Quantifying the Amount of Cash

Discount Lost

Applies to:
All Business organizations where the Financial Controller wants to analyze how much cash discount is lost
due to non-adherence to payment terms when dealing with Vendors.

Summary
This article explains the Configuration and Process steps involved in quantifying the loss as per the
management requirement.
Author:

Sarma Subrahmanya Tadikonda

Company:

Intelligroup Asia Pvt. Ltd.

Created on: 12 August 2010

Author Bio
Sarma Subrahmanya Tadikonda is working as a Principal Consultant with Intelligroup and has been part of
FICO competency since February 2005.

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Quantifying the Amount of Cash Discount Lost

Table of Contents
Introduction ......................................................................................................................................................... 3
Objective ......................................................................................................................................................... 3
Business Requirement .................................................................................................................................... 3
Solution ............................................................................................................................................................... 4
1.

Configuration Related activities ................................................................................................................... 4

1.1

Create net document type ..................................................................................................................... 4

1.2

Define Account for Net Procedure ......................................................................................................... 5

1.3

Define Accounts for Lost Cash Discount. .............................................................................................. 6

1.4

Classify G/L Accounts for Document Splitting ....................................................................................... 7

1.5

Classify Document Types for Document Splitting ................................................................................. 7

2.0

Master Data Related ................................................................................................................................ 7

G L Master Data .............................................................................................................................................. 7

3.0

Business Process .................................................................................................................................... 7

Post an Incoming Invoice and Payment to the Invoice ................................................................................... 7

Disclaimer and Liability Notice .......................................................................................................................... 13

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Quantifying the Amount of Cash Discount Lost

Introduction
In a situation where a business organization delays the payments for the outstanding line items to
Vendors, and due to this the organization need to pay the full amount and thereby sacrificing the
advantage of the payment terms.
The organization should reflect on their strategy, should get some data from their system to evaluate &
proceed with the best practice of optimizing on cash discounts and thereby reducing cash out-flows.
Objective
The objective of this article is to explain the configuration related activities to be maintained, Master
data activities and the business process.
Business Requirement
To quantify the amount of cash discount lost for a period.

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Quantifying the Amount of Cash Discount Lost

Solution
This is broadly divided and discussed as 1. Configuration Related Activity
2. Master Data Related Activity
3. Business Process

1.

Configuration Related activities

1.1

Create net document type

Use
In this step, we define a document type that is to be used when system automatically deducts cash discounts
from vendor invoices.
Activities
Create a Document type ZN with Net Document Type as checked in Control Data.
Recommendation
It is recommended to have a separate document type keeping in view of any custom developments that
may be required in future. Also when you use this document type only the discounts are posted and the
vendor liability is recognized after considering the cash discount.
Procedure
Access the activity using one of the following navigation options:
IMG Menu

Financial Accounting Accounts Receivable and Accounts

Payable Business Transactions

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Quantifying the Amount of Cash Discount Lost

Transaction Code

OBA7

User Actions and Values

Select New Entries from the Application tool bar Area.

Give Document Type ZN
Give Number Range for the document type
In accounts type allowed
select Customer, vendor, G/L Account
In Control data Check
Net Document Type
Negative Postings allowed

Choose CTRL+S to save the document type

Result

1.2

Document type ZN is created.

Define Account for Net Procedure

Procedure
Access the activity using one of the following navigation options:
IMG Menu

Financial Accounting Accounts Receivable and Accounts

Payable Business Transactions Incoming Invoices/Credit
MemosDefine Account for Net Procedure

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Quantifying the Amount of Cash Discount Lost

1.3

Transaction Code

OBXA

User Actions and Values

Enter chart of accounts.

Give the G/L account number.
Choose CTRL+S to Save the entry.
Note: The account should be a clearing account with Balance
sheet type and Open Item managed.
Name it as Discount Clearing account.

Result

Account for Net Payment procedure was defined.

Define Accounts for Lost Cash Discount.

Procedure
Access the activity using one of the following navigation options:
IMG Menu

Financial Accounting Accounts Receivable and Accounts

Payable Business Transactions Outgoing Payments
Outgoing Payments Global Settings Define Accounts for Lost
Cash Discount

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Quantifying the Amount of Cash Discount Lost

Transaction Code

OBXV

User Actions and Values

Enter chart of accounts.

