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Bill Discounting - Accounts Payable ( Implement Payment Orders or BOE)

Hi Experts,

We have the below scenario I'm trying to figure out which is the best approach .,

Scenario

  1. Company Code 1000, purchases from vendor ABC goods worth $10000 on Jan 1st, 2016 and due date is Jan 31st.
  2. Company Code 1000 creates vendor Invoice on Jan 1st , 2016 for $10000.
  3. Vendor wants immediate payment , hence C.Code 1000 makes an agreement with say CITI Bank to make always an immediate payment for this vendor
  4. Company Code 1000 sends vendor invoice extract to CITI Bank and CITI Bank makes payment to this Vendor on Jan 2nd, 2016
  5. Vendor ABC should still show open items , since C.Code 1000 has not made actual payment.
  6. Based on due date Company code ABC sends payment extract to CITI Bank, wherein CITI Bank debits Comp Code ABC account for $10000
  7. Vendor ABC account is cleared.

May I know which is appropriate solution for the above scenario

I was thinking of either Payment Orders or Bills of Exhange (BOE)

A.Payment Orders

A1.F110 can be generated and DME file showing the list of open invoices can be transmitted to CITi Bank

A2.Based on DME Invoice extract file CITI Bank makes payment to Vendor.

A3.On Due date how will company send payment extract file to CITI Bank ? is there a standard solution to support this step

A4. Clear the Vendor Open items using EBS ( Aligorthm 029)

My concern is if we implement PAYMENT ORDERS, how will we address step A3.

B. Bills of Exchange ( BOE)

Let me know your thoughts about BOE solution.

Your valuable inputs are highly appreciated and awarded accordingly.

Regards

Sanjai

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1 Answer

  • avatar image
    Former Member
    Apr 14, 2016 at 11:10 AM

    Hi Sanjai,

    I have used BOE route for it.

    It was like:

    1 Create a separate payment method and special GL indicator for it and do your all required configuration.

    2. On payment run (F110), following accounting entry will get generated;

    Vendor Account Dr (Normal Recon Acc)

    To Vendor Account (Spl GL Recon Acc e.g. BOE payable)

    It will clear normal open item and creates a special GL line item in vendor account. We can see outstanding BOE via report S_ALR_87012322

    3. On receipt of report from bank (generally daily) for submission of bills for discounting by vendors, following accounting entry should be passed:

    Vendor Account Dr (Spl GL Recon Acc e.g. BOE payable)

    To outgoing bank

    Payment Process ends over here.

    4. During bank reco

    Outgoing bank Dr

    To Main bank account

    Optional

    If bank share the discount and credit us (arrangement fee etc).

    Main bank account Dr

    To Discount Received

    Thanks and regards

    Sonu Tomar

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    • Hi Sonu,

      Thanks for your inputs,

      I have few queries in BOE route.

      After step2 , vendor account will still show open items ( with SPL GL ).

      My concern after this step 2 and before step 3 is - There is a possibility of users wrongly posting a payment entry or again executing F110 second time , so that vendor open item which is showing as SPL GL would post a payment entry in second run right? Correct if I am not getting right.

      In Step 3 - which transaction is used to post it ?

      Regards,

      Sanjai