SAP Business One Accounting

TB1100



SAP Business One Accounting

SAP Business One

2010 / Q2

Material number: 50098704

Copyright

Copyright 2010 SAP AG. All rights reserved. Neither this training manual nor any part thereof may be copied or reproduced in any form or by any means, or translated into another language, without the prior consent of SAP AG. The information contained in this document is subject to change and supplement without prior notice. All rights reserved.

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Target Audience and Course Prerequisites

Target Audience: Consultants and support employees responsible for the implementation and ongoing support of business processes with SAP Business One at customer sites

Essential Prerequisites : Familiarity with SAP Business One navigation and functionality. Basic knowledge in financial accounting. Consulting or sales experience with at least one

Recommended Prerequisites : Attend the course TB1000 SAP Business One - Logistics

Course Goals and Objectives

Outline the main financial accounting processes in SAP Business One. Perform the main accounting and banking tasks in each financial process. Manage your accounting procedures with SAP Business One Utilize controlling tools and company reports. Point out the essential settings for accounting functions.

Course Content Unit 1 - SAP Business One Standard Financial Processes: Standard financial processes The financial consequences of the sales and purchasing processes on the general ledger

Unit 2 - Banking Process: Outgoing and incoming payments Payment means and deposits Clearing an account Bank statement handling and external reconciliations

Unit 3 - Financial Process: Manage the Chart of Accounts Post a Journal Entry: Enter manual journal entry From a journal voucher Using a posting template As a recurring posting

Course Content (cont.) Unit 4 - Posting Periods Process: Posting periods - process overview Defining periods – highlights Post transactions to periods Internal reconciliation process - monitor and perform internal reconciliation Period-End closing process.

Unit 5 - Controlling Reports: We will discuss the reports in their financial accounting context: Financial reports Monetary status control Company analysis and planning

Unit 6 - Financial Accounting Initialization: Tax system. Currencies. Perpetual inventory/ non-perpetual inventory system.

Unit 1: SAP Business One Standard Financial Processes

Contents: Standard financial processes Sales and purchasing processes and their consequences on book keeping

1-1

SAP Business One Standard Financial Processes: Unit Objectives

After completing this unit, you will be able to: Discuss some general accounting conventions Describe the steps in the standard financial processes in SAP Business One Give examples of the automatic journal entries created during the sales, purchasing and inventory processes Discuss the financial consequences of the processes on the general ledger

1-2

SAP Business One Standard Financial Processes: Course Overview Diagram SAP Business One Standard Financial Processes Topic 1: Standard Financial Processes Topic 2: Sales and Purchasing Processes

1-3

SAP Business One Standard Financial Processes: Business Example

You are implementing SAP Business One at a new customer, OEC Computers: Your main contact in the customer site is Maria the accountant. Maria asks about the way SAP Business One handles the financial accounting processes. She wants to make sure she understands the big picture so she can report to the company owners the business results periodically.

1-4

Standard Financial Processes

SAP Business One Standard Financial Processes Topic 1: Standard Financial Processes Topic 2: Sales and Purchasing Processes

System Configuration Master data

Warehouse management Purchasing

Outbound logistics

Inbound logistics Production

Financial controlling

1-5

Marketing & Sales

Service

Standard Financial Processes: Topic Purpose

After completing this topic, you will be able to: Discuss some general accounting conventions

1-6

Finance Basics

Every business transaction is recorded in the company's books. This allows you: To manage your company effectively with the option of producing financial reports To report the business transactions to the authorities.

Every business transaction results with a value exchange: A certain account increases value and another decreases value, resulting in the recording of balancing debit side and credit side postings.

1-7

Value Exchange: Question

A/R Invoice

In a current sales process what happens to the accounts involved in the A/R Invoice? (Let us assume that this is a non-perpetual inventory system)

1-8

Value Exchange: Answer

A/R Invoice Debit Customer account

Credit

105

Tax account

5

Revenue account

100

1-9

Some General Accounting Conventions (1)

Each journal entry represents one posted business transaction. Each line in the journal entry represents one posting to an account (which could represent a customer, vendor or a regular general ledger account). Each line in the journal entry represents a posting of either a debit or a credit amount (but never both together). Deposit no. 500070 Debit

Cash clearing account

Bank account

Credit

105

105

In this example, when we deposit cash amounts to the company bank account, the cash clearing account decreases value and is credited and the bank account increases value and is debited. This corresponds with the Double Entry bookkeeping system, wherein every transaction or event impacts at least two different accounts. In modern accounting this is done using debits and credits.

1-10

Some General Accounting Conventions (2)

Each journal entry must include debit and credit amounts; therefore, a journal entry must include at least two lines. There is no limit on lines in a single journal entry. A journal entry must be balanced. That is, the total credit and debit amounts in a journal entry must be equal Deposit no. 500071 Debit

Credit

Check clearing account

105

Check clearing account

300

Check clearing account

205

Check clearing account

155

Bank account

765

Total

765

765

In this example, the check clearing account is credited 4 times because the deposit includes 4 checks (the business received from different customers). The bank account is debited in the total value of those 4 checks. The debit and credit amounts are equal and the journal entry is balanced.

1-11

The Account Balance (1)

The account balance represents the difference between the total debit transactions and the total credit transactions recorded for that account. The transaction summary or the balance of a certain G/L account or business partner is the initial information the accounting system can provide about the business. Customer XXXX7

Debit

Credit

105 Debit

A/R Invoice

600 Debit

A/R Invoice

400 Debit

A/R Invoice 705 Credit

Account Balance

Origin

Incoming Payment

200 Debit

A/R Invoice

100 Debit

A/R Invoice

700 Debit

1-12

The Account Balance (2)

Previously, we mentioned that in each journal entry a certain account increases value and another decreases value, resulting in the recording of balancing debit side and credit side postings. The effect on the account balance: Assets, Expenses, and Drawings accounts are generally in debit. Liability, Revenue, and Capital (Equity) accounts are generally in credit.

1-13

Profit and Loss Accounts

Balance Sheet Accounts

The Account Balance and the Account Type

For assets: Debit transactions always increase the asset value. Credit transactions always decrease the asset value For liabilities: Credit transactions always increase the liability. Debit transactions always decrease the liability.

1-14

Value Exchange and the Account Balance

The two accounts increase their values: (Let us assume that the customer is tax exempt and that this is a non-perpetual inventory system)

A/R Invoice

Debit Customer account Revenue account

Credit

440 440

1-15

Sales and Purchasing Processes

SAP Business One Standard Financial Processes Topic 1: Standard Financial Processes Topic 2: Sales and Purchasing Processes

System Configuration Master data

Warehouse management Purchasing

Outbound logistics

Inbound logistics Production

Marketing & Sales

Service

Financial controlling

In this topic we review the sales and purchasing processes discussed in TB1000 and focus on their consequences on bookkeeping.

1-16

Sales and Purchasing Processes: Topic Purpose

After completing this topic, you will be able to: Describe the steps in the standard financial processes in SAP Business One. Describe the automatic journal entries created during the sales and purchasing processes. Discuss the financial consequences of the processes on the general ledger.

1-17

Automatic Journal Entries: Reflection Question In a standard sales process which documents affect the accounting system? Standard

Sales Quotation

Sales Order

Delivery

A/R Invoice

1-18

Incoming Payment

Deposit

Automatic Journal Entries: Answer In a standard sales process which documents affect the accounting system? Standard

Sales Quotation

Sales Order

Delivery

A/R Invoice

When managing perpetual Inventory

1-19

Incoming Payment

Deposit

Examples of Automatic Journal Entries: A/R Invoice In the sales process

A/R Invoice, which account is debited and which is credited?

(Let us assume that this is a non-perpetual inventory system)

Sales Quotation

Sales Order

Delivery A/R Invoice

Debit

Customer account

Credit

105

Tax account

5

Revenue account

100

In SAP Business One, a journal entry is automatically posted from many documents during the sales, purchasing and inventory processes, such as A/R and A/P invoices.

1-20

Examples of Automatic Journal Entries – Incoming Payment In the sales process credited?

Sales Quotation

Sales Order

Incoming Payment, which account is debited and which is

Delivery

A/R Invoice

Incoming Payment

Possible Payment Means Debit

Check Credit card Cash Bank transfer *BOE

Cash clearing account

Credit

105

Customer

105

*BOE - Bill of Exchange. This option is relevant for Italy, Portugal, Spain and France and activated by default.

1-21

Examples of Automatic Journal Entries – A/P Invoice In the purchasing process credited?

A/P Invoice, which account is debited and which is

(Let us assume that this is a non-perpetual inventory system)

)

Purchase Order

Good Receipt PO

Debit

Vendor

A/P Invoice

Outgoing Payment

Credit

105

Tax account

5

Expense account

100

1-22

Financial Settings: Reflection Question How does the system “know” which accounts to use automatically? G/L Account Determination Control Accounts

1-23

G/L Account Determination

G/L Account Determination – defines default G/L accounts related to a specific business process: Sales Purchasing General (for example, Period End Closing) Inventory – three available options to choose the default G/L method for an item: At the warehouse level At the item group level At the item level You need to make decisions about G/L Account Determination together with the client accountant.

When you implement SAP Business One you define default G/L accounts to be used when transactions are created. Administration Setup Financials G/L Account Determination. G/L Account Determination: the window is divided into four tabs. Each tab contains the definitions for G/L accounts related to a specific business process: Sales, Purchasing, General, and Inventory. When you choose a pre-defined Chart of Accounts template, most of the defaults are already defined. You can change them if required. When choosing a G/L account in the G/L Account Determination window it appears in green in the Chart of Accounts. Whenever you add a document that posts a journal entry, A/R Invoice for example, the system determines the G/L accounts to be used from the default accounts.

1-24

G/L Account Determination - Example The Revenue default G/L account is defined in the G/L Account Determination window, under the Sales tab.

Revenue account

A/R Invoice

Debit Customer account

Credit

105

Tax account

5

Revenue account

100

1-25

Control Accounts

Accounts Receivable =

Control Account

A/R Invoice

Control Account

Debit

Credit

Accounts Receivable

Customer

Tax account

Tax account

5

Revenue account

Revenue account

100

105

In the G/L Account Determination window you also define the Control Accounts: Accounts Receivable for the Sales process, Accounts Payable for the Purchasing process. A control account links the business partner sub-ledger accounts to the general ledger. You need to define a G/L account as a Control Account in the Chart of Accounts. Whenever you post a document to a business partner, the system automatically register the journal entry to: The Business Partner Master Data account balance. The control account balance. (You cannot post journal entries directly to a control account). In an A/R Invoice, for example, when the customer is debited the Accounts Receivable account is also debited. This journal entry appears now in both accounts balances (the customer and the control account). Note, that the Business Partner Master Data balances do not appear in the Chart of Accounts. The receivable and payable control accounts accumulate the customers and vendors transactions in their balances. Hence, the Chart of Accounts presents the complete financial status of the company. As well as the Financial Reports (P&L, Balance Sheet). Some transactions, such as transactions with bills of exchange, must be posted to special control accounts. Therefore, you can assign these special accounts to predefined transaction types, such as Open Debts, Assets Account, Down Payments Receivable/Payable or other (country-dependent). In the G/L Account Determination window you can select if you want to assign different control accounts to different customers or vendors. Assigning control accounts to each customer or vendor is done in the Business Partner Master Data window. Choose Business Partners Business Partner Master Data Accounting tab General tab Accounts Receivable/Accounts Payable field. If this option is not selected, the control accounts defined in the G/L Account Determination window are used for all customers and vendors. You also have the ability to change the default control account in marketing documents. Choose the Accounting tab Control Account field. If you are working with several control accounts, the system can display the business partner balances separately for every control account. Business Partners Business Partners master Data open the linking arrow in the Account Balance field and choose the View by Control Account button. 1-26

Exercise - Control Accounts

Go to Reports

Financials

Financial

Balance Sheet.

Run the report. Locate the Accounts Payable in level 5. Go to level 1 and check that the report is balanced. How is the report balanced?

1-27

The Automatic Journal Entry Value

How does the system “know” the value to be credited and debited in an automatic journal entry created by an A/R Invoice? (Let us assume that the customer is tax exempt).

A/R Invoice

Debit Customer account Revenue account

Credit

440 440

1-28

Value Calculation – Invoice – Sales Process Purchasing Price List = 100 Reseller Price List = 110 Retail Price List = 120

Star Trek Computers = Reseller Price List

Reseller Price List = 110

Unit Price * Quantity = Total Value

Sales Quotation

Sales Order

Delivery

110 * 4 = 440

A/R Invoice

Let us refresh our memory with some of the topics from the Logistics course TB1000. Here is a common scenario of how prices are set in SAP Business One during the sales process: Our customer Star Trek Computers asks for an offer on 4 portable media players. Jean creates a sales quotation. She chooses the customer and then the item. The price per unit appears in the quotation. How? The Item master data includes 3 optional prices for this item. Each one of them is represented in a different Price List. Star Trek Computers is a reseller customer and so his default price list as defined in his master data record is the Reseller Price List. Therefore, in the Sales Quotation, the unit price for a portable media player is 110, the Resellers Price List. Jean enters quantity of 4.The total value of the quotation is 440 (assuming there are no additional items in the quotation and that no discount or tax amounts are added). Star Trek Computers faxes us a Sales Order based on the Sales Quotation. In SAP Business One, jean copies the Sales Quotation to a Sales Order. 2 days later Joe, the warehouse manager, dispatch the company truck with the weekly devilries, including 4 portable media players for Star Trek Computers. Later on the day, the accountant copy the Delivery to an A/R Invoice. Since no change was done to the price during the Copy To process, the Invoice total value is 440 and these are the Credit and Debit amounts in the automatic journal entry created by the A/R Invoice.

1-29

Value Calculation – A/P Invoice – Purchasing Process Purchasing Price List = 100 Reseller Price List = 110 Retail Price List = 120

Coconut Devices = Purchasing Price List

Purchasing Price List = 100

Unit Price * Quantity = Total Value

Purchase Order

Good Receipt PO Debit

Vendor Clearing acc.

100* 10 = 1000

A/P Invoice

Credit 1000

1000

In the Purchasing process a common scenario of how prices are set would be: Joe, the warehouse manager, issues a Purchase order of 10 portable media players. He chooses the vendor Coconut Devices and then the item - portable media player. The price per unit appears in the Purchase Order. How? Since Coconut Devices is a vendor, his default price list as defined in his master data record is the Purchasing Price List. Therefore, in the Purchase Order, the unit price for portable media player is 100, the Purchasing Price List from the portable media player item master data. Joe enters a quantity of 10. The total value of the Purchase Order is 1000 (assuming there are no additional items in the Purchase Order and that no discount or tax amounts are added). Joe e-mails the Purchase Order to the vendor. Few days later Joe receives a delivery including 10 portable media players from Coconut Devices. In SAP Business One, he copies the Purchase Order to a Goods Receipt PO. A week later, the Invoice from Coconut Devices arrives via mail and the accountant copy the Goods Receipt PO to an A/P Invoice. Since no change was done to the price during the Copy To process, the A/P Invoice total value in 1000 and these are the Credit and Debit amounts in the automatic journal entry created by the A/P Invoice.

1-30

Value Calculation – Inventory Process

Purchase Order 100 * 10 = 1000

Good Receipt PO

A/P Invoice

Unit Price * Quantity = Total Value

Debit

Credit

Clearing acc. Inventory acc.

1000 1000

Purchasing Price List = 100

Calculated Value = 90

Item Cost

Reseller Price List = 110 Retail Price List = 120

Sales Quotation

90 * 4 = 360

Sales Order

Delivery

Item Cost * Quantity = Total Value

A/R Invoice

Debit

Cost of Goods Sold acc.

Credit

360

Inventory acc.

360

Let us go one step back, to the Goods Receipt PO that Joe entered based on the Delivery he got from the vendor. Assuming the company runs perpetual inventory, an item cost value is being calculated automatically in each stock transaction. More details on Perpetual Inventory will be provided in the last Unit of the course. When Joe entered the Goods Receipt PO to SAP Business One, the Purchasing Price List value (100 per unit) affected the unit price in the Goods Receipt PO and also the item cost value. The item cost value is calculated automatically, behind the scene, according to the valuation method chosen for the item (Moving Average, FIFO, Standard). The calculated item cost value after the Goods Receipt PO was 90. Joe entered a quantity of 10 portable media players. Therefore, the total value of the journal entry created by the Goods Receipt PO was 1000 and these are the Credit and Debit amounts registered to the inventory default accounts. The value of the journal entry linked to the Delivery sent to the customer is 360. That is, quantity of 4 items multiplied by the Item cost value at that moment (90). Remember that the total value of the Invoice based on that Delivery was 440. It was calculated according to the Reseller Price List (110) that is defined as the default price list in the customer master data record.

1-31

The Financial Process in SAP Business One Financial Settings Chart of Accounts G/L Account Determination Sales and Purchasing process Good Receipt PO

A/P Invoice

Outgoing Payment

A/R Invoice

Payment

Deposit

Automatic Journal Entries

Manual Journal Entries

Reconciliations

Period End Closing

General Ledger, Chart of Accounts and Reports

Let us review the steps that occur regularly in the financial process in SAP Business One (most steps, except the financial settings, are recurring and could happen in a different order. This is an example of a common scenario): Financial Settings - when you implement SAP Business One you define: Chart of Accounts and default G/L accounts to be used when transactions are created in the different business process: Sales, Purchasing, Inventory and more. You need to make these decisions together with the client accountant. Sales and Purchasing processes - the financial consequences of the steps in the sales and purchasing processes are Automatic journal entries and system reconciliations. Automatic Journal Entries - are posted from many documents, such as A/R and A/P invoices. Manual Journal Entries – for business transactions that are not represented in forms or documents. The accountant enter transactions like loan, rent, or payroll using Manual Journal Entry. The Journal Entry file contains all the accounting transactions: automatic and manual. Reconciliations – Internal system reconciliations are created automatically: In a Business Partners Master Data - Invoice/ Payments, Invoice/ Credit Memo; In a G/L account - Payment/ Deposit. Internal user reconciliation – for example, when an advanced payment needs to be reconcile with the Invoice. Period End Closing – a process that transfer the balances of the Profit and Loss accounts to a Balance Sheet account – the retained earnings account when a fiscal year or posting period ends. In some localizations (Italy, Spain, France, and Portugal) you can also transfer the balance sheet account balances from one fiscal year or period to another. There is a list of tasks required while preparing for Period-End Closing. General Ledger, Chart of Accounts and Reports – all the previous steps affect the Journal Entry file, the account balances (refer to the next slides) and the financial reports. like in the examples we reviewed: When we discussed the control accounts that link the business partner accounts to the general ledger. The Business Partner Master Data balances do not appear in the Chart of Accounts. The receivable and payable control accounts accumulate the customers and vendors transactions in their balances. Hence, the Chart of Accounts presents the complete financial status of the company. As well as the Financial Reports (P&L, Balance Sheet). Another example, is the Period End Closing – that transfer the balances of the Profit and Loss accounts to a Balance Sheet account and hence affect the Profit and Loss and the Balance Sheet results. 1-32

Unit 2: Banking Process

Contents: Outgoing and incoming payments. Payment means (cash, check, credit cards, bank transfer, BOE, payment wizard). Deposits. Clearing an account - by payments and deposits. Bank statement handling and external reconciliations.

BOE - Bill of Exchange. This option is relevant for Italy, Portugal, Spain and France and activated by default.

2-1

Banking Process: Unit Objectives

After completing this unit, you will be able to: List the basic steps in the banking process in a typical small business Explain the consequences of each step on the involved G/L accounts Perform the banking process steps in SAP Business One Choose the appropriate option of bank statement handling according to the customer needs and localization. Perform the steps of bank statement handling and external reconciliations in SAP Business One.

2-2

Banking Process: Course Overview Diagram

Banking Process Topic 1: Handling Payments Topic 2: Managing External Reconciliations in the Bank Account

2-3

Banking Process: Business Example

You are implementing SAP Business One at a new customer, OEC Computers. Your main contact in the customer site is Maria the accountant. You ask Maria about the way they handle payments and bank statement. You then make a quick needs analysis and explain to Maria how SAP Business One can help her in handling and tracking the banking process in everyday work.

2-4

Handling Payments

Banking Process Topic 1: Handling Payments Topic 2: Managing External Reconciliations in the Bank Account

2-5

Handling Payments: Topic Purpose

After completing this topic, you will be able to: List the steps of the payment process and perform them in SAP Business One including: Incoming Payments, Outgoing Payments, Deposits and the Payment Wizard Explain the consequences of each step on the involved G/L accounts. Adjust the appropriate payment scenario to the customer needs and localization. You need to make decisions together with the client accountant.

