What is Bill of Exchange/Payment Request button in TX Code F110 for?

Dear Sagar,

Bill of exchange is a different way to do the payments.

You can have the bank transfer, the check, bill of exchange and so on....

What is a Bill of exchange?

A bill of exchange is an instrument enabling you to collect credits. However, the issue of a bill of exchange does not influence the credit characteristics, which remain unchanged from a legal point of view.

Generally, a bill of exchange is issued when an invoice is drawn, it is signed as a receipt, and it is delivered to a bank which has to collect the credit on behalf of the creditor when it falls due.

What are the most common uses of a Bill of exchange?

1. A bill of exchange or bill of exchange is a means of payment with a due date

2. It can be used as a short-term credit for the debtor (this use is rather common, as it is quite secure for the creditor)

3. It is a flexible financial instrument (the creditor can discount a bill of exchange before it falls due according to specific financial requirements)

The procedure to be used for bill of exchanges is quite simple: the creditor submits a list (it is usually saved on a computer file or it is sent by e-mail from the creditoru2019s firm) containing a series of credits, which have not expired yet, to his/her bank (contracting bank). The list includes the name of the debtor, the value, the due date as well as the number (Italian Bankersu2019 Association code and Banku2019s routing number) of the paying bank, i. e. the debtoru2019s reference bank where payment is carried out.

At this point, the contracting bank transfers the information to the paying bank by e-mail. The paying bank, in turn, sends a payment advice to the debtor.

If the customer does not pay within 2 working days after the due date, the paying bank has to notify the contracting bank of the failed payment (this notification can no longer be sent after 10 working days from the payment duedate).

Bill of exchanges are unquestionably a quick means of payment as they allow the creditor to overcome the difficulties related to the debtoru2019s distance, and they enable the creditor to be informed about failed payments in a very short time, so that he/she can start recovery procedures as soon as possible.

Bill of exchanges are usually managed by the local subledger accounting, and they are submitted to the Treasury bank.

Subject to final payment or After collection?

The bank can pay credits in two ways:

1. With the u2019After collectionu2019 clause: in this case the bank credits the account with the amount after the debtor has carried out payment.

2. With the u2019Subject to final paymentu2019 clause: in this way the bank credits the account with the amount immediately, but the amount is paid by the debtor at a later time, i. e. when the bill of exchange falls due. In case payment is not carried out, the account is debited with the amount.

In the first case, the service charge is made up of the bank charges only, in the second case the service charge is made up of the bank charges and the interest calculated by the bank for the amount temporarily u2018lentu2019 to the creditor.

Relevant involved transactions :

manual procedure:

1)Customer invoice (transaction FB70, F-22).

2)Payment by bill of exchange: ISSUE (transaction F-36).

3) Bill of exchange usage: for collection or for discounting (transaction F-33, F-34).

4) Credit on bank account: the credit on bank account does not conclude the credit relationship (which is subject to final payment), but it highlights the expiry of the bill of exchange and its availability on the ordinary bank account.

5) Accrual (transaction F-20 or FBW4).

6) Failed payments: bill of exchanges can be rejected (transaction FBZG).

Procedure automation

Step 1: INVOICE POSTING

Step 2: BILL OF EXCHANGE ISSUE by F110:

Step 3: BANK PRESENTATION by FBWE

Step 4: CREDIT MEMO POSTING

When the bank credits the account with the amount of bank receipts, it is necessary to carry out a manual collection posting: Debits: Bank current account; Credits: Bank - Bank receipts for collection account (transaction F-06).

Step 5: ACCRUAL

The accrual can be executed according to two different methods:

1. Manual: transaction F-20;

2. Through the running of program RFWOBL00 (by means of a daily job); this program has three functions:

- it posts the accrual;

- it posts the risk;

- it reverses the previous overdue risk;

Step 6: FAILED PAYMENTby FBZG

I hope this can help You.

Mauri