Payment terms.

[Former Member]

Hi SAP Prof,

1. WHAT IS payment terms?

2.what is Incoterms?

3. After Order in Sales process, we Deliver the goods to the customer. But PGI means goods will move out of the company.

Here iam confused with Delivery and PGI. PLZ DO EXPLAIN.

[Former Member]

Hello,

Inco Terms: It is the abbreviation of International Commercial Terms. These are the most commonly used terms in international trade. An international commercial term (Incoterm) defines the terms of sale and the passing of risks for import and export of merchandise

Payment Terms: Arrangements made with a business partner governing financial settlement with respect to goods supplied and services performed.

When you create the delivery the goods will not move out of the company. Once you do the post goods issue the ownership of goods will be handed over to the carrier. The effects og Post goods issue is :

--Inventory account updated

--Cost of goods sold acct updated

--Document flow updated

--Stock will be reduced

--billing due list updated

Prase

[Former Member]

Hi sabina,

incoterms - are international commercial terms agreed upon by the comp and customer to receive goods under different terms and conditions. Like CIF- may say cost insurance and freight are borne by the comp.

Payment Terms- identify when a customer is going to pay and may be you want to give him some discount like 15 days 3 % disc. This is deducted at the payment collection in FI with F-28 transaction. Moreover the payment terms in the cusotmer master sales area have more precedence over payment terms in comp code.

PGI- once the goods are actually transported we record that in our sap sytem with Posting the goods issue. Now based on the valuation class the standard price of the material moves into a GL based on mm account determination setttins. This is value updation. At the plant level the inventory comes down because of a quantity updation. You can see for a plant +material type at OMS2 quantity and value updation being ticked. The movement is assigned to a GL where the value gets posted.

Regards

sadhu kishore

[former_member204513]

Dear Sabina.

Payment terms

The conditions of payment agreed to between business partners with respect to goods supplied or services provided.

Example:-

0001 Payable immediately Due net

0002 Within 14 days 2 % cash discount

Within 30 days Due net

0003 Within 14 days 3 % cash discount

Within 20 days 2 % cash discount

Within 30 days Due net

0004 Payable immediately Due net

Baseline date on End of the month

0005 Payable immediately Due net

Baseline date on 10 of next month

0006 Before End of the month 4 % cash discount

Before 15 of the next month ;; 2 % cash discount

Before 15 in 2 months Due net

0007 For invoicing up to 15 of month

Before 15 of the next month ;; 2 % cash discount

Before End of the next month ;; Due net

For invoicing up to End of month

Before End of the next month ;; 2 % cash discount

Before 15 in 2 months Due net

0008 For invoicing up to 15 of month

Within 14 days 2 % cash discount

Within 30 days 1.5 % cash discount

Incoterm

A codification of international rules for the interpretation of the commonly used terms in international trade.

An international commercial term (Incoterm) defines the terms of sale and the passing of risks for import and export of merchandise.

Incoterms include the following:

EXW - Ex Works

FCA - Free Carriage and Freight

FAS - Free Alongside Ship

FOB - Free On Board ship

CFR - Cost and Freight

CIF - Cost, Insurance, and Freight

CPT - Carriage Paid To

CIP - Carriage and Insurance Paid To

DAF - Delivered At Frontier

DES - Delivered Ex Ship

DEQ - Delivered Ex Quay

DDU - Delivered Duty Unpaid

DDP - Delivered Duty Paid

PGI (Post goods issue)

When you do the PGI for the delivery document the owner ship of the goods will be transfered from company to the customer and to postings will be happen

1.Coast goods sold enter in the accounts

2.Stock redution (material document will be created)

I hope it will help you,

Regards,

Murali.

[Former Member]

Hi Sabina

Incoterm has been already explained to you by others.

"Incoterm ", stands for "International chamber of commerce term of Liability of Freight for goods in transit". There are various Incoterm,like FOB, EXW etc , you can see all these in the dropdown in the incoterm field in, customer master>sales area >billing tab.They are used as agreed between the Buyer & Seller.