2-6

Handling Incoming Payments: Business Example (1)

The customers pay their debts, that is open A/R Invoices, according to agreed payment terms: Cash Basic, Installments, Net 30, etc. Maria, the accountant at OEC Computers, deals with Incoming Payments every afternoon: When registering an Incoming Payment you first choose the customer and then you choose the A/R Invoices the customer pays. Lastly, you record the payment means. During the day OEC Computers employees created Incoming Payments for customers who shopped in the store point of sale or called the customer service center. So Maria needs to register the remaining Incoming payments and monitor the ones that were registered during the day.

Note! In this example we use the manual payments process. You have the Payment System and the Bank Statements Processing options that enable incoming and outgoing payments creation automatically and semi-automatically. From the manual reconciliation screen, you can also deposit cash, check and credit card payments and post journal entries, or create payments. For more details on these options refer to next slides.

2-7

Handling Incoming Payments: Business Example (2)

Maria enters Incoming Payments for checks received by mail. She checks the credit card accounts (Visa and Master Card) to see the amount of credit card Incoming Payments issued in the store point of sale and in the customer service center during the day. She checks the Cash on Hand account to see the amount of cash Incoming Payments issued in the store point of sale. And she connects the company bank account on-line: To see the amount of bank transfer Incoming Payments received from customers. To make sure that Visa and Master Card transferred the credit card payments according to the agreement with OEC Computers.

2-8

Handling Incoming Payments: Business Example (3)

At the end of the day: Maria enters a Credit Card Deposit in SAP Business One to record the payments Visa and Master Card transferred to the company bank account. Then, she goes to the ATM located just across the street and deposits: – The money accumulated in the cash register. – The checks received today. She issues Check Deposit and Cash Deposit in SAP Business One based on the ATM reference. Now, Maria can go home.

2-9

Reflection Question:

A customer pays with check. You deposit the check 2 days later.

When is the customer account being credited in SAP Business One? When the incoming payment is entered. When the check is deposited in the bank.

A/R Invoice

Incoming Payment

2-10

Deposit

Reflection Question: Answer A customer pays with check. You deposit the check 2 days later.

When is the customer account being credited in SAP Business One? When the incoming payment is entered. When the check is deposited in the bank.

Debit

Customer Income account

Deposit

Incoming Payment

A/R Invoice

Debit

Credit Check clearing account

105

105

Check clearing account

105

Customer

Debit

Credit

105

Bank account

Credit

105

105

The customer is not involved in the Deposit Journal Entry.

2-11

The Payment Process in SAP Business One – Sales Incoming Payment: Payment Means Check Credit card

A/R Invoice

Incoming Payment

Clearing Account

Deposit

Bank Account

Cash Debit Clearing Account: Check/ Credit card/ Cash

Credit Clearing Account : Check/ Credit card/ Cash

105

Customer

Debit

105

Bank Account

Credit

105

105

Incoming Payment: Payment Means Bank transfer A/R Invoice

Incoming Payment

Debit Bank Account

Bank Account

Credit

105

Customer

105

When you issue an Incoming Payment the open invoice on the customer account is closed. You can also issue an Incoming Payment that is not based on an invoice. for example, Payment on Account. Cash, check, and credit card payment means are posted to a clearing account. Note that the term “Clearing” is used in the US localization. In other localizations it could be: “Temporary Account” or “Suspense Account”. The instructor should use the term used in their localization. When a customer pays using cash, check or credit card, you enter an Incoming Payment that generates the following automatic journal entry: • (The customer usually pays using one payment mean. It is, however, possible to pay using a combination of payment means in a single payment). • Debit on a clearing account - cash on hand/ credit card/ checks received. • Credit on customer account. - Cash: the system retrieves the cash on hand account from the Cash on Hand field on the Sales tab under Administration Setup Financials G/L Account Determination. - Credit Cards: the system retrieves the credit card account from the G/L Account field in the credit card definition under Administration Setup Banking Credit Cards. - External tools like point of sale system and authorization of credit card transactions can be integrated into the standard process. - Check: the system retrieves the checks received account from the Checks Received field on the Sales tab under Administration Setup Financials G/L Account Determination. - You can change the default clearing account while issuing the Incoming Payment. A Deposit document must be processed in order to transfer the funds from the clearing account to the house bank account and clear the clearing account. The Deposit function in SAP Business One. Banking Deposits Deposit. Bank Transfer: this payment mean does not involve a clearing account. The customer transfer the payment directly to your house bank. Debit on the house bank account, Credit on the customer account. 2-12

Structure of a Payment Document

Incoming / Outgoing Payments

Payment Document Header

Open Invoices, Credit Memos, and Journal Entries

Totals, Remarks Add

Cancel

Deselect All

Select All

Add in Sequence

The screens for incoming and outgoing payments are almost identical. The screen is divided into the following parts: The document header area The area for selecting open invoices, credit memos and journal entries, and assigning the payment amounts The area for entering remarks and displaying totals To post an incoming payment, choose Banking

Incoming Payments

To post an outgoing payment, choose Banking

Outgoing Payments

2-13

Incoming Payments. Outgoing Payments.

The Payment Document Header Incoming / Outgoing Payments

Code

No. (from Series or Manual)

Name

Posting Date

Pay to

Due Date Document Date Reference

Contact Person

Transaction No.

Project Vendor master record

Add

Cancel

Customer master record

Deselect All

Select All

Add in Sequence

In the document header, you choose the customer or vendor code for the payment. The system then copies the Name and the standard Contact Person from the master record. The default value for incoming payments is Customer and for outgoing payments Vendor. You can create both incoming and outgoing payments for Customer, Vendor, or Account. For incoming payments, the system copies the Bill to address from the business partner master record into the address field in the document header: For outgoing payments: the system copies the default Pay to address. You can manually choose a different Pay to address or the bank of the vendor. Then you can check Display Invoices With Matching Billing Address to filter the open invoices displayed in the payment screen. You can either enter the document number manually or have the system assign it automatically out of a document series. The system proposes the current date as the Posting Date, Due Date and Document Date. You can enter an external document number in the Reference field. You can assign the payment to a Project or to a Distribution Rule for cost accounting. When you post the document, the system automatically assigns it a Transaction Number (number of the journal entry) and displays it in the relevant field.

2-14

How To Determine the Payment Amount Incoming / Outgoing Payments

Payment Document Header Display Invoices with Matching Billing Address Sel.

Add

Doc. Installm.

*

Total

Balance Due

Dis- Doc. count Type

Total Payment

*

200

180

IN

180

IN

98

101

1 of 2

101

2 of 2

100

100

202

1 of 1

-50

-50

CN

-50

204

1 of 1

98

98

RC

98

303

1 of 1

25

25

JE

25

*

Cancel

2%

Payment on Account

25

Total Amount Due

205

Open Balance

25 Add in Sequence

The system displays the open invoices and credit memos with the installment number. If you select the BP Reference Number indicator in the Form Settings, the system displays the customer/ vendor reference numbers instead of the invoice number. This option is helpful when you enter outgoing payment and base it on the invoices number you received from the vendor. Display Invoices with Matching Billing Address - Only available when an outgoing payment is created for a vendor. Displays in the table only invoices with pay to address/bank details identical to the address/bank selected in the Pay To field. The document type field tells you the origin of the line (IN for A/R invoices, CN for A/R Credit Memos, PU for A/P invoices, PC for A/P Credit Memos). An account may contain postings that are not invoices or credit memos (for example, journal entries or payment on account). The system only displays these transactions if you select the Display All Transactions indicator in the Form Settings. The system displays these transactions as blue lines below the invoices and credit memos. An asterisk (*) after the invoice date indicates that the invoice is due. The system displays the invoice amount and balance due (invoice amount less any partial payments or credit memos) for each invoice. If cash discount applies (according to the business partner payment terms), the system deducts the cash discount from the due balance and proposes the final amount for payment. To enter payments that cannot be assigned to an invoice select the Payment on Account indicator. The system then lets you enter the payment amount manually. For example, when you get a payment in advance. To select an open invoice for payment, select the checkbox for the line. You can also enter a smaller amount as partial payment by changing the Total Payment amount column. The system displays the full payment amount (sum of all selected lines in the table plus the manual entered amount) in the Total Amount Due field. 2-15

How To Specify the Payment Means

1.Determine 2.Split

the Payment Amount

the Payment Amount According to Payment Means Possible Payment Means: Check Bank Transfer Credit Card Cash

After you determine the payment amount, you must specify the payment means for the payment. You can select one of the following payment means: Check, Bank Transfer, Credit Card, and Cash. You can define a default account for incoming checks and cash payment means. Choose Administration Setup Financials G/L Account Determination Sales tab General tab Checks Received and Cash on Hand fields. You can define a default account for outgoing bank transfer payment means. Choose Administration Setup Financials G/L Account Determination Purchasing tab General tab Bank Transfer field. You can copy the total amount to an amount field by choosing CTRL + B or right-click the mouse and choose Copy Balance Due. In most cases, the payer pays the amount in full using one means of payment. However, it is possible to split the amount among several means of payment. The system takes the details on the means of payment for incoming payments from the customer master records. You can define a maximum amount for over and underpayments. This is relevant when small differences exist between the payment and the balance due. The process will be transparent to the user. Choose Administration Setup Financials G/L Account Determination. Choose the Sales tab to define the G/L account to be used in case of over or under payment. Do the same on the Purchase tab. Choose Administration Setup Financials Currencies, the following four columns define the max. amount to be posted as over or under payment: Incoming Amt Diff. Allowed/ Outgoing Amt Diff. Allowed - for a specific currency, specify the maximum amount allowed for incoming/ outgoing payment differences. The field is enabled only if the amount in the Incoming/ Outgoing % Diff. Allowed field is zero, or if the field is blank. Incoming % Diff. Allowed/ Outgoing % Diff. Allowed - for a specific currency, specify the maximum percentage allowed for incoming/ outgoing payment differences. The field is enabled only if the amount in the Incoming/ outgoing Amt Diff. Allowed field is zero, or if the field is blank. The base amount for the percentage calculation is the total amount paid, which is the sum of the amounts entered in the Payment Means window. When you post a payment, the system reconciles the payment with the selected invoices, and closes the transactions. If the payment was posted as Payment on Account, the invoices and the payment stay open. If a partial payment was made, the system adjusts the Balance Due appropriately.

2-16

Deposits of Cash and Checks Customer OI

Open Invoice

1

Open Invoice

1

1

Bank

2

Incoming Payment Payment Means Cash

Customer OI

Cash on Hand 2

Cash Deposit

Checks Rec. 1

Bank

2

Incoming Payment Payment Means Check

2

Deposit of Checks

If you take cash from your cash register or checks from your check drawer and bring them to your bank, you can use the Deposit transaction to post this transfer. •

Choose Banking Deposits Deposit and select the Cash tab to post a cash deposit. Enter the cash on hand account that represents your cash register into the G/L account field. The system displays the balance in the Balance field. Enter the amount that you want to deposit into the Amount field. Enter the G/L account number that represents your bank account into the Bank Account field. If you try to deposit an amount greater then the account balance, the system will block you.

•

Choose Banking Deposits Deposit and select the Checks tab to post a check deposit. The system lists all checks which are not deposited yet in the table. Highlight the checks which you want to deposit. Enter the G/L account number that represents your bank account into the Bank Account field.

If you have selected the Reconcile Amounts After Deposit indicator, the system reconciles the debit and the credit line items on the cash on hand account or the checks received account with each other. The debit line item on the bank account is always managed as an open item. This distinguishes it from the line items that have already been reconciled with the bank statement belonging to this bank account. The reconciliation finally closes the debit line item.

2-17

Handling Outgoing Payments: Business Example

OEC Computers pays open vendor A/P Invoices, according to agreed payment terms: Cash Basic, Installments, Net 30, etc. Maria, the accountant at OEC Computers, deals with outgoing payments every morning: She runs the Vendor Liabilities Aging report and enters today's date in the Due Date To field to display the open A/P Invoices to be paid today. She then enters Outgoing Payments to those vendors. OEC Computers pays using Bank Transfer or Checks according to agreement they have with each vendor. Maria issues Outgoing Payments with Checks as Payment Means. She then prints the checks that are created automatically and sends them via mail. She connects to the bank account and transmits Bank Transfers to the vendors online. She then issues Outgoing Payments in SAP Business One with Bank Transfer as Payment Means to document those online Bank Transfers.

Note! In this example we use the manual payments process. You have the Payment System and the Bank Statements Processing options that enable incoming and outgoing payments creation automatically and semi-automatically. From the manual reconciliation screen, you can also post journal entries, or create payments. For more details on these options refer to next slides.

2-18

The Payment Process in SAP Business One – Purchasing

Outgoing Payment: Payment Means Check Credit Card Cash

A/P Invoice

Bank Account/ Cash account

Outgoing Payment

Bank Transfer

Debit Bank Account Vendor

Credit 202

202

Note that the system does not involve a clearing accounts for manual outgoing payments for credit card, checks and bank transfers. Instead, the credit posting is done directly on the bank account. An interim account can always be manually inserted in the G/L account field in the Payment Means. Then, when the payment is reduced from the bank, an entry should be entered to debit the interim account and credit the bank account. The payment wizard can be used to automatically generate payments against the clearing account. If you want to use clearing accounts automatically, you can use the Bank Statement Processing functionality (refer to the next slides) which can be set up to automatically post the transfer between the clearing and bank accounts. The same is true for the Cash and Bank add-on which is relevant for some localizations. Note that Cash and Bank is not available if the Bank Statement Processing functionality has been switched on. Postings for Outgoing Payments: Cash: Debit on vendor account, credit on cash on hand account or the bank account number. Because most companies have multiple cash registers with one assigned cash on hand account each, you must manually enter the correct cash on hand account number. Credit Card: Debit on vendor account, credit on bank account. You must manually enter the bank account number. Check: Debit on vendor account, credit on bank account. You must manually enter the bank account number. Bank Transfer: Debit on vendor account, credit on bank account. The system retrieves the bank account from the Bank Transfer field on the Purchase tab under Administration Setup Financials G/L Account Determination.

2-19

Exercise – Incoming Payments and Deposits

2-20

The Payment Process in SAP Business One – Bank Account Reconciliation Bank Transfer

Deposit Deposit Bank Statement

Deposit House Bank Account Outgoing Payment Outgoing Payment Outgoing Payment

3 options for external reconciliation: You can create payment documents while you reconcile the bank statement with the bank G/L account in SAP Business One.

Incoming Payments, Outgoing Payments and Deposits post journal entries to the house bank account. You need to reconcile those transactions with the Bank Statement and adjust where needed. The Bank Statement serves as a legally binding notification instrument from the bank to its customers. In SAP Business One you have three options for external reconciliation (For more details on each option refer to next slides):

Manual Reconciliation - from this screen you can create adjustments to close any discrepanices and bring the difference down to 0. For example, you can deposit cash, check and credit card payments that appear on the printed bank statement. You can also post journal entries, or create payments. Reconciliation. Bank Statement Processing - With this option, you manually enter a bank statement and reconcile the G/L account and at the same time post bank transfer payments.

2-21

The Payment Process in SAP Business One – Business Partner

A/R Invoice

Debit

Customer

Incoming Payment

Debit

Credit Check clearing account

105

Income account

105

Internal Reconciliation

Expense / Clearing account

202

105

Outgoing Payment

Debit

Credit

202

Vendor

105

Customer

A/P Invoice

Debit

Credit

Bank Account

Internal Reconciliation

Vendor

Credit 202

202

When you post a payment, the system reconciles the payment with the selected invoices, and closes the transactions. If the payment was posted as Payment on Account, the invoices and the payment stay open. If a partial payment was made, the system adjusts the Balance Due appropriately. More details on internal reconciliations in business partners (system and user) will be provided in Unit 4 Financial Periods Process.

2-22

The Payment Process in SAP Business One – Payment Wizard

Payment Wizard

Incoming Payments:

Bank Account

Outgoing Payments: Bank Transfer

Bank Transfer

Checks

The Payment Wizard enables you to create outgoing and incoming payments in batches for bank transfers, checks and bills of exchange. The payments are created according to your selection criteria and payment methods. Outgoing: check or bank transfer, incoming: only bank transfer The Payment Wizard runs cover A/P and A/R documents and transactions that are not fully paid, credited, or reconciled and un-reconciled/allocated payments on account. If the created payments are bank transfer payments or direct debit payments, the Payment Wizard creates the payment files in the correct country-specific. The Payment Engine or other 3rd party add-on is required to create the correct files for the bank.

2-23

The Payment Wizard (1) Selection Criteria General Parameters

Business Partners Selection Criteria

Payment Method – Selection Criteria

Document Parameters

Load

Payment Run Sel.

Saved Payment Runs

Save

Recommendations

Execute

The Payment Wizard enables you to create outgoing and incoming payments in batches for bank transfers, checks and bills of exchange. The payments are created according to your selection criteria and payment methods. The Payment Wizard runs cover A/P and A/R documents and transactions that are not fully paid, credited, or reconciled and un-reconciled/allocated payments on account. Each run of the payment wizard is identified by a payment run name and the date of the payment run. When starting the payment wizard, you specify several selection criteria: General parameters, such as the date of the next planned payment run, type (outgoing or incoming), payment means (check or bank transfer), and document series which are used to create the payment documents. The business partners that the system checks for due invoices. Selection criteria for the documents that the system includes. The payment methods that the system uses. Enhancements in 8.8 release – - Added range for Due date criteria (tolerance days are still taken into account). - Added filter criteria Document date. - Enhanced processing of saved runs in locked periods. Based on these selection criteria the system creates a recommendation report or a list of suggested payments. You can accept or reject the recommendations. You can save the recommendations and proceed at a later date, or you can execute the payments. The button Non-Included Trans. creates a list of all open items that could not be included in the payment run. To run the payment wizard, choose Banking Payment Wizard. You should define defaults values for the payment wizard. Choose Administration Payment Run Defaults. This data is used by default in every payment run.

2-24

Setup

Banking

The Payment Wizard (2) Selection Criteria Payment Run Sel.

General Parameters

Report Printing

Business Partners Selection Criteria

Document Parameters

Payment Method – Selection Criteria

Recommendations

Document Printing

Payment documents Deutsche Bank

- Four*Hundred -

Check Printing

To

€

- 400,-

Bank Transfer

Checks

Payment File

$

The printed text must not be m odified or crossed out.

00000150900

X

Acc. No. 12131400

X

X

X 67291500 11

© SAP 2007 / Page 25

When you execute the payments, the system automatically creates the payment documents for your accepted recommendations. A payment usually includes the amounts of several invoices if you did not specify differently in the business partner master record (select Single payment indicator on the Payment System tab). The system always compares the cash discount that is currently valid with the cash discount that is to be valid at the date of the next payment run minus the number of tolerance days. If the created payments are bank transfer payments or direct debit payments, the Payment Wizard creates the payment files in the correct country-specific format. If you need to create or adapt file formats you can use the Format Definition add-on. This SAP Business One add-on is a graphic tool that lets you define and modify incoming bank statement formats. For more details on Bank File Formats and Creating Bank Files with the Payment Wizard, refer to the appendix. If the created payments are check payments, they can print directly from the system under Banking Document Printing or Banking Outgoing Payments Checks for Payment to print single checks. After the check is printed, the system assigns the check numbers. Once the process is complete, use the Banking Check number confirmation to confirm the numbers assigned.

2-25

Payment Methods as Main Control Instrument Business Partner

Definition Type Outgoing

Payment Means Deutsche Bank

- Four*Hundred To

€

400, -

The printed text must not be m odified or crossed out.

XAcc. No.X 12131400 00000150900

X X 67291500 11

Incoming

Payment Method House Bank and Account

G/L Account

AP Invoice Validation Options

With the payment method, you control the entire payment process. Choose Administration

Setup

Banking

Payment Methods to define and maintain payment methods.

In the definition of a payment method, you define the following: Type of payment and payment means (outgoing: check or bank transfer, incoming: only bank transfer). House bank and the bank account that should usually receive or issue the payment made with this payment method. In the definition of the house bank, a G/L account and a G/L interim account (optional) is mapped to the bank account. Validation checks that the system is to carry out before using this payment method, as well as amount restrictions. Postings in relation with G/L interim accounts. In the master records of the business partners, you must specify which payment methods you want to use with each business partner. In vendor master records of the vendors, you can specify payment methods with the type outgoing. In the master records of the customers, you can specify payment methods with the type incoming. You can define a default payment method to assign to new Business Partners’ creation. Choose Administration System Initialization General Settings BP tab. From the payment methods listed in the master records of the business partners, the system automatically chooses one, based on the settings in the Payment run. If you want to use a specific payment method for a certain invoice, you can also directly enter the payment method there. If you want to use a different house bank for a certain business partner other than one specified in the payment method, you can enter the house bank directly in the master record for the business partner. In the master records of the business partners, you can specify if you want to block payments. A payment block can also be made on invoice level. 2-26

Exercise – Payment Wizard (Optional)

2-27

Managing External Reconciliations in the Bank Account Banking Process Topic 1: Handling Payments Topic 2: Managing External Reconciliations in the Bank Account

2-28

Managing External Reconciliations in the Bank Account: Topic Purpose

After completing this topic, you will be able to: Explain the options for Reconciling externally a bank G/L account. Choose the appropriate option of bank statement handling according to the customer needs and localization. You need to make decisions together with the client accountant. Perform the steps of bank statement handling and external reconciliations in SAP Business One.