Give the G/L account number.
Choose CTRL+S to Save the entry.
Note: The account should be a P & L type.

Name it as Material or Consumption account or the original

purchase account to which you have booked the Purchase
or you can flow the value to another account as Account
for Cash Discounts Lost.

1.4

Result

Accounts for Lost Cash Discount defined.

Result

Movement types for LIFO/FIFO valuations were identified.

Result

FIFO Valuation areas were maintained

Classify G/L Accounts for Document Splitting

In this step the Cash discount clearing account is classified as 01300-Cash Discount clearing and
Cash Discount as 40100-Cash Discount (Expense/Revenue/Loss) Item Categories.

1.5

Classify Document Types for Document Splitting

In this step the document type ZN is assigned with transaction variant 0300 with Variant
0001.

2.0

Master Data Related

G L Master Data
You need to create Two GL accounts.
1. As a Balance sheet Item with Open Item Managed and Line Item Display to post values at
the time of posting the Invoice.
2. As a P&L account type with Line item display to post the values when there is no cash
discount is availed.

3.0

Business Process

Post an Incoming Invoice and Payment to the Invoice

Scenario 1:
Post Invoice with payment terms as 0002 from SAP standard where in 3% in 14 Days and 2% in 30
days and 45 days net are the payment terms and clear the vendor outstanding amount with the
due date to avail 3% full cash discount.

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Quantifying the Amount of Cash Discount Lost

If you observe the above entry the discount of 3% was calculated at the time of posting it self and posted
to a Clearing account and the vendor liability is shown for the entire amount that is payable as per the
invoice.
The expense is booked for a lesser amount as it has already considered the discount amount.
Lets pay the invoice on or before the due date and see what happens.

System calculates the discount amount and posts the discount to the discount clearing account with the
processes Post with Clearing.
Lets look at the Discount clearing account now using FBL3N.

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Quantifying the Amount of Cash Discount Lost

Scenario 2:
Post Invoice with payment terms as 0002 from SAP standard where in 3% in 14 Days and 2% in 30
days and 45 days net are the payment terms and clear the vendor outstanding amount with the
due date to avail 2% cash discount.

If you observe the above entry the discount of 3% was calculated at the time of posting it self and posted
to a Clearing account and the vendor liability is shown for the entire amount that is payable as per the
invoice.
The expense is booked for a lesser amount as it has already considered the discount amount.
Lets pay the invoice after 15 days but on or before 30 days of the due date and see what happens.

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Quantifying the Amount of Cash Discount Lost

System clears the Cash discount clearing account with the full amount and the balance of 1000 that is lost
is posted to a Cash discount account.
Now lets see the FBL3N for the Discount clearing account.

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Quantifying the Amount of Cash Discount Lost

The line items are cleared automatically.

Now lets check the Cash discount account in FBL3N.

The amount that is showing here is nothing but the amounts lost as discounts for non adherence to
payment terms.
Scenario 3:
Post Invoice with payment terms as 0002 from SAP standard where in 3% in 14 Days and 2% in 30
days and 45 days net are the payment terms and clear the vendor outstanding amount with the
due date of more than 45 days.

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Quantifying the Amount of Cash Discount Lost

Lets pay the amount after 30days and see what happens.

Now the system has considered the entire amount as loss on account of non adherence to payment terms
and posted the loss to P&L account.
Now lets run the FBL3N for the discount account

Invoice-wise details on how the discounts are fore gone are detailed through the standard report are
displayed which will supplement organization for suitable decision making.
Note: This document assumes that other related configuration is in place to do this activity.

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Quantifying the Amount of Cash Discount Lost

Disclaimer and Liability Notice

This document may discuss sample coding or other information that does not include SAP official interfaces and therefore is not
supported by SAP. Changes made based on this information are not supported and can be overwritten during an upgrade.
SAP will not be held liable for any damages caused by using or misusing the information, code or methods suggested in this document,
and anyone using these methods does so at his/her own risk.
SAP offers no guarantees and assumes no responsibility or liability of any type with respect to the content of this technical article or
code sample, including any liability resulting from incompatibility between the content within this document and the materials and
services offered by SAP. You agree that you will not hold, or seek to hold, SAP responsible or liable with respect to the content of this
document.

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