nr.

    Regards,
    Andrea

  2. Currently i am trying to resolve a production issue, where the Vendor Customer Netting has been configured. I have several invoices for that Vendor, and a Credit note. F110 run process does not include the Credit against the invoices, it gets isolated with Error 001 “No payment possible because items with a debit balance still exist, see job log​” . Regardless if the document (invoice) has the partner bank selected or not, if the vendor has a Debit balance, it should offset against the Credit note, but instead it gets blocked with Error 001…………The only way, Credit note gets included in the payment, is to manually Reallocate it. Hope you can shed some light on what is missing for the process to run automatically.

    1. I am not sure whether I get the question well. If the configuration settings for vendor/customer netting off are all in place, the netting off process should ordinarily do the netting off without manual intervention. If your vendor is also a customer as implied in your email, then it may be that the sum of the credit note (which is a debit on the vendor account) and the customer invoice is more that the vendor invoice (which is a credit on the vendor account). In such a situation, the system sees no reason to execute the payment program. However, if the net balance is a credit, the system should do the netting off automatically and pay the difference. If it does not then check the following:
       Re-check your configurations again.
       Check to make sure the “individual payment” checkbox is not flagged in the vendor master data (payment transaction tab in the company code data).
       Check to make sure that the invoice and the credit memo have the same payment terms (example the same payment methods for the line items).
       Check customizing (FBZP) for the payment method you entered in the line items, and ensure that the indicator “Single payment for marked item” is not be set for it.
       Check to make sure that the invoices and credit memos are not in different payment groups, you cannot clear them together if they are.
       Check to ensure that the Invoice and credit memo are both due at the date of clearing.
      I am not sure whether this is helpful.

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