2-29

Managing External Reconciliations in the Bank Account: Business Example Maria, the accountant at OEC Computers, has just received by mail a printed Bank Statement from the bank. Maria asks you what is the most effective way for her to enter this Bank Statement in SAP Business One. And how to reconcile the transactions the bank recorded for OEC Computers, with the transaction she recorded for the bank G/L account in SAP Business One. You should take into consideration that OEC Computers pays and is paid using all payment means (check and cash deposits, checks for payments as well as bank transfer).

2-30

External Reconciliations

External Bank Statement 2000

External Reconciliation

House Bank Account Debit

Credit 2000

3000 3000

Incoming Payments, Outgoing Payments and Deposits post journal entries to the house bank account. You need to reconcile those transactions with the Bank Statement and adjust where needed. You do not reconcile these open items until you receive the bank statement after the bank has actually made the payment. When you perform an external reconciliation, you reconcile the open items of a bank G/L account in SAP Business One with the open items in an external account statement. In most cases, the account statement is received from a bank and the account to be reconciled is the associated bank account. The statement, however, can also be received from a business partner that wants to reconcile the business partner account in your books with its own account. In SAP Business One you have three options for external reconciliation.

2-31

Options for External Reconciliation

Manual Reconciliation * ANZ, Canada, South Africa, UK & USA * Option to deposit cash, check and credit card payments and post journal entries, or create payments.

External Bank Statement

House Bank Account

Printed statement ending balance

Open transactions in G/L account

External statement transactions

Open transactions in G/L account

Reconciliation

Manual Automatic Semi-Automatic * All Localizations * Option to post journal entries.

Bank Statement Processing * Available for several localizations

Bank Statement

* Reconciles the G/L account and at the same time posts bank transfer payments.

* Austria, Belgium, Brazil, China, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Hungary, India, Irish Republic, Italy, Japan, Korea, Netherlands, Norway, Poland, Russia, Singapore, Slovakia, Spain, Sweden, Switzerland, and United Kingdom

In SAP Business One you have three options for external reconciliation: Manual Reconciliation (supported in ANZ, Canada, South Africa, UK & USA) : With this option, you enter the ending date and balance from your printed bank statement. The system displays open transactions for the bank G/L account. You manually match them to the printed statement and clear the transactions from the account. The system tracks the difference between the statement ending balance and the cleared items from the G/L account. The system only allows you to reconcile the account when this difference is 0. From the manual reconciliation screen, you can create adjustments to close any discrepanices and bring the difference down to 0. For example, you can deposit cash, check and credit card payments that appear on the printed bank statement. You can also post journal entries, or create payments. The system keeps track of the statement balance for the next reconciliation. To use Manual Reconciliation, choose Banking Bank Statements and External Reconciliations Manual Reconciliation. Reconciliation (supported in all localizations): With this option, you first import, or manually type the bank statement transactions into the system using the Process External Bank Statement function. To use Reconciliation, choose Banking Bank Statements and External Reconciliations Reconciliation. The system displays side-by-side the open transactions from the G/L account in SAP Business One and the imported or typed transaction from the bank statement. You can choose a reconciliation type: Manual, Automatic, or Semi-Automatic. These work in a very similar manner to the internal reconciliation types. Bank Statement Processing (supported in Austria, Belgium, Brazil, China, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Hungary, India, Irish Republic, Italy, Japan, Korea, Netherlands, Norway, Poland, Russia, Singapore, Slovakia, Spain, Sweden, Switzerland, and United Kingdom): With this option, you manually enter a bank statement and reconcile the G/L account and at the same time post payments (the BTHF add-on is required to import bank file of a specific format which can be defined using the File Formatting Tool add-on). Choose Banking Bank Statements and External Reconciliations Bank Statement Processing. 2-32

Bank Statement Processing – BSP

Bank Statement Processing automates the handling of bank statement transactions. It is designed for businesses that intensively use direct Bank Transfer for Outgoing and Incoming Payments.

Bank Statement

Bank Statement Processing

Bank Statement Processing: Enables you to generate incoming and outgoing payments: Payment Handling – On Account, Partially or Fully Reconciled. Payment from Customers Payment to Suppliers – directly or via an Interim Account (Payment Wizard) Payments with Exchange Rate Differences, Small Difference, Cash Discounts Payment of Multiple Documents Bills of Exchange - Country-Specific: Belgium, Chile, France, Italy, Portugal, Spain Payment to Account: – Salaries – Sundry Expenses with Tax – e.g. Gas Expenses – Bank handling charges and interest payments Perform internal reconciliation and identify which invoices have been paid. Match externally between the payment in SAP Business One side and the bank side according to pre-defined matching criteria. Perform external reconciliation of transactions already posted in SAP Business One, for example, by manual payments or the payment wizard Cash/Check Deposit to a Bank Interim Account Bank statement reports For detailed information on Bank Statement Processing and the Bank Transaction Handling Facility (BTHF) Add-on refer to the Bank Statement Processing – BSP landing page in the Channel Partners Portal. You can also find useful information on Bank Statement Processing settings and working procedures in the Online Help

2-33

The key to the BSP functionality: Question

The highlighted row is one row out of many imported automatically from the bank. It represents bank transfer payment. The non highlighted rows below represent existing invoices in SAP Business One How does SAP Business One “know “which documents to apply to which payment?

2-34

The key to the BSP functionality

The key to the BSP functionality is the setup: To use bank statement processing you must define the correct system settings for ensuring that automation occurs as required. The settings you specify should complement the way the company works with bank statements and payment processing. If you follow the setup guidelines, then the functionality should greatly improve and speed up the flow of tasks associated with bank statement processing. It is important to emphasize that the efficiency of the bank statement processing is directly related to the accuracy of the system settings as relevant to the business

To use Bank Statement processing, choose Administration System Initialization Company Details Basic Initialization tab, and select Install Bank Statement Processing. You can do this at any time. Note: Once you have activated this functionality, the checkbox is disabled and cannot be deselected. The Payment Engine for incoming payments and the Cash and Bank Add-on are then no longer available. It is not recommended to work with the other external reconciliation options: Manual Reconciliation, Process External Bank Statement.

2-35

The BSP from the Customer Point of View

The end user:

Import/ manually enter bank statement

BankBank Statement Statement

edit existing (draft) bank statement

View finalized bank statements

SAP Business One:

Perform internal and external reconciliations

After SAP Business One has been configured, the customer can use bank statement processing:

The customer can automatically import or manually enter bank statements to perform internal and external reconciliations using the Bank Statement Details window. He can edit existing (draft) bank statements View finalized bank statements SAP Business One creates automatically: Payments and accounting transactions Internal reconciliation External reconciliation

2-36

Demo – Options for External Reconciliation

From the following slides, choose the option/s that suits your localization

2-37

Demo - Manual Reconciliation (1)

House Bank Account

External Bank Statement Printed statement ending balance

Open transactions in G/L account Manual Reconciliation * Option to deposit cash, check and credit card payments and post journal entries, or create payments.

Records are automatically created

Process External Bank Statement

Manual Reconciliation – This function enables you to verify and reconcile the transactions recorded in SAP Business One against the balance received from the bank and to create adjustments if required. In localizations that use the Manual Reconciliation function, the Process External Bank Statement menu option is not displayed in the main menu. The Process External Bank Statement option is not recommended to use since the Manual Reconciliation option creates a reconciled record in the Process External Bank Statement window (OBNK table). Let us see how an external reconciliation is made. Go to Banking Bank Statements and External Reconciliation Manual reconciliation. The External Bank Reconciliation - Selection Criteria window opens. Use this window to specify the parameters for the external bank reconciliation. In the Account Code field, you can choose the bank account for which you would like to process the external bank reconciliation. Under the bank’s statement title, you can see fields related to the actual bank statement. The Last Balance field displays the balance as you recorded it the last time you performed the external reconciliation. Let’s say you have received the statement for your bank updated for today. Instead of detailing all the transactions appearing in the statement, you simply type the ending balance of the statement, according to a certain date. Let us say you received an external bank statement for this bank, with an ending balance of XXX. The bank statement is updated for today, let us say, April 20th. Choose OK to open the Reconciliation Bank Statement window. The table displays the open (non-reconciled) transactions as recorded in your books. That is, transactions recorded in Business One.

2-38

Demo - Manual Reconciliation (2)

House Bank Account

External Bank Statement Printed statement ending balance

Open transactions in G/L account Manual Reconciliation * Option to deposit cash, check and credit card payments and post journal entries, or create payments.

Records are automatically created

Process External Bank Statement

In the Statement Number fields, you can type the number of the bank statement you have received from your bank. The Last Statement Balance is the balance calculated automatically by the system. Click the Display drop down menu to select one of the following options: All, Cleared, Uncleared. • Cleared – select to display the transactions chosen to be cleared in this event of reconciliation. • Once you reconcile the selected transactions they will not appear in this window anymore, unless you cancel the reconciliation. • To cancel reconciliations go to Banking Bank Statements and External Reconciliation Manage Previous External Reconciliations. The Type column displays the transaction type. DP stands for deposit. The Payment column - displays the amount on the debit side in the transaction. The Deposit column - displays the amount on the credit side in the transaction. You can add columns to the table by using the Form Settings option. Let us choose to clear two transactions. Under the Cleared column, select the boxes for each transaction you would like to clear with the current ending balance. You can see that the Cleared Book Balance field is updated according to the selected rows. The Difference field is updated respectively. You can see that there’s a difference of X GBP (not more than 10) between the cleared transactions and the ending balance. In this case, we can create adjustments. Choose Adjustments to open this window. You can choose to create documents from within this window. You can create journal entries, incoming payments, outgoing payments, checks for payment or deposits. In this case, we know that the X GBP difference is due to a certain fee that the bank charged the company. This can be reflected in a journal entry, so we leave the journal entry’s option chosen and choose OK. The journal entry window opens, and allows us to create a journal entry for clearing this difference. Type the required amount, select an offsetting account, and add the journal entry. You can see that in the table, the adjustment journal entry was added automatically and selected as cleared. The difference is now zero. It is possible to choose Save to save your preferences in this window before making the actual reconciliation. This allows you to check your transactions and the bank’s transactions again, to open the window again and reconcile after you are certain that your selections are correct. Since we are sure that our selection is correct, we can choose Reconcile. The reconciliation has ended successfully. A single record was now recorded in the Process External Bank Statement window. However, in localizations that use the Manual Reconciliation function, the Process External Bank Statement menu option is not displayed in the main menu. For this demonstration, we will now display it, using the Form Settings icon of the main menu window and open it. Choose the bank account and you can see that the Process External Bank Statement window displays a row with the amount we have just reconciled for this bank account. Since records are automatically created in this window, in localizations that use Manual Reconciliation, using this window as well, will cause a duplicity in the process, therefore, it should not be used.

2-39

Demo – Reconciliation (1)

House Bank Account

External Bank Statement

Process External Bank Statement transactions

Open transactions in G/L account Reconciliation * Option to post journal entries. Manual Automatic Semi-Automatic

External Reconciliation – Banking Bank Statements and External Reconciliation Process External Bank Statement. The Process External Bank Statement window displays the transactions recorded by your bank. You can enter information manually or automatically import from a file. These transactions should be reconciled with the transactions recorded in your books in SAP Business One. In European localizations it is possible to import the external bank statement automatically using the Payment Engine Add-on and perform bank reconciliation using the Cash and Bank function (Payment Engine is an SAP Business One add-on used to import and process bank statements. It consists of the following two programs: Import External Bank Statements and Cash and Bank Book). Let us enter few rows manually: • The first row represents a deposit you made to the bank. Enter a credit amount XXX GBP (make sure it matches a deposit recorded in SAP Business One). • The second row is for a fee charged by the bank for this deposit, and it’s on the debit side, for the amount of 5.99 GBP. • Now let us see how we reconcile these two transactions: The reconciliation is performed using the Reconciliation window. Banking Bank Statements and External Reconciliation Reconciliation. The External Reconciliation – Selection Criteria window opens. Select how the system should process the external bank statement: for a G/L Account or a Business Partner. After selecting, you can choose the relevant G/L account or business partner. Let us choose the bank account. You can perform Manual, Automatic, or Semi-Automatic external reconciliation. For automatic and semi-automatic external reconciliations you need to define some parameters so the system “knows” how to reconcile the bank transactions recorded in your books against the transactions recorded by your bank. With the Manual option you perform the reconciliation so you only need to define the Due Date To field. This means that all transactions whose due date is earlier than or identical to the displayed date will be included in the reconciliation. The current date is displayed be default. We will demonstrate the Manual option. We click the Reconcile button. 2-40

Demo – Reconciliation (2)

House Bank Account

External Bank Statement

Process Process External External Bank BankStatement Statement transactions transactions

Open transactions in G/L account Reconciliation * Option to post journal entries. Manual Automatic Semi-Automatic

The External Reconciliation window displays the bank transactions recorded in your books in SAP Business One (on the left) against the transactions recorded by your bank (on the right). Reconcile between matching transactions and, if required, perform balancing transactions to match your data with the bank’s data. In the Books side, find the deposit that was recorded in SAP Business One. On the right side, we have the open transactions in the external bank statement. Locate the row representing the deposit. Since we have two transactions with identical amounts in the book side and in the external statement side, we can reconcile them. Double-click the rows to move them to the bottom tables. You can see that there is no difference, since the amounts are equal. Now, in the external statement side double-click the row recorded for the fee. This row has no matching transaction on the books side. It was not recorded in SAP Business One since it was charged by the bank. Next, click Reconciliation. The system displays the message: Reconciliation is not balanced. Create balancing transaction? Choose OK to open the Journal Entry window. Here you can see that the bank account with the amount of the fee is already displayed. Now simply select an offsetting account to complete the journal entry. Click Add. The rows are reconciled. Now let us go back to the Process External Bank Statement window and select our bank account. You can see that the Reconciled column displays the external reconciliation number for the two rows. This means that the two rows in the external bank statement are now reconciled. Reconciled rows cannot be cancelled or modified, unless the reconciliation is cancelled. To cancel reconciliations go to Banking Bank Statements and External Reconciliation Manage Previous External Reconciliations.

2-41

Demo – Bank Statement Processing (BSP)

Bank Statement

Bank Statement Processing

2-42

Exercise – Options for External Reconciliation

Choose the option/s that suits your localization.

2-43

Review Question

Which option would you recommend Maria to use? And what if OEC Computers were located in Germany/ UK/ your localization?

2-44

Banking: Unit Summary

Main Terms: Incoming Payments. Outgoing payments. Deposits. Invoice is due (*). Payment on Account. Partial Payment. Payment Means Payment Method Clearing Account. Payment Wizard. External Reconciliation – 3 options: Manual Reconciliation Reconciliation Bank Statement Processing (BSP)

2-45

2-46

Unit 3: Financial Process

Contents: Manage the Chart of Accounts. Post a Journal Entry: Enter manual journal entry From a journal voucher Using a posting template As a recurring posting

3-1

Financial Process: Unit Objectives

After completing this unit, you will be able to: Set up a Chart of Accounts adapted to the company type Discuss the Chart of Accounts structure Discuss the effect of the standard processes on the Chart of Accounts Manage the Chart of Accounts Explain the ways to post journal entries Post a journal entry in SAP Business One.

3-2

Financial Process: Course Overview Diagram

Financial Process Topic 1: Manage the Chart of Accounts Topic 2: Post a Journal Entry

3-3

Financial Process: Business Example

You are implementing SAP Business One at a new customer, OEC Computers. Maria the accountant shows you some financial reports she issued in their legacy system and tells you that when looking at these reports she cannot see the overall financial status of the company. You ask Maria what is exactly the problem and you find out that the order of the accounts and their balances summary in the reports make them ambiguous. You tell Maria about the Chart of Accounts structure in SAP Business One that affects the Financial Reports structure. You then discuss with Maria the options for entering manual journal entries. You show her the different posting tools that can help her in entering those entries correctly.

3-4

Manage the Chart of Accounts

Financial Process Topic 1: Manage the Chart of Accounts Topic 2: Post a Journal Entry

3-5

Manage the Chart of Accounts: Topic Purpose

After completing this topic, you will be able to: Adapt a Chart of Accounts for a business According to accounting conventions: Discuss the Chart of Accounts structure Discuss the effect of the standard processes on the Chart of Accounts Manage the Chart of Accounts

3-6

Manage the Chart of Accounts: Business Example You are implementing SAP Business One at a new customer, OEC Computers. Maria, the accountant, tells you that moving to SAP Business One is a good opportunity for her to organize the company accounts structure. You show Maria the pre-defined Chart of Account templates in SAP Business One. You tell her that she can use this template as the basis for her Chart of Accounts and adjust it before go live. Maria says that this structure will help her in presenting the financial reports in a clear and structured way. You discuss with Maria the effect of the sales and purchasing processes on the chart of accounts and as a result on the financial reports. Maria has chosen a Chart of Account template and now, you show her how to adjust the accounts: add, remove and update.

3-7

Reflection Question: The Chart of Accounts How are the Business Partner Master Data balances presented in the Chart of Accounts?

The Business Partner Master Data balances do not appear in the Chart of Accounts. Accounts Receivable =

The receivable and payable control accounts accumulate the customer and vendor transactions in their balances.

Control Account

Hence, the Chart of Accounts presents the complete financial status of the company, as well as the Financial Reports (P&L, Balance Sheet).

A/R Invoice

Control Account

Debit

Credit

Accounts Receivable

Customer

Tax account

Tax account

5

Income account

Income account

100

105

We discussed the control accounts topic in unit 1: SAP Business One Standard Financial Processes.

3-8

The Chart of Accounts

The chart of accounts is an index of all G/L accounts used by your business. Every G/L account has: An account code An account description And other information that determines the functions of the G/L account.

To access the chart of accounts, select Financials

3-9

Chart of Accounts.

Chart Of Accounts

The Financial Process in SAP Business One

Financial Settings Chart of Accounts G/L Account Determination Sales and Purchasing process Good Receipt PO

A/P Invoice

Outgoing Payment

A/R Invoice

Payment

Deposit

Automatic Journal Entries

Manual Journal Entries

Reconciliations

Period End Closing

General Ledger, Chart of Accounts and Reports

Let us return to the steps that occur regularly in the financial process in SAP Business One (most steps, except the financial settings, are recurring and could happen in a different order. This is an example of a common scenario): We have introduced this process in the first Unit: SAP Business One Standard Financial Processes. We will now focus on the Chart of Accounts which is involved in the first and last steps of the process. Financial Settings - when you implement SAP Business One you define: Chart of Accounts Default G/L accounts to be used when transactions are created in the different business process: Sales, Purchasing, Inventory and more. General Ledger, Chart of Accounts and Reports – all steps affect the Journal Entry file, the account balances and the financial reports. For example, the control accounts that link the business partner sub-ledger accounts to the general ledger. Another example, is the Period End Closing – that transfer the balances of the Profit and Loss accounts to a Balance Sheet account and hence affect the Profit and Loss and the Balance Sheet results.

3-10

Define Valid Legal Chart of Accounts

You have 3 options for defining a Chart of Accounts: 1. Select a pre-defined Chart of Account template. 2. Define your own Chart of Accounts. 3. Import the chart of accounts data from a legacy system. Defining the entire chart of accounts is a long, complex procedure. You can use one of the existing standard charts of accounts and adapting it to the company’s needs. Although using one of the existing standard chart of accounts will suffice in many situations, some organizations should take this opportunity to determine what the chart of account structure should look like to accommodate their needs. You need to make decisions about the chart of accounts together with the client accountant.

Discuss the options conceptually – the practice of choosing a pre-defined Chart of Accounts template will be done in TB1200 course. You have 3 options for defining a Chart of Account: Select a pre-defined Chart of Account template. Select a valid legal chart of accounts. Note! once you have started to work with the company database you cannot choose a different Chart of Accounts template. You can however add, update or remove accounts in the Chart of Accounts. Define your own Chart of Accounts by selecting User Defined option. Import the chart of accounts data from your legacy system using the Data Transfer Workbench (DTW) tool. The DTW as a tool for importing accounts will be discussed in TB1200.