*Payment Term*

Every organisation uses some Payment term for its business, may be decided some time mutually with Trading association also.

Like,If you have purchased from me,you will be governed by that Payment term,and if defaulted then it may attract some penalty in the form of interest.

Suppose in my organisation, I give 5% cash discount if you will pay me within 7 days, 1% discount if you will pay me within 15 days, 30 days is due and credit period is over.If you will not pay me within 30 days, then I will be charging 24% interest from the 31st day onwards.

This is an example of Payment Term, in which we mention our cash discount rate.All the Payment Terms are stored in a Table "T052" and there is a condition type SKTO ,which retreives this cash discount rate from this Table while you process a Sales order.

Delivery & PGI

Actually, in Sales process, after Sales order processing, we go for next phase called "Shipping".

Shipping is a process consisting of several sub-process.

First, we create a Delivery document with reference to the Sales order,which is a mandatory sub activities in Shipping process, beacuse on the basis of this delivery documentwe process futher.

Like, we go Picking (if required),which is an optional sub-activity,

then if required Packing(if required) which an optional sub-activity,

then Transportation planning (if required), which also an optional sub-activity of Shipping process.

Lastly, we go for PGI, which is a mandatory sub-activity in Shipping process as it has to be reflected in relevant/integrated department like MM,FI,CO etc.

Now as far as the difference, Delivery creation means you are creating a Delivery document. That means you have started your Shipping process.

PGI done means you have completed your Shipping process and more importantly , on this date goods actually (physically) leaves for the customer and reaches the customer on the confirm delivery date.

Therefore the time taken from Goods issue date to the confirm delivery date is called "Transit time".

[jpfriends079]

- Delivery is for creation of doc related to delivery.

PGI is issue of goods, i.e., on this goods should leave the company's premises.

- Incoterms: These are terms related to delivery of goods between the customer and seller . Very import for international trade. ICC (as decided by Internation Chamber of Commerce) recommends that "Incoterms 2000" be referred to specifically whenever the terms are used, together with a location. For example, the term "Delivered at Frontier" (DAF) should always be accompanied by a reference to an exact place and the frontier to which delivery is to be made.

For example, EXW EX WORKS (named place)*

FCA FREE CARRIER (named place)

FAS FREE ALONGSIDE SHIP (named port of shipment)*

FOB FREE ON BOARD (named port of shipment)

CFR COST AND FREIGHT (named port of destination)

CIF COST, INSURANCE AND FREIGHT (named port of destination)*

CPT CARRIAGE PAID TO (named place of destination)

CIP CARRIAGE AND INSURANCE PAID TO (named place of destination)*

DAF DELIVERED AT FRONTIER (named place)*

DES DELIVERED EX SHIP (named port of destination)

DEQ DELIVERED EX QUAY (named port of destination)*

DDU DELIVERED DUTY UNPAID (named place of destination)*

DDP DELIVERED DUTY PAID (named place of destination)*

- Terms of Payment or Payment Terms: Method Usual Time of Payment Goods Available To Buyer Risk to Seller Risk to Buyer Comments; CASH IN ADVANCE: Before shipment: After payment:

Take care. JP.

[Former Member]

Hello Sabina,

1) Payment terms are the terms of payment the company offers the customer. Based upon the payment term a discount may be given for prompt payment.

2) INCO stands for INternation COmmercial Terms: The INCOTERMS (International Commercial Terms) is a universally recognized set of definitions of international trade terms, such as FOB, CFR and CIF, developed by the International Chamber of Commerce (ICC) in Paris, France. It defines the trade contract responsibilities and liabilities between buyer and seller. For more, you can google out.

3) Delivery is just a document creation and initiates/triggers the actual delivery. Once goods are delivered, it is confirmed via the PGI process.

Assign suitable points, if this info is useful to you.

Rgds,

Raghu.