3-11

Chart of Accounts Structure in Association with Financial Reports Level 1 Bank account

Assets

Accounts Payable Account

Liabilities

Account Type

Financial Reports

Balance Sheet Accounts

Balance Sheet

Cap. + Res.

Revenue Account

Period End Closing

Turnover

Trial Balance

General Ledger

Cost of Sales

Operating C.

Profit and Loss Accounts

Non-Operating

Profit and Loss Statement

Tax + Extr.

The Chart of Accounts is organized by drawers and levels. Let us look at this example of Chart of Accounts (the chart of accounts varies according to the company’s localization). The organization of the chart of accounts follows GAAP (Generally Accepted Accounting Principles) in which there is a separate “drawer” for accounts representing: Assets, Liabilities, Equity (Capital and Reserves), Revenues (Turnover), Cost of Sales, Expenses (Operation Costs), Financing (Non-Operating Income and Expenditure), and Other Revenues and Expenses (Taxation and Extraordinary Items). These drawers, which have been defined by SAP and cannot be changed, organize your accounts by level in a logical fashion appropriate to your financial accounting and reporting processes. In the General Ledger, we distinguish between Balance Sheet Accounts and Income Statement Accounts, also called Profit and Loss Accounts. Balance Sheet Accounts: The first 3 drawers: Assets, Liabilities, Equity (Capital and Reserves) hold the Balance Sheet Accounts, such as the Sales Tax account and the Accounts Payable Account. The bookkeeping balance of these accounts is kept from one fiscal year to the next. The Balance Sheet Accounts – reflect the monitory value of the company - stock, assets, debt, etc. Profit and Loss Accounts: The last 5 drawers: Revenues (Turnover), Cost of Sales, Expenses (Operation Costs), Financing (Non-Operating Income and Expenditure), and Other Revenues and Expenses (Taxation and Extraordinary Items) hold the Profit and Loss Accounts, such as the Income Accounts. Note that in some localizations, the lower drawers are not all profit and loss account drawers. The bookkeeping balance of these accounts has to be cleared at the end of each fiscal year – this is the Period End Closing process (will be discussed in Unit 4: Financial Periods Process). The Profit and Loss Accounts - reflect the changes in the company value, such as: sell stock – cost of goods sold, increase revenues. Reports: Financial reporting requirements drive most of the initial settings and configuration decisions. The different financial reports run on the account balances relevant to a selected date range and present them according to their drawer, level and type: The Balance Sheet - summarizes the value of the business assets liabilities, and owner’s equity accounts. The Trial Balance - details for each account: beginning balance for a particular period, all of the debits and credits, and the ending balance. Profit and Loss Statement – after the end of the fiscal year, the balances of the expense accounts will be subtracted from the balances of the revenue accounts to come up with the profit or the loss for the fiscal year.

3-12

Financial Reports

Balance Sheet Accounts Asset Accounts

Liability Accounts

Profit and Loss Accounts Revenue Accounts

Equity Accounts

Balance Sheet Assets

Expense Accounts

Profit & Loss Statement Revenue ./. Expenses

Liabilities Equity

= Profit/Loss

The profit or loss will either increase or decrease the equity on the balance sheet.

3-13

Reflection Question: Balance Sheet Accounts Debit Assets

Credit

In Unit 1: SAP Business One Standard Financial Processes, we discussed the fact that you can predict an account’s typical balance according to its activity type.

Liabilities Equity

Following this and after reviewing the automatic transactions created in SAP Business One, choose Debit or Credit for each drawer of the Balance Sheet accounts.

3-14

Reflection Question: Balance Sheet Accounts Answer

Debit

Assets

Credit

+

Liabilities

+

Equity

+

3-15

Levels in the Chart of Accounts

Level 1

Level 2

Level 3

Level 4

Freehold Land

Assets

General Ledger

Liabilities

Tangible Assets

Cap. + Res.

Turnover

Fixed Assets

...

Cost of Sales

Land & Buildings

...

...

Buildings

Plant & Machinery Formation Expenses

... Intangible Assets

Operating C.

Non-Operating

Level 5

Current Assets

... Patents, and so on

Title Active Account

Tax + Extr.

A chart of accounts arranges a company's general ledger accounts in a hierarchical structure. The top level in the structure (level 1) consists of sections or groups for different type of accounts (assets, liabilities, capital and reserves, turnover, and so on). The number of account groups depends on the localization that was selected when the company was created and cannot be modified by the user. The system displays the section as a cabinet drawer (see figure). Each drawer has a section title, which you cannot change. The system displays lower-level titles in blue and normal active accounts in black. Accounts that you have entered in the G/L Account Determination (default accounts) are displayed in green. Levels 2 through 4 can contain either active accounts or titles that combine several active accounts. Level 5 only contains active accounts. Because only active accounts can be posted to in SAP Business One, it is a good practice to have all your active accounts at the same level. In reports, a title account summarizes all the balances of each active account below it.

3-16

Demo – Manage the Chart of Accounts

We will demonstrate the two functions for maintaining the chart of accounts: Choose Financials

Chart of Accounts to:

View the chart of accounts. Change the properties of an account. Tip: to view and change some of the account properties choose the Accounts Details button. Add a new G/L account to an existing title. Tip: to add a new account you must switch to Add mode (Data

Add).

All changes in the definition of an account are logged under Tools Choose Financials

Edit Chart of Accounts to:

Add a new title Delete an account. Tip: you can only delete an account that has no postings. Move title and accounts within the structure of the chart of accounts.

3-17

Change Log….

Demo - G/L Account Properties and Account Details in the Chart of Accounts

Balance Confidential External Code Account Type Account Details Code for Exporting Default VAT group Active or On Hold Relevant to budget Alternative Account Name

When you select an account in the Chart of Accounts, the system displays information for the account, including the balance. You can navigate using the orange arrow to the line item display of the account. In the line item display, the system displays the debit values in black and the credit values in green and in parentheses. In the chart of accounts display, you can mark an account as Confidential. Only users with General Authorization to confidential accounts can see and use confidential accounts. In the External Code field you can enter an alternative code for the account. The alternative code can be used by external programs that you integrate with SAP Business One. In the Account Type field, you define a Profit and Loss account as revenue account (Sales) or expense account (Expenditure). All other accounts should have the account type other. Accounts that you mark as Cash Accounts appear as cash accounts in the Cash Flow report. Generally, all your bank accounts should be defined as cash accounts. Accounts that you mark as Control Accounts can be assigned to business partners. If you choose Account Details, you can enter additional information about the account: You can define an Alternative Account Name for the account. This can be useful when your company works in different languages. You can set a G/L account as Active or On Hold for a certain period of time You can set a default VAT group (or tax code) for the account to be used by default when creating manual journal entry. If you mark the account as Relevant to Budget, and you have defined a budget, the system will apply a check before posting to the account. Information about Account Segmentation in the Appendix. 3-18

The G/L Account and the Standard Financial Processes in SAP Business One – Recap Account Type

G/L Account Determination

Automatic Journal Entries

Tax Account in the Tax group Balance Sheet Accounts

Other Control Account – Accounts Receivable in Customers

A/R Invoice

Sales Profit and Loss Accounts

Default Accounts in Items Expenditure Control Account

3-19

Debit

Credit

Accounts Receivable

Customer

Tax account

Tax account

5

Income account

Income account

100

105

Exercise – Manage the Chart of Accounts

3-20

Post a Journal Entry

Financial Process Topic 1: Manage the Chart of Accounts Topic 2: Post a Journal Entry

3-21

Post a Journal Entry: Topic Purpose

After completing this topic, you will be able to: Explain the ways to post journal entries Post a journal entry in SAP Business One

3-22

Post a Journal Entry: Business Example

You are implementing SAP Business One at a new customer, OEC Computers. Maria, the accountant, asks you how she can record business transactions that do not have a document in SAP Business One. You ask Maria about the type of transactions she is looking for. Maria mentions that for very small expenses she prefers using manual journal entries rather than using the A/P Invoice and the Outgoing Payment documents. She also tells you about the rent payment OEC Computers pays on a monthly basis. In addition, Maria says that at the end of the year she records the annual bonus amount for OEC Computers’ employees. You tell Maria that she can use the Journal Entry function. Moreover, you can help her in defining several templates that will help her to record the manual journal entries correctly.

3-23

Journal Entry

Set Document Settings

Manual Journal Entries

Journal Entries file

SAP Business One Document

A/R Invoice

Good Receipt PO

Incoming Payment

Automatic Journal Entries

Deposit

A/P Invoice Outgoing Payment

In SAP Business One, a journal entry is automatically posted from many documents, such as A/R and A/P invoices. Additionally, you can manually post a journal entry directly to a G/L account or to a business partner subledger account. All journal entries are posted to one file in SAP Business One – the Journal Entries file. You can set various defaults for journal entries. You can also change some document settings for an individual journal entry.

3-24

Origin Documents

o A/R Inv IN

Jour na

l Entrie

s

Reference to Origin Document Type and Origin Document Number

ices

l Journa s Entrie JE

o A/P Inv PU

ices

All journal entries refer to the type and number of the origin document (for example, IN for customer invoices) in case it was created as a result of adding another document. The origin documents of manual journal entries are the journal entries themselves. For this reason, they refer to themselves and are of type JE (journal entry). Most journal entries refers to other document types (for example, IN for customer invoices or PU for AP invoices). The Transaction Journal Report shows all the journal entries of a certain origin type in chronological order, sorted by transaction number. From here, you can go directly to the origin document for the posting. To run the Transaction Journal Report, choose Financials Financial Reports Accounting Transaction Journal Report or choose the icon on the upper tool bar. The Document Journal report is a similar report. Here you can use more options to select and tailor the output. To run the Document Journal, choose Financials Financial Reports Accounting Document Journal. The General Ledger report provides a view of the selected general ledger and business partner accounts and lists all line items that you have posted to the account. To run the General Ledger report, choose Financials Financial Reports Accounting General Ledger.

3-25

Demo - Journal Entry

To post a manual journal entry, choose Financials

Journal Entry.

Note: using Document Settings. Choose Administration choose Journal Entry on the Per Document tab.

System Initialization

Document Settings and

You can also use Form Settings to change some document settings for an individual journal entry. You can also show and hide fields from the rows, using Form Settings. For example, you can show the Distribution Rule field if you want to allocate the amount from a row to a profit center.

3-26

Journal Entry Form Fields: Document Header Data Journal Entry

Document Header Data

Expanded Editing Mode for a Line Item G/L Acct/BP Code

1000 1775

Add

G/L Acct/BP Name

Expenses Bank

Cancel

Debit

Credit

100,00 100,00

Cancel Template

Display FC

Display SC

The screen for entering journal entries manually is divided into three areas: document header data, extended editing mode for an item, and the items table. Header: In automatic journal entries created by the documents in SAP Business One, the fields are filled automatically from the document fields. In manual journal entries you set the values: The system automatically enters a number in the document header. This number is incremented with every transaction. You can define numbering series for journal entries on the Document Numbering screen, under the Administration System initialization Document Numbering. The three dates in the header default to the current system date but you can change them: Posting Date. This date determines the posting period, and therefore the fiscal period for financial reporting. You can post to an earlier or later date if the posting period is Unlocked for posting. Due Date. The date the transaction is due. Document Date. The date used for tax reporting purposes. You can use the Ref. 1 and Ref. 2 fields to enter references to associated actual documents. You can also classify the document using a transaction code, for example, as an accrual/deferral document, depreciation document, or value adjustment document. Choose Administration Setup Financials Transaction Codes to maintain the transaction codes. The system copies the description of the transaction code to the Details field.

3-27

Journal Entry Form Fields: Expanded Editing Mode for a Line Item Form Settings Journal Entry

Document Header Data

Expanded Editing Mode for a Line Item G/L Acct/BP Code

1000 1775

G/L Acct/BP Name

Expenses Bank

Debit

Credit

100,00 100,00

Line Items Table

Add

Cancel

Cancel Template

Display FC

Display SC

You can show or hide the expand editing mode. The mode always refers to the row that is currently selected and displays all the item fields for you to enter the relevant data. The Ref. 1, Ref. 2, Project, and Details fields are usually filled with the content of the fields from the header area. Using Form Settings, you can define which columns show in the line items table. Furthermore, you can store values in the settings that the system uses as default values when you enter a journal entry. In the line, place the cursor in the G/L Acct/BP Code field and press Tab to display the accounts list, or CTL + Tab to display the Business Partners Master Data list. Alternatively, you can search for an account or a business partner using the G/L Acct/BP Name field. After choosing the account or the business partner, enter an amount in debit or credit. You can enter multiple lines with debit or credit amounts. In every line you add SAP Business One will recommend a balancing amount which you can update. Once the journal entry is completed and balanced choose Add.

3-28

Reverse Transactions Standard Reverse Transaction Incorrect Posting

Account 1

Account 1 2050

0

2050

0

Account 2 0

2050

0

2050

Account 2

2050

2050

2050

2050

2050

2050

2050

2050

Increase in Totals

Reverse Transactions with Negative Amounts Account 1

Account 2

2050 -2050 0

2050 -2050 0

0

0

Reset of Totals

Users can make input errors. As a result, the journal entry created may contain incorrect information. To provide an audit of the correction, the user must first reverse the journal entry in error, and then capture the document correctly. You can specify whether reversal transactions are performed: As standard reverse transactions As reverse transactions with negative amounts The standard reverse transaction causes the system to post the debit in error as a credit and the credit in error as a debit. This corrects the balance of the accounts. However, the standard reverse transaction causes an additional increase in the totals on the debit and credit sides, which might be misleading. The reverse transaction with negative amounts causes the system to post the debit in error as a negative debit and the credit in error as a negative credit. This not only corrects the balance of the accounts but also the totals. It depends on the country whether standard reverse transactions or reverse transactions with negative amounts are required. Choose Administration System Initialization Company Details and select the Use Negative Amount for Reverse Transaction field on the Basic Initialization tab to switch on the reverse transaction with negative amounts. This is relevant for automatic and manual journal entries. Canceling transactions – For most documents you have a canceling document. For Example, you issue an A/R Credit Memo to cancel an A/R Invoice. This document will create a canceling transaction automatically. For manual journal entries - you locate the journal entry you wish to cancel and choose Cancel from the Data menu. You approve the system message, enter any necessary changes and add the canceling journal entry. In the Remarks of the cancelling journal entry you will have ‘Reversal’ and the number of the journal entry you cancelled. The reverse method will be the standard one or the negative amount method if you defined it in the Company Details window, under the Use Negative Amount for Reverse Transaction field. 3-29

Exercises – Enter Manual Journal Entries

3-30

Posting Tools

You can post a Journal Entry by: Entering a manual journal entry like we have just seen in the previous slides. Using a posting template As a recurring posting. From a journal voucher.

3-31

Posting Template with Percentages

Journal Entry

Template Type: Template:

Code: Utility

Percentage Utility

Description: Utility Bills

G/L Account/BP No.

G/L Account/BP Name

6320

Utilities

6321

Electricity

V550

Public service

Debit% Add Add Cancel Cancel

25

Credit% Cancel Template

75 100

You can create posting templates for journal entries that have a very similar structure. These templates can contain account numbers but you can also just specify an account description in a line item if you do not yet know which exact account will be used for this line item. Instead of fixed amounts, only percentages are entered here. These percentages indicate how the total amount is distributed among the line items. The illustration shows an example of how you can allocate out a utility expense, like the electric bill, to its component expenses at a specific percentage rate. The posting template is stored under a code and with a description. Choose Financials Templates to enter and maintain posting templates.

Posting

When you enter a journal entry manually, choose Percentage in the Template Type field and enter the template code in the Template field or press tab and choose it from a list. Enter an amount in one of the line items and the template will allocate the amounts to the other lines based on the percentage rate.

3-32

Recurring Postings Code: Rent

Description: Rental Payment

G/L Account/BP No.

G/L Account/BP Name

Debit

620000

Property Rent

1000

161000

Girobank Account

Frequency:

Monthly

Next Execution:

Daily Weekly Monthly Quarterly Half Yearly Annually One Time

1000

Valid to

On 1 10/01/10

09/30/14

Template Frequency List

Credit

For Manual Journal Entries Template Type: Recurring Posting

Not Executed Yet

Inactive

SAP Business One features a recurring postings function for similar, fixed amount journal entries created on a regular basis. Choose Financials Recurring Postings to enter and maintain recurring postings. Recurring postings use a template that is stored with a code and a description. In this template, you define (among other things) the frequency in which the journal entry is supposed to be created and until when the recurring posting is valid. The possible entries in the Frequency field include: Daily, Weekly, Monthly, Quarterly, Half Yearly, Annually: You must also specify the next execution date for these entries. One time: Although a one-time recurring posting seems a bit odd, it serves a special purpose. With this you can schedule a journal entry for a specific date. Template: Journal entries that you need repeatedly but not on a regular basis can be created as this type. You can access these templates from the manual journal entry. To do so, you must specify Recurring Posting in the Template Type field. Not executed yet: If you do not need the recurring posting at present, you can turn it off with this entry. In the Valid To field, you can enter a date until which the recurring posting is valid and will be executed by the system. The system duplicates the original recurring posting (instance 0) every time the execution date arrives. Once you use this instance and add it to the system, it will be deleted. You can display a list of all the recurring postings in the system. You can then adjust these postings and confirm them. You can also configure the system so that the execution list is displayed automatically in the execution date as soon as you log on. Choose Administration System Initialization General Settings and select the Display Recurring Postings on Execution indicator on the Services tab to activate this service for your user. You can add recurring postings to the cash flow, which appear in green in the report. 3-33

Post a Journal Voucher: Business Example

Maria tells you that every now and then, a student intern that works in OEC Computers, helps her in recording manual journal entries to the accounting system. She is happy to get the assistance but wants to be able to review the journal entries the student is entering before they are registered permanently to the journal entries file. You tell Maria about the Journal Voucher option.

3-34

Journal Vouchers

Entries in Entries in Journal Journal Voucher Voucher

Create Journal Voucher

Correct and Update

Journal Entries File Journal Entries File

Journal Voucher (Folder of Journal Entry Drafts)

SAP Business One offers a two-stage procedure for creating journal entries. You can create the journal entries as drafts first, correct and post them later. When the user is creating a journal voucher it is used for storing several journal entry drafts. You can change journal voucher as long as they have not been posted yet. Then, you can access the journal voucher, make any necessary corrections, and post the entire journal voucher. You do not have to post each journal entry individually. If you do want to post the journal entries individually, however, you must create a separate journal voucher for each journal entry draft. You can save an unbalanced journal vouchers as long as it is in the draft mode. To create, change, and post journal vouchers, choose Financials

Journal Vouchers.

You can remove a journal voucher or delete an entry from a journal voucher, as long as they have not been posted yet. Choose the Data menu or, right-click the journal voucher row.

3-35

Exercises – Posting Tools

3-36

Financial Process: Unit Summary

Main Terms: Chart of Accounts. Chart of Accounts template Chart of Accounts Structure in Association with Financial Reports Balance Sheet accounts, Profit and Loss accounts The Journal Entries file: Automatic journal entries Manual journal entry Journal vouchers Posting templates Recurring postings

3-37

3-38

Unit 4: Posting Periods Process

Contents: Process overview Defining periods – highlights Post transactions to periods Internal Reconciliation Process - monitor and perform internal reconciliation Period-End Closing - at the month end vs. at year end

4-1

Posting Periods Process: Unit Objectives

After completing this unit, you will be able to: Discuss the process of defining, managing and closing periods. Utilize the process of internal reconciliation in G/L accounts and business partners (system and user). Review system reconciliations. Perform internal reconciliation (manual). Prepare for Period-End Closing. Perform Period-End Closing.

4-2

Posting Periods Process: Course Overview Diagram Posting Periods Process Topic 1: Process Overview Topic 2: Take a Look at Defining Periods Topic 3: Internal Reconciliation Process Topic 4: Period-End Closing

4-3

Process Overview

Posting Periods Process Topic 1: Process Overview Topic 2: Take a Look at Defining Periods Topic 3: Internal Reconciliation Process Topic 4: Period-End Closing

4-4

Process Overview: Topic Purpose

After completing this topic, you will be able to: Discuss the process of: Defining Managing Closing periods.

For additional information on working with Posting Periods refer to the How-To Guides: How To Work with Multiple Open Posting Periods in 8.8. Tips for Year End Closing.

4-5

Process Overview: Business Example (1) You are implementing SAP Business One at a new customer, OEC Computers. You explain to Maria, the accountant, that a mandatory step in creating the company database is defining the company Posting Periods: The Main Posting Period - the Fiscal Year, which usually corresponds to the calendar year. The Sub-Periods in the fiscal year. You both discuss the financial processes in OEC Computers. The company creates the annual financial statement once a year. However, they need twelve posting periods for their internal controlling. You create a new company database and define the Fiscal Year as the calendar year and the sub-periods as Months. You define settings that relate to posting periods. Maria asks what she needs to do in order to record a certain document or a journal entry to a posting period or sub-period. You tell her that SAP Business One determines automatically which posting period the transaction belongs to based on the transaction’s posting date.

4-6

Process Overview: Business Example (2)

Since OEC Computers creates the annual financial statement once a year. They will use the twelve posting periods for their internal controlling. They will not run the Period-End Closing process at the end of each month, they will do it at the end of the main Posting Period - the Fiscal Year. There are many tasks they do at month end. You discuss those tasks, for example sending debtor statements for outstanding debts. You also tell Maria about the Internal Reconciliation Process and how it can help her in managing the business partner accounts at the end of each month. You discuss the steps Maria will have to take before Year-End Closing.

4-7

Posting Periods – Process Overview

Sub-Periods: Months

tti Se s ng

2010-01 2010-02 2010-03 …….

Fiscal Year: 2010 Additional settings

Settings

o ati er Op

Posting date

l na

Sub-period

*Optional

/ nd d E End ri o r Pe Yea ing os Cl

Period End Tasks:

Period End Closing

Change Period Status

Year End Tasks

Year End Closing

Change Period Status

The steps in the Posting Periods Process: Define the Main Posting Period - the Fiscal Year. Define the Sub-Periods in the fiscal year: Year/ Quarters/ Months/ Days. Note! Once you have created a posting period you cannot remove it from the system; however you can change the posting date range. Define settings relate to posting periods: Period Indicator, Document Numbering, G/L account determination. In everyday work, enter documents and manual journal entries with a Posting Date that will be registered automatically to the appropriate sub-period. Sub-periods allows the user to control posting into them – so postings to each month can be controlled. The Period End Closing process is typically done at the end of a financial period which is typically a year in length. You can, however, close a Sub-Period using the Period-End Closing window. This action will zero all profit and loss account balances to the retained earnings account. There are many tasks done at month end and in our example can be considered Period End tasks. For example – review and perform internal reconciliation, send debtor statements for outstanding debts and print financial reports. These tasks are not related to preparing and submitting accounts but are instead related to ongoing business management. You have the option to close or inactivate the Sub-Period status by locking it using the Period Status filed in the Posting Period window. In the Posting Periods window you have the option to automatically assign the status Closing Period to periods that have already ended. At the end of the year you perform all the tasks necessary to Year End Closing, such as record adjusting entries received from accountants and other reporting entities. You close the year using the Period-End Closing window. You choose the fiscal year and the corresponding Sub-Periods. If you have already closed Sub-Periods during the year, Close the last period of the fiscal year. The key purpose of the Period-End Closing is to prepare the accounts for submission to the authorities and therefore involves the re-setting of the P&L account to zero so that the next period can begin again collecting P&L data that is relevant to it. You then close or inactivate the Sub-Posting Periods in the fiscal year by locking them using the Period Status field in the Posting Period window.

4-8

Reflection Question: Posting Periods

Let us discuss an example of a company that closes a period on a quarterly basis: A delivery note with a large amount of items was posted on March 31st. The A/R Invoice for this delivery was issued on April 2nd. Would that be a problem in the Profit and Loss report for the first quarter?

4-9

Take a Look at Defining Periods

Posting Periods Process Topic 1: Process Overview Topic 2: Take a Look at Defining Periods Topic 3: Internal Reconciliation Process Topic 4: Period-End Closing

4-10

Take a Look at Defining Periods: Topic Purpose

After completing this topic, you will be able to: Discuss the tasks for defining periods.

4-11

Take a Look at Defining Periods: Business Example

You ask Maria, the accountant, how she wants to define the company Posting periods: You both discuss the financial processes in OEC Computers. The company creates the annual financial statement once a year. However, they need twelve posting periods for their internal controlling. Maria decides to create a calendar year as the main posting period (the Fiscal Year) and define Months for sub-periods. You create a new company database and define the periods. You define settings that relate to posting periods: Period Indicator, Document Numbering, G/L Account Determination.

Considerations when defining posting periods: Legal reporting. Business consolidation. It is also important to mention that one main objective of creating posting periods is to analyze the financial performance of a company between periods. For example, compare the current accounting period with the previous period of the same year, or the same period of last year. SAP Business One provides different reports for this purpose: Balance Sheet Comparison, Trial Balance Comparison, Profit and Loss Statement Comparison. Choose Financials Financial Reports Comparison.

4-12

Defining Posting Periods

4

1 Quarters

Year 3

1

2

Fiscal Year

12

1

11

2 3

10 Months

Days

9

4 5

8 7

6

When you create a new company database, you create the posting periods for the first fiscal year. Posting periods split the fiscal year into sub-periods. Sub-Periods are created automatically by SAP Business One in the fiscal year. The available sub-periods are: Year (one sub-period) Quarters (four sub-periods) Months (twelve sub-periods) Days (any number of sub-periods) Using this information, the system automatically creates the corresponding number of posting periods. You can change these periods, if necessary. The first posting period must be defined at the time the company database is created. Afterwards, to set up new posting periods, go to: Administration

System Initialization

Posting Periods.

From here you can update the generated periods (such as date ranges) and create new ones (by choosing New Period). You can also set or change the start of the fiscal year. You can create posting periods for future fiscal years at any time.

4-13

Posting Periods Caveats Bear in mind the following important caveats: The beginning of the fiscal year can only be the first of the month. Periods Order - it is recommended to create the posting periods from the oldest and up. Consider the oldest data you would like to migrate to determine the first period. You cannot have overlapping posting periods. G/L account determination is saved by period and is copied from the previous period to the next. You can change the G/L account determination before starting to work with a new period. You need to make decisions together with the client accountant.

Note! The practice of how to create a new company will be covered in TB1200.

4-14

Internal Reconciliation Process

Posting Periods Process Topic 1: Process Overview Topic 2: Take a Look at Defining Periods Topic 3: Internal Reconciliation Process Topic 4: Period-End Closing

4-15

Internal Reconciliation Process: Topic Purpose

After completing this topic, you will be able to: Utilize the process of internal reconciliation in G/L accounts and business partners (system and user). Review system reconciliations Perform internal reconciliation (manual)

4-16

Internal Reconciliation Process: Business Example Maria asks you about the Internal Reconciliation Process. She remembers you told her that, among other processes, it relates to PeriodEnd Closing: Maria is happy to hear that most internal reconciliations are performed automatically by SAP Business One these are the System Reconciliations. You give Maria examples of the automatic reconciliations: In the Business Partners Master Data accounts when an Incoming Payments is based on an A/R Invoice (or a Credit Memo on an A/R Invoice). In clearing G/L Accounts when you deposit a check received by an Incoming Payment. You tell Maria that SAP Business One also performs Partial System Reconciliations if, for example, a customer partially pays an A/R Invoice. However, there will be cases where Maria will perform internal reconciliations herself – these are the User Reconciliations. For example, when OEC Computers pays a vendor in advance and receives the A/P Invoice later on, Maria will have to internally reconcile the Vendor Master Data and match the Payment with the A/P Invoice transactions.

4-17

Reflection Question: Internal Reconciliation Process

When Maria looks at the vendor’s account balance, it reflects the advanced Outgoing Payment and the A/P Invoice transactions. Then why is it important for Maria to reconcile the vendor master data internally?

4-18

Internal Reconciliation Process: System Reconciliation - Full Reconciliation

2

1

Outgoing Payment based on an A/P Invoice (or invoices)

A/P Invoice

Debit

Vendor Expense / Clearing account

Debit

Credit

202 202

Credit

Bank Account

Automatic Internal Reconciliation

Vendor

202

202

in the Vendor Master Data * Could be multiple A/P Invoices that are fully paid by the same Outgoing Payment

2

When you post a payment for a customer or vendor, the system reconciles the payment with the selected invoice (or invoices), and closes the transactions. Relevant for a credit memo too. Internal reconciliation refers to the matching and clearing of open credit items to open debit items within an account (therefore internal). This is necessary for accounts where a business process is not regarded as fully complete until each credit amount has a corresponding debit amount: For customer accounts, a receivable (debit) must be followed by an incoming payment (credit). For vendor accounts, a liability (credit) must be followed by an outgoing payment (debit). For payments made with the Payment Wizard or Bank Statement Processing, the system automatically proposes (and sometimes automatically matches) payments with invoices or credit memos based on criteria that you supply, such as due date and amount.

4-19

Internal Reconciliation Process: System Reconciliation - Partial Reconciliation

2

1 A/P Invoice

Debit

Vendor Expense / Clearing account

Outgoing Payment based on an A/P Invoice

Credit

Debit

202 202

Bank Account

Automatic Partial Internal Reconciliation in the Vendor Master Data

Vendor

Credit 100

100

2 Balance Due: Credit = 102

Balance Due in the Vendors Liabilities Aging Report

When issuing manual Incoming or Outgoing Payments, you can also partially reconcile an open invoice or a payment if the payment amount does not match. If a partial payment was made, the system adjusts the Balance Due appropriately. When the remaining balance on the invoice will be paid the invoice will be fully reconciled and the Balance Due will become zero.

4-20

Internal Reconciliation Process: User Reconciliation – Manual Type: Business Partner Account In this example, Customer Master Data Selected

Origin

Posting Date

Amount

Balance Due

Amount to Reconcile

IN

10.07

1000.00

1000.00

1000.00

IN

17.08

2000.00

2000.00

1500.00

RC

24.08

(1000.00)

(1000.00)

(1000.00)

RC

24.08

(1500.00)

(1500.00)

(1500.00)

IN

01.09

3000.00

(3000.00)

0.00

Manual Internal Reconciliation in the Customer Master Data

If the payment was posted as Payment on Account (that is you did not select any invoices) the payment and the invoices stay open (unreconciled). This can happen when the customer pays you on account according to an agreement you have and you post the invoices when the actual deal happens, or when you forgot to select the invoices. In these cases you need to reconcile the account with the Reconciliation function – User Reconciliation. To perform an internal reconciliation for a business partner, choose Business Partners Internal Reconciliations Reconciliation. Note: you can also access internal reconciliation from the Account Balance in the business partner master data if you have not selected Display Account Balances Grouped by Control Accounts in the General Settings. To perform an internal reconciliation for a G/L account, choose Financials Reconciliations Reconciliation.

Internal

When you internally reconcile a business partner or G/L account, you can choose a reconciliation type. If you choose the reconciliation type Manual: The system displays all transactions for the account that are open on the current date. If desired, you can change the date to see open transactions for a different date.

4-21

Internal Reconciliation Process: User Reconciliation User Reconciliation: G/L Account If your company uses the perpetual inventory system you usually reconcile the Allocation account that is being credited when you issue a Goods Receipt PO and debited in an A/P Invoice. You can perform user reconciliation in this account (and in general) using one of the three reconciliation types: Manual Automatic Semi-automatic

A/P Invoice

Good Receipt PO

Go to Financials

Internal Reconciliation

Reconciliation.

For information on Automatic and Semi-Automatic User Internal Reconciliation types refer to the appendix.

4-22

Demo - Internal Reconciliation Process: User Reconciliation - Manual

When you internally reconcile a business partner or G/L account, you can choose a reconciliation type. If you choose the reconciliation type Manual: The system displays all transactions for the account that are open on the current date. If desired, you can change the date to see open transactions for a different date. You manually select matching debits and credits. When the total of all the credit items selected for reconciliation matches the total of all the selected debit items, you can perform the reconciliation by choosing Reconcile. If the total of the selected credit items does not match that of the debit items, you can either: Partially reconcile one of the transactions by changing the Amount to Reconcile for the transaction Create a journal entry to post the difference as an adjustment that results in the selected transactions becoming reconciled. Note: for business partner reconciliation you can also create an incoming or outgoing payment as an adjustment. You can manually reconcile one G/L account at a time. You can manually reconcile one business partner account at a time, or you can reconcile across multiple business partner accounts (for example, a business partner that is both a vendor and a customer). Journal Entries posted by the reconciliation process have the origin “JR”. Journal entries are posted when the system processes cash discounts, exchange rate differences, deferred tax, and withholding tax. Note: use the SHIFT and double click combination on the Amount column header to sort by absolute values.

4-23

Internal Reconciliation Process – Terminology

Internal Reconciliation: System Reconciliations Statuses: Full Partial User Reconciliations Types: Manual Automatic Semi-automatic User reconciliation statuses: Fully reconciled: – Fully Closes transactions –

Creates a journal entry to post the difference as an adjustment that results in the selected transactions becoming reconciled.

–

Note: for business partner reconciliation you can also create an incoming or outgoing payment as an adjustment.

Partially reconciled: of one (or more) of the transactions by changing the Amount to Reconcile for the transaction

4-24

Manage Previous Reconciliations

Account Cancel Reconciliation

2000 3000

Account 2000 3000

5000 2000

5000 2000

The system assigns a unique reconciliation number to each completed internal reconciliation (manual, automatic, and semi-automatic). The system also saves and assigns a unique number to system reconciliations, for example, reconciliations during payment processing. The Manage Previous Reconciliations function allows you to review or cancel a user reconciliation. You can select reconciliations by account, reconciliation date, and reconciliation number, and then cancel them individually. This function does not allow you to reverse reconciliation postings. The postings still exist even though the reconciliation has been canceled. If you want to reverse these postings, you must reverse them in the general ledger in the usual way by choosing Data Cancel in the journal entry display. To cancel a user reconciliation, choose either: Business Partners Financials

Internal Reconciliations

Internal Reconciliations

Manage Previous Reconciliations

Manage Previous Reconciliations

4-25

Exercise - Internal Reconciliation Process

4-26

Period-End Closing

Posting Periods Process Topic 1: Process Overview Topic 2: Take a Look at Defining Periods Topic 3: Internal Reconciliation Process Topic 4: Period-End Closing

4-27

Period-End Closing: Topic Purpose

After completing this topic, you will be able to: Prepare for Period-End Closing Perform Period-End Closing

You need to make decisions together with the client accountant.

4-28

Period-End Closing: Business Example

Let us go back to the business example we discussed in the first topic of the unit – the Process Overview: Since OEC Computers creates the annual financial statement once a year. They will use the twelve posting periods for their internal controlling. They will not run the Period-End Closing process at the end of each month, they will do it at the end of the main Posting Period - the Fiscal Year. However, there are many tasks they do at month end - Period End Tasks. For example – internal reconciliation and sending debtor statements for outstanding debts. You discuss the steps Maria will have to take before Year-End Closing.

4-29

Period-End Closing: at the Month End vs. at Year End *Optional

Change the Period Status to Closing Period

Period End Tasks:

Period End Closing

Change Period Status to Locked Change to Closing Period

Year End Tasks

Year End Closing

Change Period Status to Locked

Move all P&L account balances to the Retained Earnings account and zero the P&L accounts

Period End Tasks and Year End Tasks: SAP Business One supports such activities in a variety of ways. It is possible to carry forward the balances of Balance Sheet accounts and Business Partners using the Period-End Closing window for the following localizations: Austria, Belgium, Chile, Costa Rica, Czech Republic, France, Guatemala, Hungary, Italy, Mexico, Portugal, Slovakia, and Spain.

The Period End Closing process is typically done at the end of a financial period which is typically a year in length. You can, however, close a Sub-Period using the Period-End Closing window. This action will zero all profit and loss account balances to the retained earnings account. Changing the Period Status to Closing Period - to prevent users from creating documents for the previous fiscal year, you can change the status of the period you are about to close to Closing Period. This means that only authorized users can post data, documents, and transactions. There are many tasks done at month end and in our example can be considered Period End tasks. For example – review and perform internal reconciliation, sending debtor statements for outstanding debts and print Financial Reports. These tasks are not related to preparing and submitting accounts but are instead related to ongoing business management. You have the option to close or inactivate the Sub-Period status by locking it using the Period Status field in the Posting Period window. In the Posting Periods window you have the option to automatically assign the status Closing Period to periods that have already ended. At the end of the year you perform all the tasks necessary to Year End Closing, such as record adjusting entries received from accountants and other reporting entities. You close the year using the same window: the Period-End Closing window. You choose the fiscal year and the corresponding Sub-Periods. If you already closed Sub-Periods during the year, Close the last period of the fiscal year. The key purpose of the Period-End Closing is to prepare the accounts for submission to the authorities and therefore involves the re-setting of the P&L account to zero so that the next period can begin again collecting P&L data that is relevant to it. You then close or inactivate the Sub-Posting Periods in the fiscal year by locking them using the Period Status field in the Posting Period window. 4-30

Reflection Question: Period-End Tasks (1)

Let us go back to the example of a company that closes a period on a quarterly basis: A delivery note with a large amount of items was posted on March 31st. The A/R Invoice for this delivery was issued on April 2nd. We discussed the effects of this scenario on the periodic financial reports. Let us see the journal entries including the involved accounts, of the documents that were issued in different periods: the Delivery and the A/R Invoice based on that delivery.

4-31

Reflection Question: Period-End Tasks (2) Effects on the P&L Accounts: Period 1

Period 2

Delivery

Debit

Cost of Goods Sold acc. Inventory acc.

A/R Invoice

Debit

Credit Customer

Credit

44000

35600

Income account

35600

44000

A/R Invoice - the revenue are booked to period 2.

Delivery - the costs of the good sold causes a negative effect on profitability in period 1.

Reflects the periodic Financial Reports: If the business is closing periods and reports on a quarterly basis, it shows a ‘loss’ for period 1 and a ‘gain’ in period 2.

Therefore, one of the Period-End Tasks will be: To ensure you invoice all deliveries in the same period.

4-32

Prepare for Period-End Closing: Period End Tasks

Here are more examples for Period-End Tasks : Make sure that all transactions for the period were posted properly, including adjustments and accruals. Make sure all Journal Vouchers are posted. Internal Reconciliation of Allocation and Expense Clearing Accounts. Tax and legal reports for the local authorities. Print: Trial Balance (a balance of each account and a current status). Vendor Liabilities Aging and Customer Receivables Aging reports to reconcile receivable accounts with the G/L Inventory Audit report to reconcile inventory with the G/L Financial Statements Make a backup of your database and put it in an off-site storage location

Internal Reconciliation of Allocation and Expense Clearing Accounts: perform the reconciliation regularly at the end of the month; otherwise, you have a high number of transactions to reconcile at the end of the year. To simplify the process, you can run automatic reconciliations.

4-33

Prepare for Year-End Closing: Year End Tasks

Here are some examples for Year-End Tasks : Post final transactions for the period in all modules Post any final adjusting entries in the G/L Close the last period of the fiscal year Print a final detailed Trial Balance Print Financial Statements Set up a new fiscal year (if not done already). Backup – to save the status of the previous fiscal year. Post Doubtful Debts – refer to the next slides Post exchange rate differences, conversion differences See additional tasks in the appendix– Adjustments with Automatic Reversals Deferrals with Automatic Reversals Refer to the Tips for Year End Closing How-To Guide.

Backup - It is not always possible to reconstruct a report backdated to the cut-off date in SAP Business One. Therefore, we strongly recommend that once you have entered and completed all transactions for the previous fiscal year, and before entering any transactions for the new fiscal year, you back up your production database. The backup saves the status of the previous fiscal year. Exchange rate differences, conversion differences – will be discussed in unit 6.

4-34

Account Clearing Before Period Closing – Business Example: Period end process Validate transactions Manual journal entries

Perform cross checks

Internal reconciliation

Match balances with sub-ledger

Print financial reports & sub-Ledger reports

Validate automatic journal entries on a regular basis to ensure correct transactions

Create accruals and provisions (like doubtful debts), periodic entries and corrections

Some cross-checks to match the taxes to the sales and purchasing. Validate ‘suspense accounts’ and high risk accounts like price & exchange rate difference accounts

Ensure the internal and external reconciliations are done.

Match the account receivables accounts with the aging reports Match the inventory accounts with the inventory audit report

Print the trial balance, P&L statement together with relevant sub-ledger reports (aging, inventory audit report, etc….)

Here is an example of the tasks list a controller performs as part of the period end closing process: Validate transactions: following the acquaintance of the controller with the company processes, he can validate automatic transactions. It could be a random check in defined time intervals. Manual journal entries: details on doubtful debts in the next slide. Perform cross checks/ Match balances with sub-ledger: the matching a controller does between the financial reports and other reports before closing a period to validate correctness: Comparing the balance of the Account Receivables accounts in the Balance Sheet with the Aging Reports summary for the selected period. Comparing the balance of the inventory accounts in the Balance Sheet with the Inventory Audit report. A controller will also match the tax account balances with the Profit and Loss balances according to the company’s localization and industry rules.

4-35

Doubtful Debts Due Date of Invoice

Adjustments for Doubtful Debts (Control Account)

+ z Days + y Days Time

+ x Days 3%

4%

5%

250

Customer 1000

Transfer to Doubtful Debts (Expense Account)

250

250

In some localizations it is handled this way: If a customer does not pay its liabilities after a certain number of days after the due date, it may be that the customer is not able to pay. In this case a part of its liabilities is considered to be doubtful debts. This part increases over time because it becomes more and more unlikely that it will finally pay its liabilities. If you define the numbers of days after the due date and the doubtful debt percentages in the system, the system supports you in calculating and posting the doubtful debts. To define the doubtful debts, choose Administration Setup Financials Doubtful Debts. The system calculates and displays the doubtful debts if you run the Customer Receivables Aging report. The calculated doubtful debts are displayed in the last column of the report result. To post the doubtful debts to the control account for doubtful debts, select the doubtful debts that you want to post in the report result and choose Go To Journal Entry. The system opens a journal entry and creates a first line item. This line item posts the amount of doubtful debts on the credit side of the customer account and simultaneously to the credit side of the control account for doubtful debts. This account is an adjustment account to the normal accounts receivables account. You must enter the second line item, which posts the doubtful debts to the debit side of an expense account. The Customer Receivables Aging report bases its calculation on the full amount of the invoices ,or it can be calculated for the amount of a specific invoice. Therefore, you can use the automatic reversal to reverse this posting at the first day of the new period, depending on the company financial policy. We will discuss in details the Customer Receivables Aging report and the Dunning process in Unit 5: Controlling Reports. 4-36

Perform Period-End Closing And now perform the Period-End Closing: Run the period-end closing routine to close the fiscal year : Zero all Profit and Loss account balances to the Retained Earnings account (a Balance Sheet account Capital and Reserves drawer), that now contains the total brought forward cumulated profit. Adjust the Balance Sheet accounts. Close or inactivate the period by locking it using the posting period window.

Period-End Closing

Move all P&L account balances to the Retained Earnings account and zero the P&L accounts

Change Periods Status to Locked

The key purpose of the Period-End Closing is to prepare the accounts for submission to the authorities and therefore involves the re-setting of the P&L account to zero so that the next period can begin again collecting P&L data that is relevant to it. You then close or inactivate the Sub-Posting Periods in the fiscal year by locking them using the Period Status field in the Posting Period window.

4-37

Period-End Closing Utility Water Expense Account Balance

Accept and Post Proposal Proposal

Automatic Journal Entries: Posting Date: December 31st

Debit Water Expense Account Period-End Closing Account

Period-End Closing period

11500 11500

Debit

Posting Date: January 1st Period-End Closing Account Following posting period

Retained Earning Account

Credit

Credit 11500

11500

At the end of a period (month, quarter, or year), you must transfer the balances of the P&L accounts to a retained earnings account. Choose Administration

Utilities

Period-End Closing to run Period-End Closing.

With the Period-End Closing function, you can choose P&L accounts and periods, and specify a retained earnings and period-end closing accounts. When you execute the period-end closing, the system generates a list of proposals for closing entries. You can accept each proposal individually. After you accept the proposals, the system transfers the account balances from the Expense and the Revenue accounts to the Period-End Closing account on the same day (the last day of the period). This sets the accounts balances to zero. At the same time but with the first day of the following posting period as posting date, the system transfers the balances form the Period-End Closing account to the Retained Earnings account (the Period-End Closing is a clearing account). Two transactions are created for each account and two journal entries are automatically created to reflect those transactions. Now, the Retained Earnings account, which is a Balance Sheet account, contains the total brought forward cumulated profit. Journal Entries posted by the Period-End Closing Utility have the origin “BC”. Note that you can store the results initially as a report and then post them at a later stage. If you make postings after entering the balances carried forward, you need to repeat the periodend closing routine to include these subsequent postings.

4-38

Demo - Period-End Closing

Administration

Utilities

Choose all P/L accounts

Period-End Closing . choose the periods in the fiscal year until today.

Choose the Retained Earning and the Period End Closing accounts. Choose 2 P&L accounts Enter a Document Date and a Due Date be registered in the created journal entries. Execute the report. Review the 2 journal entries created for one of the accounts Review the account balance in the Chart of Accounts.

4-39

Review the Remarks field to

Exercise - Period-End Closing

4-40

Posting Period Status

Closing Period

12

Current period Unlocked

1

11

2

12

1

11 3

10

2

Previous fiscal year

10

9

9 5

8 7 Locked

3

4 Current fiscal year

6

4 5

8

Locked or Unlocked

7

6

When a posting period is Unlocked, anyone can post transactions with a posting date that falls within the period start and end. At end of a posting period, after all business transactions belonging to that period have been posted to the system, you can lock the period so that no additional postings can be made. Choose Administration System Initialization Posting Periods, and then click the orange navigation arrow for the period you want to lock. Change the period status from Unlocked to Locked. As well as Unlocked and Locked, you can set the period status to: Unlocked Except Sales. If a period has this status, you can post any document or journal entry to the period except for documents from the Sales A/R menu. Closing Period. If a period has this status, only authorized people can post transactions to the period. The authorization “Period Status: Closing Period” is set using Administration System Initialization Authorizations General Authorizations. You can have the system automatically change the status to Closing Period by selecting the checkbox on the posting periods screen. As seen in the figure, during the first periods of the new fiscal year you may need to make postings for the year-end closing of the previous fiscal year. In this case, the last period of the old year has the status “Closing Period”.

4-41

Reflection Question: Period-End Closing and the Financial Reports (1) What would be the influence of the Period-End Closing on Financial Reports such as Balance Sheet and Profit and Loss?

4-42

Reflection Question: Period-End Closing and the Financial Reports (2)

Balance Sheet – When issuing the report while in the following posting period - the total brought forward cumulated profit (or loss) will be reflected in the Retained Earnings account balance (refer to the dates in the automatic journal entries created by the Period-End Closing utility). Profit and Loss – For previous periods – SAP Business One allows you to issue the report for previous periods with the expense and revenue account balances before the Period-End Closing. For the following posting period – The period begins again collecting P&L data that is relevant to it the expense and revenue account balances will not show the previous period balances allowing you to issue a clean report.

The financial reports in SAP Business One include options for filtering closing adjustments and balances: Balance Sheet and Trial Balance options: Add Closing Balances Ignore Adjustments Profit and Loss Statement option: Ignore Adjustments

4-43

Period-End Closing: Unit Summary

Main Terms: Posting Periods: Main Posting Period - the Fiscal Year. Sub-Periods in the fiscal year. Period-End Closing process: Period End Closing Year End Closing Period Status Profit and Loss account balances; Retained Earnings account Internal Reconciliation Process System Reconciliations Statuses: –

Full

–

Partial

User Reconciliations Types: –

Manual

–

Automatic

–

Semi-automatic

User reconciliation statuses: –

Full

–

Partial

4-44

Unit 5: Controlling Reports

Contents: We will discuss the reports in their financial accounting context: Financial Reports Cash management reports Company analysis and planning

5-1

Controlling Reports: Unit Objectives

After completing this unit, you will be able to: Discuss the effect of standard processes in SAP Business One on controlling reports. Decide when to use each report. Interpret typical report data.

5-2

Controlling Reports: Course Overview Diagram

Controlling Reports Topic 1: Financial Reports Topic 2: Cash Management Reports Topic 3: Company Analysis and Planning

5-3

Controlling Reports: Business Example

You are implementing SAP Business One at a new customer, OEC Computers. Your main contact at the customer site is Maria the accountant. You have almost completed the system setup and you are now discussing some controlling tools that Maria will use periodically. You give Maria some guidelines regarding the purpose and the outcome of each report. The reports will help Maria to see the big picture of the business and to control financial processes internally and externally.

5-4

Financial Reports

Controlling Reports Topic 1: Financial Reports Topic 2: Cash Management Reports Topic 3: Company Analysis and Planning

5-5

Financial Reports: Topic Purpose

After completing this topic, you will be able to: Discuss the effect of standard processes in SAP Business One on Financial Reports: Balance Sheet Trial Balance Profit and Loss Describe when to use each report. Interpret typical report data.

5-6

Financial Reports: Business Example

You review the Financial Reports with Maria: Maria mentions that you discussed the influence of the Period-End Closing on the Financial Reports: Balance Sheet and Profit and Loss. This is because you usually issue the Financial Reports at the last day of each financial year/ period to get the financial status of the company. You demonstrate to Maria the financial reports in SAP Business One. You then discuss the matching a controller does between the financial reports and other reports before closing a period.

Run day of the Financial Reports – the company usually gets last year related documents after the end of the financial year/ period. Therefore, they also issue the reports for the closing period, during the following period. The matching a controller does between the financial reports and other reports before closing a period - this was already mentioned in unit 4: Posting Periods Process: Comparing the balance of the Account Receivables accounts in the Balance Sheet with the Aging Reports summary for the selected period. Comparing the balance of the inventory accounts in the Balance Sheet with the Inventory Audit report. A controller will also match the tax account balances with the Profit and loss balances according to the company’s localization and industry rules.

5-7

Financial Reports: Question At the end of the year you issue the Balance Sheet report. You present the report in a summarized form. For the Assets Drawer you see the following result: Balance Sheet: Assets: Fixed Assets: Current Assets:

10.04% 89.96%

Total Assets:

100%

From a financial controller’s point of view – What are the consequences of this result on the financial status of the company? Where is the money invested?

5-8

Chart of Accounts Structure in Association with Financial Reports Level 1 Bank account

Assets

Accounts Payable Account

Liabilities

Account Type

Financial Reports

Balance Sheet Accounts

Balance Sheet

Cap. + Res.

Income Account

Period End Closing

Turnover

Trial Balance

General Ledger

Cost of Sales

Operating C.

Profit and Loss Accounts

Non-Operating

Profit and Loss Statement

Tax + Extr.

Let us go back to the Chart of Accounts Structure in association with Financial Reports. We discussed this topic in the Financial Process unit, in the Manage the Chart of Accounts topic. We said that in the General Ledger, we distinguish between Balance Sheet Accounts and Income Statement Accounts, also called Profit and Loss Accounts. Let us look at this example of Chart of Accounts (the chart of accounts varies according to the company’s localization): Balance Sheet Accounts: The first 3 drawers: Assets, Liabilities, Equity (Capital and Reserves) hold the Balance Sheet Accounts, such as the Sales Tax account, the bank account and the Accounts Payable Account. The bookkeeping balance of these accounts is kept from one fiscal year to the next. The Balance Sheet Accounts – reflect the monitory value of the company - stock, assets, debt, etc. Profit and Loss Accounts: The last 5 drawers: Revenues (Turnover), Cost of Sales, Expenses (Operation Costs), Financing (NonOperating Income and Expenditure), and Other Revenues and Expenses (Taxation and Extraordinary Items) hold the Profit and Loss Accounts, such as the Income Accounts. Note that in some localizations, the lower drawers are not all profit and loss account drawers. The bookkeeping balance of the Profit and Los accounts has to be cleared at the end of each fiscal year – this is the Period End Closing. The Profit and Loss Accounts - reflect the changes in the company value, such as: sell stock – cost of goods sold, increase revenues. Financial Reports: The different Reports run on the account balances relevant to a selected date/ date range and present them according to their drawer, level and type. Mostly issued at the last day of each financial year/ period. Choose Financials Financial Reports Financial and then Balance Sheet or Trial Balance or Profit and Loss Statement to generate these financial reports. You can create comparison reports that compare the figures from a specific company or fiscal year with those of a different company or fiscal year. Choose Financials Financial Reports Comparison. 5-9

Balance Sheet The Balance Sheet presents the financial position of a business, the company’s value.

Dates

Up to a certain date

Drawers/ Type

All Balance Sheet Accounts: Assets, liabilities, and owner’s equity accounts

Calculation

Run on the account balances of the Balance Sheet accounts and summarizes their values: Total Assets = Total Liabilities + Equity. Also: Relative percentage of each balance in the company’s assets, liabilities, and equity set. Each first-level title (drawer) equals 100 %, and its related titles and active G/L accounts display their relative percentage.

Example of documents and accounts affecting the report

A/R Invoice - Accounts receivables, Sales tax account. Outgoing Payment - Bank account. Good Receipt PO - Inventory account

5-10

Trial Balance The Trial Balance displays a summary of all accounts and/or business partner balances. Can comprise a particular cross section.

Dates

Selected period

Drawers/ Type

Selection from: All accounts (Profit and Loss and Balance Sheet) All business partners master data.

Calculation

Example of documents and accounts affecting the report

For each account: total debit and credit amounts, and the ending balance = debit amount – credit amount + opening balance amount. For the entire report: if the trial balance includes all the accounts in a complete period, the debit and credit side totals must be equal. Total report balance = 0 (the same as in each and every journal entry). A/P Invoice - Vendor, Accounts Payable account, Expense/ Clearing/ Inventory account, Output Tax account.

5-11

Profit and Loss Statement The Profit and Loss Statement shows the profit (or loss) of your business for the fiscal year/ selected period. It explains the change in the company’s value. Dates

Selected period

Drawers/ Type

All Profit and Loss Accounts: The last 5 drawers: Revenues, Cost of Sales, Expenses, Financing, and Other Revenues and Expenses

Calculation

The balances of the Expense accounts will be subtracted from the balances of the Revenue accounts to come up with the profit or the loss for the fiscal year/ selected period.

Example of documents and accounts affecting the report

A/R Invoice - Income account. A/P Invoice - Expense account.

5-12

Financial Reports: Reflection Question The Balance Sheet calculation is: Total Assets = Total Liabilities + Equity.

How is the calculation balanced if the report considers only the Balance Sheet accounts?

5-13

Financial Reports

Balance Sheet Accounts Asset Accounts

Liability Accounts

Profit and Loss Accounts Revenue Accounts

Equity Accounts

Balance Sheet Assets

Expense Accounts

Profit & Loss Statement Revenue ./. Expenses

Liabilities Equity

= Profit/Loss

The profit or loss will either increase or decrease the equity on the balance sheet.

5-14

Exercise - Financial Reports

5-15

Cash Management Reports

Controlling Reports Topic 1: Financial Reports Topic 2: Cash Management Reports Topic 3: Company Analysis and Planning

5-16

Cash Management Reports: Topic Purpose

After completing this topic, you will be able to: Discuss the effect of standard processes in SAP Business One on monetary reports. Describe when to use each report. Interpret typical report data.

5-17

Cash Management Reports: Business Example

Maria tells you that controlling the customer receivables status and minimizing payment time is a crucial task for her: You tell Maria that SAP Business One provides her with the tools to control customer receivables. You discuss the Customer Receivables Aging Report and the Dunning process that enable active tracking of open A/R Invoices. You also discuss the Cash Flow that helps you forecast the monetary status of the company.

5-18

Cash Management Reports: Question 1

OEC Computers invests in a new product and applies for a loan from the bank. What report would the bank ask for before approving the loan? Does the bank need to see a past status of the company or a forecast?

5-19

Cash Flow Report Cash flow is a forecast report – The report provides information about the liquidity of your business that is beyond the scope of a Profit and Loss Statement. It displays the Balance Sheet Accounts which reflect the monitory value of the company. Totals and Balances (Per Time Interval) of:

Cash Credit Card Vouchers Checks Received Customer Liabilities Payables to Vendors

The cash flow provides information on the liquidity of your company. The cash flow report in SAP Business One lists the totals and balances of the following accounts for the selected interval: Accounts that represent cash holdings Accounts that expect a cash flow in the future (incoming and outgoing)

5-20

Cash Flow Report in SAP Business One To: Today + 5 days

Due Date

Security Level

Document

Account

Today

Cash Accounts

Payment to vendor (Bank transfer)

House Bank

Today + 3

Credit/ Checks

Incoming Payment

Credit Card Clearing acc.

Today + 4 days

Customer Liabilities

A/R Invoice

Customer acc.

Today + 5 days

Debts to Vendors

A/P Invoice

Vendor

Cumulative Balance: Today + 5 days

Debit

Credit 5,000

10,000 2,000

3,000

4,000

The Cash Flow runs on: Open transactions – not reconciled (with the option to Display Fully Reconciled Postings). The transaction Due Date. The Cash Flow is displayed according to: The level of probability that the transaction will turn to cash (incoming and outgoing). Time Intervals.

The probability that a cash flow can be expected varies considerably. For this reason, the system assigns the balances to various security levels. Security here means the level of certainty with which an account balance is relevant to the cash flow. The following security levels exist: Cash (all cash accounts are assigned to this level. You define an account as cash account in the Chart of Accounts G/L Account Properties). Credit card vouchers (all accounts for credit card vouchers are assigned to this level) Checks received (the check clearing account is assigned to this level) Customer Liabilities (all customer accounts are assigned to this level) Payables to Vendors (all vendor accounts are assigned to this level) Postings that you have not yet made when the report is compiled can be included manually and assigned to a security level. Furthermore, you can decide if you want to include recurring postings or journal vouchers into consideration. Choose Financials

Financial Reports

Financial

5-21

Cash Flow to run the cash flow report.

Cash Management Reports: Question 2

The Sales process affects the cash status of the business. How can OEC Computers improve the Cash Flow Results? What kind of options does a company have to optimize their cash flow? Background: although a company is profitable, it can go bankrupt due to cash flow problems. Keeping a positive cash flow is therefore important. How can they ensure that a timely invoice is generated to enhance positive cash flow?

5-22

Customer Receivables Aging Report

Define Payment Terms for your customers that influence sales documents due date and expected payments, Cash Flow, Aging report and Dunning: Default payment terms for customers and vendors in System Initialization Payment terms in the Business Partner Master Data Payment terms in documents (Due Date field) The Customer Receivables Aging report is the monetary controller of the Sales-A/R module. This report shows all the money owed to a company and how long it has been owed. This is a key report for managing the company’s cash flow as well as evaluating the credit quality of customers.

To generate this report, select Business Partners Receivables Aging.

5-23

Business Partner Reports

Aging

Customer

Aging Reports

Customer Receivables Aging Aging Date

Business Partner

Funtech

Surf O’bello Microchips

Document

Due Date

Balance Due

A/R Invoice

1,000

A/R Invoice

20,000

A/R Invoice

500

A/R Invoice

750

A/R Invoice

3,100

A/R Invoice

1,500

Future Remit

Aging Intervals 0-30

31-45

46-75

76-100

1,000 20,000 500 750 3,100 1,500

A/R Invoice

270

A/R Invoice

4,700

A/R Invoice

11,000

11,000

42,820

11,000

4,600

24,700

2,250

270

100%

25.68%

10.74%

57.68%

5.25%

0.63%

The money owed to a company and how long it has been owed

270 4,700

SAP Business One is shipped with two reports for monitoring the due dates for open customer receivables and vendor liabilities: Customer Receivables Aging Vendor Liabilities Aging Both reports allow you to restrict the information to certain business partner accounts. You can specify an aging date after which the due dates are to be calculated. You can also specify interval in days, months or periods after which items that are overdue are to be grouped. In 8.8 release you have a flexible definition of interval in days (see example in the slide). You can display the report by posting date or due date. Both reports include expandable list with all BP and documents allowing you to drill down to the details in one screen (new display in 8.8 release). You can run the Customer Receivable Aging report from either Financials Financial Reports Aging or from Business Partners Business Partner Reports Aging. You can run the Vendor Liabilities Aging report from either Financials Aging or from Business Partner Reports Aging.

Financial Reports

Accounting Accounting

You can also post a doubtful debt provision journal entry from the Customer Receivables Aging report. To set up doubtful debt provision, choose Administration Setup Financials Doubtful Debts. We discussed the doubtful debt option in unit 4: Posting Periods Process. More Enhancements in 8.8: Group By Customer/Vendor or Group by Sales Employee/Buyer option. New option: “Ignore Future Remit“ checkbox. When this option is selected, the future remit amount is

subtracted from the balance due amount. More columns in the report. 5-24

Cash Management Reports: Question 3

What proactive steps can OEC Computers take to improve the Cash Flow Results? What kind of options does a company have to ensure timely payments? How can they prevent “bad debts”?

5-25

Dunning Process

A complementary tool to enhance a positive cash flow will be to send debtor statements for outstanding debts. For this purpose you need to configure the Dunning System.

Dunning System setup: Prior to running the Dunning Wizard you must setup the Dunning Levels and Dunning Terms in the company: Go to Administration

Setup

Business Partners.

Each customer must be assigned with a dunning term. It is possible to setup a default dunning term for new customers on the Administration Initialization General Settings BP tab.

System

For details on the Dunning Wizard and Dunning Terms refer to the appendix. For more information on the Dunning Process refer to the how-To guide: How to Set Up an Automated Dunning Process.

5-26

Exercise – Aging Reports and Dunning

5-27

Company Analysis and Planning

Controlling Reports Topic 1: Financial Reports Topic 2: Cash Management Reports Topic 3: Company Analysis and Planning

5-28

Company Analysis and Planning: Topic Purpose

After completing this topic, you will be able to: Discuss the effect of standard processes in SAP Business One on company analysis and planning reports. Describe when to use each report. Interpret typical report data.

5-29

Company Analysis and Planning: Business Example

Maria says that in previous years they ended the fiscal year with much more expenses than expected: OEC Computers would like to be able to plan their expenses for a fiscal year and track them during the year. They also want to track profit and loss: Internally, by department. And at the project level. Reports that provide financial analysis of cost planning and profitability inside the company: Budget Project Cost Accounting

You need to make decisions about Budget, Projects, and Cost Accounting definitions together with the client accountant.

5-30

Budget - Question

When the company decides on an annual expense budget, what kind of data is being considered? What can be a good reference for this kind of forecast?

5-31

Budget Management

The Budget module helps you manage and track company expenses. The purpose of budgeting is to provide a forecast of revenues and expenditures i.e. to construct a model of how our business might perform if certain strategies, events and plans are to be carried out. This way, the actual financial operation of the business can be measured against the forecast. In SAP Business One a budget is based on the data you enter, which specifies the maximum amount that can be allocated to a particular G/L account. You can block the creation of transactions for G/L accounts that exceed their budget limit.

In the course of routine work, the application checks the debit side of G/L accounts for which a budget has been defined. If the budget is exceeded, the application either issues a warning or blocks the action, depending on the chosen setting. Note! the budget functionality works with calendar months only. For more information on initializing and working with budget refer to the How To Manage Budgets in Release 8.8 guide.

5-32

Budget Management and the Perpetual Inventory system

If your company manages a perpetual inventory system, you can use the Purchase Accounts Posting System. This option includes the recording of expense accounts in journal entries created by purchasing documents that affect the inventory valuation. You can use the budget functionality to control these purchase accounts, thus monitoring your expenses in real time. This functionality can be used where the purchase accounting option is enabled. Starting from 8.8 version Purchase Accounting is available for all localizations.

To activate the Purchase Accounts Posting System, from SAP Business One Main Menu, choose Administration System Initialization Company Details Basic Initialization tab and select the Use Purchase Accounts Posting System checkbox. Once journal entries have been made, this setting cannot be modified.

5-33

Defining Budget Settings

Steps to activate the budget functionality: 1.

First, the budget functionality has to be initialized in your company. You can manage your budget on an annual or monthly basis. You have the option to Mark all P&L accounts as budget accounts.

2.

Define Budget Distribution Methods. Budget Distribution Methods allow you to automatically divide the budget amount among the months of year. Note: budget distribution methods are not relevant for working with an annual budget.

Budget Initialization - Administration System Initialization Budget tab select the Budget Initialization checkbox.

General Settings, and on the

You have the option to Mark all P&L accounts as budget accounts. Choose Yes. As a result the Relevant to Budget checkbox is selected in all your profit-and-loss G/L accounts. Note You can find this checkbox in Financials

Chart of Accounts

Account Details pushbutton.

You can manually select non profit-and-loss G/L accounts to be relevant to the budget by selecting the Relevant to Budget checkbox for each G/L account. If the Purchase Order, Goods Receipt POs, and Accounting checkboxes are selected, the application performs a check for deviation from the budget during the generation of purchase orders, goods receipt POs, and A/P invoices. Budget Distribution Methods - choose Financials Methods.

5-34

Budget Setup

Budget Distribution

Use Budget Scenarios

3.

Budget scenarios are used mainly for displaying budget reports. Using a scenario, you create a prognosis of a particular situation for the company's budget and obtain important information about what the budgetary balance would be according to the selected scenario.

Optimistic Scenario

Main Scenario

Pessimistic Scenario Note that during routine work, deviation from the budget is checked against the main budget scenario only. The other scenarios are used for budget reports!

Account 100000

Account 200000

Account 300000

Account 400000

Account 500000

Scenarios are used to create a prognosis of a particular situation in the company's budget and to obtain important information about what the budgetary balance would be according to the selected scenario. For example: an optimistic scenario versus a pessimistic scenario. When you set up a new company, the application provides a default scenario called Main Budget. This scenario cannot be altered. Note that in the course of routine work, deviation from the budget is checked against the main budget only. The other scenarios are used only for budget reports! The Import Budget Scenario function lets you import budget data from a company to the company with which you are currently working, and duplicate a budget scenario in the same company, for the same fiscal year or for the next fiscal year. Note! make sure during the operation that the G/L account codes in the source company match those in the target company. The Copy Budget Scenario function lets you copy budget data from a budget scenario into a target budget scenario in the same company for the same fiscal year or for the next fiscal year. From the SAP Business One Main Menu, choose Financials

5-35

Budget Setup

Budget Scenarios.

Defining Budget Amounts

4.

After you have defined budget scenarios, it is now time to define budget amounts.

5.

Now the budget is defined for the selected accounts, enabling you to perform an analysis by comparing the defined budget with the actual business activity.

Defining a budget - From the SAP Business One Main Menu, choose Financials Budget.

Budget Setup

In the Scenario field, choose the scenario for which you want to define a budget. In the Local Debit / Credit column specify an amount in local currency for each G/L account. Note that: You can define budget amounts only for G/L accounts which are defined as Relevant to Budget in the Chart of Accounts. You can specify an amount in local currency for each G/L account SAP Business One checks the budget for deviations against the debit side. Thus, alerts are only triggered for accounts with a budgeted amount in the Debit column. You can use the Credit field for sales accounts to set revenue targets which you can track with the budget report.

5-36

Budget: Getting Down to Work In the course of routine work, when you create a transaction against an expense G/L account which is Relevant to Budget, a check for deviation from the main budget scenario is executed, and if the budget is exceeded, an alert is issued. In the Authorization window, under the Financials module, there is a Budget clause in which you can define authorizations for users to confirm budget deviation in case a G/L account exceeds the budget and an alert is displayed (according to the definition under General Settings Budget tab page). The Budget Report enables you to display the company’s budget data according to your requirements. This report analyzes the business activities that occur during a defined period, with reference to a selected budget scenario. Company Budget Reports: The standard company reports can be displayed along with the budget data. You can run the budget reports according to a preferred budget scenario.

Financials

Financial Reports

Reports Financials Budget Reports.

Budget Reports

Budget Reports

Budget Report.

Balance Sheet/Trial Balance/Profit and Loss Statement

5-37

Cost Accounting: Business Example Assuming your company is divided to departments: Sales Support Service And Accounting In this example, the Sales department brings more revenues than the other departments. On the other hand they have a lot of expenses: travel, hotel, dinner, conferences, advertising, bonuses etc. As the accountant of the company, how could you know the bottom line for each department? How can you issue a Profit and Loss report for a department?

5-38

Cost Accounting: Profit Centers and Sort Codes Center_z OEC Computers

Sales

Support

Accounting

Service

Sort Code Admin

To use the cost accounting functions in SAP Business One, you must define the cost centers or departments in your company as profit centers. You can then compile a profit and loss statement for each profit center in every period. You can combine your profit centers into groups by using a sort code. Choose Financials

Cost Accounting

Profit Centers to define and maintain profit centers.

The system automatically creates a center zero profit center (Center_z) that collects the costs and revenues that cannot be clearly distributed to other profit centers because not enough information is available. The Center_z profit center can also record costs that are not to be reported in internal cost accounting. For example, if you want to show only 80% of your rental expenses as costs, you can assign the remaining 20% to Center_z. The Center Z is used when defining distribution rules

5-39

Cost Accounting: Distribution Rules Profit Center Total

Center_z PC 1

PC 2

PC 3

100

0

100

0

0

100

0

0

100

0

100

0

0

0

100

500

0

100

200

200

20

2

4

8

6

Dist. Rule PC 1 Distribution Rules for DIRECT Costs and Revenues

PC 2

PC 3

Distribution Rules for INDIRECT Costs and Revenues

Area

Employees

Distribution rules define how the costs or revenues posted for an account are distributed to the profit centers. When you create a profit center, the system automatically creates a distribution rule with the same name. This rule (which cannot be changed) is configured so that the system posts all the costs or revenues to the relevant profit center. In other words, the system does not split the amounts. You can use these distribution rules for direct costs and revenues, which you can assign uniquely and in full to a specific profit center. For example, in OEC Computers, company car expenses are assigned directly to the “service” profit center since only technicians hold a company car. You cannot assign indirect costs and revenues directly to a profit center. Instead, you allocate them to one or more profit centers using a distribution rule. In the distribution rule, you specify how the amount is to be allocated amongst the profit centers. You can allocate by percentage or ratio, for example, you can distribute heating costs to the profit centers in accordance with the size of the heated areas. Similarly, you can distribute voluntary employee benefits among the number of employees. If you cannot define the total allocation (because you do not have enough information at the time), the system allocates any unassigned costs or revenues to the Center_z profit center. When you have the information you need, you can change the distribution rule so that the system corrects the distribution accordingly. Choose Financials rules.

Cost Accounting

Choose Financials Cost Accounting the allocations for distribution rules.

Distribution Rules to define and maintain distribution Table of Profit Centers and Distribution Rules to display

5-40

Cost Accounting: Link Between General Ledger and Cost Accounting Heating Costs X Distribution Rule

area

Journal Entry Journal Entry 1000 Heating Heating Costs Costs 1000 Distr. Distr. Rule Ruleareaarea

Profit Center 1

Profit Center 2

Profit Center 3

For costs to be included in cost accounting, you can either: Include a distribution rule in a journal entry row or marketing document row. Use Form Settings to display the distribution rule field (in journal entries) or profit center field (in marketing documents). For journal entries, use Expand Editing Mode to enter a distribution rule for the row. Post a journal entry or marketing document to a G/L account that is linked to a distribution rule. You can only link accounts with the account type Sales or Expenditure in the chart of accounts. To link an account to a distribution rule, choose Chart of Accounts. You can use the Profit Center report to display an overview of the posted costs and revenues. Choose Financials Cost Accounting Profit Center Report. You can produce some standard reports for a specific profit center, for example, Profit and Loss Statement, Trial Balance, Budget Report.

5-41

Projects - Question

What do you expect from “project based accounting”?

5-42

Projects in SAP Business One Project A

Original Documents

Project B

Trial Report Budget Report P&L Budget Report

Project: ....

P&L Budget Report

Transaction Report

Trial Report Budget Report

Transaction Report

P&L

Accounting Documents

P&L General Ledger

General Ledger Trial Report Budget Report

Project: ....

Trial Report Budget Report

You can use projects in SAP Business One to monitor your company's larger key projects and their economic success. To do so, you first define projects in the system. Choose Administration Setup Financials Projects. You can then enter these directly in the relevant line items or the journal entry or marketing document. You can also enter projects in general ledger accounts or business partners. The relevant project is then automatically entered in the documents you post to these accounts. The Transaction Report by Projects lists all postings that you have made for a selected project. Choose Financials Financial Reports Accounting Transaction Report by Projects. You can produce many standard reports for a specific project, for example, Profit and Loss Statement, Trial Balance, Budget Report.

5-43

Exercise - Cost Accounting + Projects

5-44

Controlling Reports: Unit Summary

Main Terms: Financial Reports: Balance Sheet Trial Balance Profit and Loss Financial Report Templates Cash Management Reports: Cash Flow Customer Receivables Aging Report Dunning Company Analysis and Planning: Budget Project Cost Accounting: – –

Profit Centers Distribution Rules

5-45

5-46

Unit 6: Financial Accounting Initialization

Contents: Tax system. Currencies. Perpetual inventory/ non-perpetual inventory system.

6-1

Financial Accounting Initialization: Unit Objectives

After completing this unit, you will be able to: Set up definitions in the implementation process. Explain the consequences of each definition on the financial accounting process. Give examples of some processes in SAP Business One. You need to make decisions about these definitions together with the client accountant.

6-2

Financial Accounting Initialization: Course Overview Diagram Financial Accounting Initialization Topic 1: Tax System Topic 2: Currencies Topic 3: Perpetual Inventory/ Non-Perpetual Inventory System

6-3

Financial Accounting Initialization: Business Example

You are implementing SAP Business One at a new customer, OEC Computers. Your main contact at the customer site is Maria the accountant. You and Maria will work together to set cross-company definitions: Tax system. Currencies. Perpetual inventory/ non-perpetual inventory system. The setup begins when initializing the company and continues in defining the Business Partner Master Data records and the Items. Those definitions are reflected in the: Sales, purchasing and inventory documents and transactions. Automatic journal entries created by documents. Company reports. You discuss those definitions with Maria to see how to implement them in OEC Computers.

6-4

Tax System

Financial Accounting Initialization Topic 1: Tax System Topic 2: Currencies Topic 3: Perpetual Inventory/ Non-Perpetual Inventory System

6-5

Tax System: Topic Purpose

After completing this topic, you will be able to: Define the tax system according to your localization. Explain the consequences of the tax system defined in your company on the financial accounting process. Give examples of some tax issues in SAP Business One.

6-6

Tax System: Business Example

You discuss the tax definition with Maria, the accountant: You explain to Maria that in order to issue A/R and A/P Invoices, she needs to define some initial settings. Maria is happy to hear that when you both created a new database in SAP Business One, a set of Incoming and Outgoing Tax Groups was defined automatically according to the UK localization you chose.

The tax system is determined according to the localization you choose for the company database. In the next slides we will discuss 2 main tax systems.

6-7

Tax Process - Europe

Setup - Tax Groups Business Partner Master DateTax Liable/Exempt/ EU Tax Group

Item Master Data - Tax Group: Sales/ Purchasing

A/R A/P Invoice Tax Group: in the document row

Automatic Journal Entry - VAT row

Tax Report – Output/Input tax groups

To ensure that the system uses the correct tax group in the documents, you have to properly define the tax settings on the Tax tab within the Accounting tab in your business partner master records. Setup – Tax Groups - SAP Business One provides predefined tax groups for each supported locality to be used by your company for purchasing, sales, and payments. Each tax group should be connected to a G/L account to be used automatically in the journal entries created by documents containing this group. Administration Setup Financials Tax Tax Groups Business Partner Master Date - Tax Liable/Exempt/ EU – Domestic customers If the customer is tax liable enter Liable in the Tax Status field. Keep the Tax Group field blank. If you enter a document for this customer, the system copies the output tax group from the Sales Data tab of the item master record into the document. If the customer is tax exempt enter Exempt in the Tax Status field. The Tax Group field then disappears. If you enter a document for this customer, the system uses the standard output tax group with 0% tax rate into the document, for example, A0. Domestic vendors If the vendor is tax liable enter Liable in the Tax Status field. Keep the Tax Group field blank. If you enter a document for this vendor, the system copies the input tax group from the Purchasing Data tab of the item master record into the document. If the vendor is tax exempt enter Exempt in the Tax Status field. The Tax Group field then disappears. If you enter a document for this vendor, the system uses the standard input tax group with 0% tax rate into the document. If you enter a tax group in the business partner master record, this tax group would overwrite the tax group from the item master record. This is usually not desired for domestic business partners. Therefore, you should keep the Tax Group field in the master record of domestic business partners empty. For Service Type Invoices, if there is no tax group defined in the business partner master data, SAP Business One uses the default tax group defined in Administration Setup Financials G/L Account Determination Sales/ Purchasing tab Tax sub-tab Purchasing/ Sales tax group (Service) field. The system then automatically calculates the tax for each row in the document and summarizes the total document tax amount in the document footer area. An additional line(s) is created in the automatic journal entry of the document. This line(s) posts the tax amount to the correct tax account. Use the Tax Report to display documents and manual journal entries that include tax amounts sorted by tax code.

6-8

Sales Tax Process - US

Tax Jurisdictions:

County 2%

City 1%

9%

Setup - Sales Tax Codes

Business Partner Master DateTax Liable/Exempt Sales Tax Code:

State 6%

Sales Tax Code

Customer – Ship to Address Vendor – Tax Code defined for the Warehouse receiving the goods

Item Master Data – Tax Liable: Yes/ No

A/R A/P Invoice Sales Tax Code: in the document row

Automatic Journal Entry: Row for each jurisdiction

Tax Jurisdiction Report – According to Tax Codes or Jurisdiction Codes.

Setup - Sales Tax Codes – The first step is to define the Jurisdiction types as required by the tax authorities. Administration Setup Financials Tax > Sales Tax Jurisdiction Types. The system contains the three necessary jurisdiction types: State, County, and City. Next you need to define rates for sales tax jurisdictions. Administration Setup Financials Tax Sales Tax Jurisdictions. Select the required jurisdiction and then choose OK. In this window you also define the G/L Accounts to be used automatically in the journal entries created by documents containing this tax jurisdiction (in the Sales Tax Code). For the State Jurisdiction SAP Business One provide the list of states. You need to define the other Jurisdictions you work with (For example, County and City). The final step is to setup the Sales Tax Codes that combine the tax rate for each Tax Jurisdiction - city, county, state, and so on, using the predefined Jurisdictions rates. Administration Setup Financials Tax Sales Tax Codes. The tax codes will calculate the correct tax rate for a specific location by the jurisdiction rates included in it. The Sales Tax Code is used automatically to calculate the sales tax amount in sales and purchasing documents. The total sales tax amount charged is calculated as follows: For each item SAP Business One checks if it is Tax Liable. If so, it calculates a sales tax amount for the item row according to the tax code and the quantity. The Tax Code in Sales documents is determined based on the default Ship to Address of the customer in the Business Partner Master Record. You can select a different Ship to Address defined for the customer, while issuing the document. The tax code in Purchasing documents is determined based on the selected warehouse: Administration Setup Inventory Warehouses General tab Tax Code field. For Service Type A/P Invoices, the tax code is based on the default tax code of the company: Administration > System Initialization > Company Details > Accounting Data tab Tax Code field. The System summarizes the total document tax amount in the document footer area. In the automatic journal entry of the document, a row is created for each tax jurisdiction included in the Tax Code . Each row posts the tax amount to the correct tax account. Tax Jurisdiction Report - this report summarizes sales tax collected from sales and purchasing invoices for a specified period of time (typically quarterly or monthly). You can display the report according to Tax Codes or Jurisdiction Codes. The Jurisdiction Codes display gives you the amount to be paid to each legal authority.

6-9

Tax System: Question

How was this topic handled in implementation projects you were involved in?

6-10

Currencies

Financial Accounting Initialization Topic 1: Tax System Topic 2: Currencies Topic 3: Perpetual Inventory/ Non-Perpetual Inventory System

6-11

Currencies: Topic Purpose

After completing this topic, you will be able to: Set up the definition of currencies in the implementation process. Explain the consequences of the currencies defined in your company on the financial accounting process. Give examples of some currency issues in SAP Business One.

6-12

Currencies: Business Example

You discuss the currencies definition with Maria: Maria says that most of their customers are located in the UK. However few customers and vendors they work with are located in the US. You tell Maria about the working methods with currencies in SAP Business One.

6-13

Currencies: Reflection Question

OEC Computers is pricing some of their items in US Dollars for UK customers. What will be the currency of the A/R Invoice total amount? What will be the currency in the automatic journal entry created by the A/R Invoice?

6-14

Company Level – Local and System Currencies

mySAP Business Suite

SAP BW

SAP Business One

SAP Business One

Local Currency: EUR System Currency: USD

Local Currency: USD System Currency: USD

Currency: USD

Microsoft Excel

SAP Business One

Local Currency: JPY System Currency: USD

SAP Business One can handle accounting in two parallel currencies: the local currency and the system currency. The Local Currency is the currency in which the company is legally required to keep its books. In our example, British Pound. The System Currency may be a different currency than the local currency and is especially useful for subsidiaries of global companies whose head office uses a different currency than the subsidiaries (for example, EUR (€) in the subsidiary and USD ($) in the head office). In this case, the system automatically calculates all postings in the local currency and manages an additional account balance in the system currency. This makes it easier to have aggregated reporting on all the subsidiaries and allows for better integration with the system of the head office. For example, you could export the financial data in system currency from the SAP Business One systems of the subsidiaries to the SAP Business Suite or the SAP Business Information Warehouse of the head office. Alternatively, financial consolidation can be done with Microsoft Excel or any other product based on the financial data in system currency. In our example, OEC Computers is a local company and does not have a reporting requirement in another currency. Therefore you set the system currency to your local currency - British Pound. Choose Administration System Initialization Company Details to define the local currency and the system currency on the Basic Initialization tab. Note that you cannot change the Local or the System Currency once you have started to work with the database. In some financial and accounting reports you have the Revaluation option, that enables you to revaluate report results according to three pre-defined methods. Note that the revaluation is for display purposes only and does not affect the postings values. 6-15

Account Currencies

Currencies for Entering Journal Entries

Currencies of the Account Balance

Account Currency = Local Currency

Local Currency

Local Currency System Currency

Account Currency = Specific Foreign Currency

Local Currency Specified Foreign Currency

Local Currency System Currency Specified Foreign Currency

Account Currency = All Currencies

Local Currency Any Foreign Currency

Local Currency System Currency

Each Business Partner Master Data record and each G/L Account needs to have an account currency definition: • The system sets the Local Currency as the default currency for all Business Partner Master Data records. • You can define a default currency for new G/L accounts using the Default Account Currency field on the Basic Initialization tab under Administration System Initialization Company Details. In our example, most vendors and customers in OEC Computers will be defined as British Pound (Local Currency). The vendors and customers from the US will be defined in USD (Specific Foreign Currency). The company Bank Account will be defined as All Currencies since it needs to register journal entries and documents in more than one specific Foreign Currency (e.g. bank transfers). The table in the slide details the options for entering Journal Entries and viewing the Account Balance for each option of the Account Currency – Local, Foreign and All Currencies: If you define the Local Currency in the Currency field, you can enter journal entries in the local currency and the system manages the account balance in the local currency and the system currency in parallel. If you define any specific foreign currency in the Currency field, you can enter journal entries in the specified foreign currency or the local currency. The system then manages the account balance in the specified foreign currency, the local currency, and the system currency in parallel. If you define All currencies in the Currency field, you can post journal entries to this account or business partner in any currency. The system, however, manages the account balance only in the local and system currencies. In other words, it does not manage the balance in the currencies in which the items were entered. For All Currencies accounts, you can only conduct external bank reconciliations in the local currency. Take this fact into account when working with multi currency accounts. At any point, you can change an account currency to be All-Currencies, but you will not be able to change it back once you update. The G/L Accounts and Business Partners report produces a list of all accounts, including their name, account group, and balances. To run the G/L Accounts and Business Partners report, choose Financials Financial Reports Accounting G/L Accounts and Business Partners. 6-16

Define Currencies - Summary

Company Level Account Currency

Local Currency and the System Currency.

Options - Local Currency, specific Foreign Currency, All Currencies Business Partner Master Data record - Local Currency is the default currency for all Business Partner Master Data records. G/L Account - You can define a default currency for new G/L accounts. At any point, you can change an account/ BP currency to be All Currencies, but you will not be able to change it back once you update.

Currencies Setup Window

Enter a code of up to three characters for the currency, for example, USD, EUR. You will use this code in the pricing fields, document amounts and journal entries.

Pricelist

You can enter a Unit Price in any Foreign Currency defined in the Currencies – Setup window. SAP Business One will convert the total row value and the total document value to the BP Currency/ Local Currency/ System Currency.

Exchange Rates and Indexes Window

This window lets you define, either manually or automatically exchange rates for the foreign currencies defined in the Currencies - Setup window.

Company Level - choose Administration System Initialization Company Details to define the Local Currency and the System Currency on the Basic Initialization tab. Account Currency G/L Account: you can define a default currency for new G/L accounts using the Default Account Currency field on the Basic Initialization tab under Administration System Initialization Company Details. Currencies - Setup Window: Administration Setup Financials Currencies. Specify the currency name as well. This name appears in the dropdown boxes of various windows pertaining to currency. Pricelist

Unit Price: Inventory

Item Master Data

choose a price list

Unit price field.

Exchange Rates and Indexes Window - Administration Exchange Rates and Indexes. If you do not enter a value for a specific day, the Exchange Rates and Indexes window will popup when you create a document involving a foreign currency. For example, when you choose a foreign currency business partner or an item with a foreign currency unit price.

6-17

Value Calculation in Marketing Documents: Business Example Posting date: xx/yy/zzzz A/P Invoice Business partner’s currency = foreign currency USD

Unit price in foreign currency USD

Unit price in local currency

Row rate

Exchange rate

Total row value

Total row value

BP Currency USD

Total document value

This is an example of value calculation for a foreign currency business partner: The business partner’s currency sets the document default currency (USD in our example). Once the posting date is set SAP Business One takes the exchange rate of the selected currency from the Exchange Rates and Indexes window. You can manually update the rate in the document. The system saves the row rate for currencies that are different from the local currency. The unit price in the local currency is divided/ multiplied by the exchange rate. The result is then multiplied by the quantity to present the total row value in the business partner’s currency. - Note! There is a setting which determines the display of exchange rates in SAP Business One. This setting affects the calculation that you use to enter the exchange rates in the Exchange Rates and Indexes window. Choose Administration System Initialization General Settings Display tab Exchange Rate Posting field. Select Direct to display the exchange rate according to the foreign currency. Select Indirect to display the exchange rate according to the local currency. This setting is updated per company, for all users, after the next logon, but cannot be changed after transactions are recorded in the company. The exchange rate values are always saved in the system according to the direct rate. The indirect rate is for display use only. The total document value, in this example, is also presented in the business partner’s currency. Note! you can choose to display the total row and the total document values in local or system currency using the drop down menu in the document header. In the journal entry created by the document, the exchange rate is applied on the credit and debit amounts in BP currency and come up to the credit and debit amounts in the local currency. System currency: is calculated by applying the exchange rate to the local currency posted value. 6-18

Row Exchange Rate for Prices: Draw Document Wizard

Delivery

A/R Invoice

Good Receipt PO

A/P Invoice

Draw Document Wizard Row Ex, Rate for Prices Use Row Exchange Rate from Base Document Use Document and Row Exchange Rate from Base Document Use Current Exchange Rate from the Exchange Rate Table Draw all data (Freight and Withholding Tax) Customize

The exchange rate of a foreign currency can change daily. This affects documents you create for a foreign business partner, or prices you manage in a foreign currency for local business partners. SAP Business One supports this scenario: When you create a sales or purchasing document based on existing documents (Copy From), SAP Business One opens the Draw Document Wizard window where you can define factors that affect the target document you create. Some fields in the Draw Document Wizard handle the exchange rate differences: Use Row Exchange Rate from Base Document. Use Document and Row Exchange Rate from Base Document - New option in 8.8. Use Current Exchange Rate from the Exchange Rate Table.

6-19

Posting Exchange Rate Differences Outgoing Payments

Foreign Vendor

Rate: 0.25 40 LC

10 FC

40 LC

10 FC

Rate: 0.5 20 LC

10 FC

20 LC

Payment

Exchange Rate Differences

Invoice in Foreign Currency

20 LC

LC: Local Currency FC: Foreign Currency

Exchange rate fluctuations can cause exchange rate differences when you pay invoices in foreign currencies: The figure shows an A/P invoice which has been issued by a foreign vendor in foreign currency. At the posting day of the invoice the exchange rate was 0.5. The system converts the 10 units foreign currency into 20 units local currency and posts both values in parallel on the credit side of the vendor account. At the time when you post the payment for this invoice the exchange rate has changed to 0.25. 10 units in foreign currency are now equal to 40 units in local currency. Compared to the value at the time of the invoice there is an exchange rate difference of 20 units local currency. When you post the payment the system automatically posts this exchange rate difference to an exchange rate difference account. The system posts the exchange rate differences as expense or revenue to the accounts that you have entered in the Realized Exchange Diff. Gain field and the Realized Exchange Diff. Loss field on the Sales tab and the Purchase tab under Administration Setup Financials G/L Account Determination.

6-20

Exchange Rate Differences, Conversion Differences at Period End Closing Account in Foreign Currency

Exchange Rate Differences 10 LC

Non-Valuated Bal. Valuation

10 LC

200 LC

100 FC

Valuated Balance 190 LC

100 FC

LC: Local Currency FC: Foreign Currency

Reject Proposal or

Accept and Post Proposal

Proposals from Difference Postings

Business partner accounts and general ledger accounts that you manage in a foreign currency post an account balance in the respective foreign currency and an account balance in the local currency. The balance in the local currency comprises the foreign currency items that were translated using the exchange rate in the exchange rates table at the posting date or the tax date. In other words, the balance is based on past exchange rates. At period-end closing, therefore, you have to valuate the foreign currency account balance with the exchange rate on the closing key date. Choose Financials Exchange Rate Differences for this purpose. When you execute the function, the system generates a list of proposals for difference postings. You can then accept or reject each proposal individually. You can select foreign exchange accounts and a foreign currency, as well as specify an execution date. The system defaults the exchange rate differences accounts defined in the Realized Exchange Diff. Gain field and the Realized Exchange Diff. Loss field on the Sales tab and the Purchase tab under Administration Setup Financials G/L Account Determination. You can enter a future date in the Auto. Reverse field. This enables you to reverse this posting automatically in the future. In addition to the local currency, the system also manages your data in the system currency in parallel. If your company's local currency is different from the system currency, exchange rate differences can arise. The system can clear these differences automatically. This is carried out using the Conversion Differences function under Financials Conversion Differences in the same way as the exchange rate differences.

6-21

Exercise - Currencies

Issue an A/R invoice for a foreign currency customer. Review the currency calculation in the: Unit Price field Total row amount Total document amount The automatic Journal Entry The customer Account Balance Issue an A/R invoice for a local customer. For the item/s in the invoice, enter the unit price in foreign currency. Review the calculation in the: Unit Price field Total row amount Total document amount The automatic Journal Entry Create a Credit Memo for the first A/R invoice. In the Draw Document Wizard, review the options in the Row Exchange Rate for Prices section.

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Perpetual Inventory/ Non-Perpetual Inventory System Financial Accounting Initialization Topic 1: Tax System Topic 2: Currencies Topic 3: Perpetual Inventory/ Non-Perpetual Inventory System

6-23

Perpetual Inventory/ Non-Perpetual Inventory System: Topic Purpose

After completing this topic, you will be able to: Define Perpetual Inventory/ Non-Perpetual Inventory System in the implementation process. Explain the consequences of the inventory system defined in your company on the financial accounting process. Give examples of Perpetual Inventory/ Non-Perpetual Inventory System in SAP Business One.

For more information on Inventory Systems refer to the How-To Guides: How to Set Up and Manage a Perpetual Inventory in 8.8 How to Set Up and Manage a Non-Perpetual Inventory in 8.8

6-24

Inventory System: Business Example

You discuss the inventory system definition with Maria: Maria says that most of their inventory valuation is calculated according to Moving Average . She asks you what the best way is to set up the system so that all items are handled by moving average and the values calculated automatically. Maria says she wants to minimize any manual corrections in the Inventory valuation. You set up a Perpetual Inventory System.

6-25

Perpetual / Non-Perpetual Inventory System: Reflection Question

What is the difference between perpetual/ non-perpetual inventory systems? What is commonly used in your localization? What is the calculation for Moving Average?

6-26

Perpetual Inventory or Non-Perpetual Inventory System

According to local legal settings - control the inventory valuation: Define a perpetual inventory system that automatically controls stock value and affects the financial system. Or: use a non-perpetual inventory system in which sales, purchasing, inventory, and production transactions create inventory transactions and affect the inventory levels but do not generate inventory related monetary entries directly into the general ledger.

A perpetual inventory system reflects the value of inventory postings in terms of monetary transactions in the accounting system. These monetary transactions are carried out when items defined as inventory items are received or released from stock.

6-27

Perpetual Inventory System - Example for Monetary Value of Inventory Postings Inventory Transactions

Inventory Account Balance

Inventory Item

Good Receipt PO

Delivery

An Inventory item is linked to an inventory account that has a certain value from previous transactions. As you purchase this item, the balance of the inventory account increases. When you sell this item, the balance of the inventory account decreases. In the next slides we will review some concepts of a perpetual inventory system. Some of the topics were already discussed in TB1000.

6-28

Perpetual Inventory System - G/L Account Determination Set G/L Accounts by Item Level #

WH Code

WH Name

1

01

General Warehouse

2

02

Drop Shipment

3

03

Consignation

Accounts Types

Accounts Entered Manually

Set G/L Accounts by Warehouse #

WH Code

WH Name

1

01

General Warehouse

2

02

Drop Shipment

3

03

Consignation

Accounts Types

Accounts from Warehouse Definition

Set G/L Accounts by Item Group #

WH Code

WH Name

1

01

General Warehouse

2

02

Drop Shipment

3

03

Consignation

Accounts Types

Accounts from Item Group Definition

In the Item Master Data you define the G/L Accounts to be involved in the monetary transactions (we discussed this issue in details in TB1000): To simplify the account determination, in every item master record you can specify that the accounts are retrieved from a higher level: Warehouse level: In this case the system automatically retrieves the accounts from the warehouse definition. To maintain the accounts in the warehouse definition, choose Administration Setup Inventory Warehouses and choose the Accounting tab. Item group level: In this case the system automatically retrieves the accounts from the item group definition. To maintain the accounts in the item group definition, choose Administration Setup Inventory Item Groups and choose the Accounting tab. Item Level – any G/L accounts that you define at the item level Choose the default G/L method for new items: Administration System Initialization Settings Inventory tab Items Set G/L Accounts By field.

General

You can define default accounts under Administration Setup Financials G/L Account Determination. These values are defaulted for all levels (warehouse level, item group level, and item level).

6-29

Perpetual Inventory System – Valuation Methods

SAP Business One provides the following three valuation methods for calculating the inventory value : Moving average – Calculates the average cost for the item in each sales, purchasing, inventory, and production transaction. Moving Average Price

FIFO – Calculates the inventory value by the FIFO (first in first out) method. This means that goods purchased first (or produced first) are sold first, regardless of the actual goods flow.

€ € € € € First In – First Out (FIFO)

Standard – Calculates the inventory value by a fixed price, which is then used for all transactions Standard Price

FIFO – Each inventory receipt transaction creates a layer of quantities linked to costs. A FIFO layer is defined as the quantity of an item in a warehouse with a particular cost value. Each inventory release transaction uses quantities and their corresponding costs from the first open layer or layers. You can set a default valuation method per item group, in Administration Setup Inventory Item Groups General tab Default Valuation Method field. An item you assign to this group will automatically receive this valuation method. You can specify the default valuation method for newly added item groups. Choose Administration System Initialization Company Details Basic Initialization tab Item Groups Valuation Method field. You can define whether the system calculates one inventory pricing for all warehouses or a separate own inventory pricing for each warehouse. Choose Administration System Initialization Company Details on the Basic Initialization tab with the Manage Item Cost per Warehouse checkbox.

6-30

FIFO - Example

The item cost is calculated as the cost of the oldest unit on hand. The item cost is managed by layers for each item. Purchasing Purchase 5 Units for 100 each Inventory Value = 500

Purchasing Purchase 5 Units for 200 each Inventory Value = 1500

Sales Sell 7 for sales price of 300 Total COGS = 900 (5X100+2X200) New Inventory Value 600

Each inventory receipt transaction creates a "layer" of quantities linked to costs. Each inventory release transaction uses quantities and their corresponding costs from the first open layers.

6-31

Standard Cost - Example

The unit cost is determined manually when you setup the item. Variances that occur due to a different purchase price are recorded to a variance account, and the unit cost is not affected. Purchasing Set manually unit cost to100 Purchase 5 Units for 100 each. Inventory Value = 500

Purchasing Purchase 5 Units for 200 each Current Unit cost = 100 New Inventory Value = 1000 (Variance of 500)

Sales Sell 7 for sales price of 300 Current Unit cost = 100 Total COGS = 700 New Inventory value 300

6-32

Moving Average - Example

The item cost is calculated by dividing the total inventory value by the on-hand quantity.

Purchasing Purchase 5 Units for 100 each Unit cost = 100 Inventory Value = 500

Purchasing Purchase 5 Units for 200 each Current Unit cost = 150 New Inventory Value = 1500

Sales Sell 7 for sales price of 300 Current Unit cost = 150 Total COGS = 1050 New Inventory value 450

6-33

Perpetual Inventory System – Definitions and Updates: You should determine a perpetual inventory system during basic initialization, before posting any transactions. If selected, each transaction of inventory items is reflected also in the inventory related G/L accounts. When you use a perpetual inventory system, SAP Business One lets you do the following: Specify the default valuation method for newly added item groups. Specify a default valuation method per item group. Specify the default G/L method for new items. Manage the three valuation methods in the same company. Select a certain valuation method and/ or G/L method for each item individually. Update the valuation method of your items globally. Update the calculated item cost for each item, if required.

Determine a perpetual inventory system – Administration System Initialization Details Basic Initialization tab Use Perpetual Inventory option.

Company

Note: after the first inventory transaction is posted, this option is disabled, and its status cannot be changed. Updating Valuation Methods: •

SAP Business One lets you change the valuation method of an item. However, that is possible only as long as the item is not linked to any open documents and its in-stock quantity is zero.

•

Use the Inventory Valuation Method and the Update Valuation Method windows to update the valuation method of your items.

•

You can change the valuation method manually for each item separately using the Item Master Data window.

Update the calculated item cost for each item - go to Inventory Inventory Revaluation to revaluate inventory values.

6-34

Inventory Transactions

Inventory Audit Report

Generating Inventory Audit Reports: The Inventory Audit report provides an audit trail for the posted inventory transactions in the chart of accounts. Use this report to make comparisons between the accounting view (inventory balance accounts) and the logistics view (inventory value displayed by the audit report). The report explains the value changes in inventory accounts. This report does not recalculate the item cost but displays the information from the database. In addition, only inventory related transactions are displayed in the report. Transactions with noninventory items or drop-ship warehouses are not displayed.

Note: The Inventory Audit report is available only for companies using the perpetual inventory system. To create what-if scenarios, use the Inventory Valuation Simulation report.

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Value Calculation – Inventory Process Reminder from Unit 1: Standard Financial Processes

Purchase Order

A/P Invoice

Good Receipt PO

Debit

100 * 10 = 1000

Unit Price * Quantity = Total Value

Clearing acc. Inventory acc.

Credit 1000

1000

Purchasing Price List = 100

Calculated Value = 90

Item Cost

Reseller Price List = 110 Retail Price List = 120

Sales Quotation

A/R Invoice

Sales Order Delivery

Debit

90 * 4 = 360

Item Cost * Quantity = Total Value

Cost of Goods Sold acc.

Credit

360

Inventory acc.

360

Let us go back to the Goods Receipt PO that Joe entered based on the Delivery he got from the vendor. Assuming the company runs perpetual inventory, an item cost value is being calculated automatically in each stock transaction. When Joe entered the Goods Receipt PO to SAP Business One, the Purchasing Price List value (100 per unit) affected the unit price in the Goods Receipt PO and also the item cost value. The item cost value is calculated automatically, behind the scene, according to the valuation method chosen for the item (Moving Average, FIFO, Standard). The calculated item cost value after the Goods Receipt PO was 90. Joe entered a quantity of 10 portable media players. Therefore, the total value of the journal entry created by the Goods Receipt PO was 1000 and these are the Credit and Debit amounts registered to the inventory default accounts. The value of the journal entry linked to the Delivery sent to the customer is 360. That is, quantity of 4 items multiplied by the Item cost value at that moment (90). Remember that the total value of the Invoice based on that Delivery was 440. It was calculated according to the Reseller Price List (110) that is defined as the default price list in the customer master data record.

6-36

Exercise - Perpetual Inventory System

6-37

Non-Perpetual Inventory System

A non perpetual inventory system is an inventory management system in which costs of inventories are not maintained on a constant basis: In a non-perpetual inventory system, sales, purchasing, inventory, and production transactions, which reflect the inventory levels, do not generate inventory related monetary entries directly into the general ledger. Therefore, the inventory value of a company is not revalued on every inventory release or receipt. Instead, the inventory account balance is updated by manual journal entry once in every accounting period or after a physical inventory count. In SAP Business One, the Inventory Valuation report is central to the nonperpetual inventory system. To calculate the value of inventory at any given time, you need to run the Inventory Valuation report. This report lets you obtain an up-to-date valuation of the existing inventory and to create what-if scenarios.

You must set up a non-perpetual inventory system during the basic initialization of the company, before any transactions have been posted. Once transactions have been posted, you cannot change the inventory system used for that company. Note: the following countries have a non-perpetual inventory system as their default inventory management system: Germany, Israel, Italy, Panama, South Africa, and Switzerland. In the Italy localization, while working with a non-perpetual inventory system, you can also work with purchase accounts posting system.

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Financial Accounting Initialization: Unit Summary Main Terms: Tax System : Tax Process – Europe Tax Process – US

Tax Groups.

Tax Codes, Jurisdictions.

Currencies: Company Level: – –

Local Currency System Currency

BP and G/L Account Currency: Local Currency – Specific Foreign Currency – All Currencies Perpetual Inventory/ Non-Perpetual Inventory System: Inventory postings Monetary transactions The three valuation methods for calculating the inventory value: – Moving Average – Standard – FIFO –

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6-40

Manual Payments - Exercises Unit: Banking Topic: Incoming Payments At the conclusion of this exercise, you will be able to: Post incoming payments manually using different payment means

You can use manual payments to post payments for a single customer or vendor.

1-1

Incoming Payment (using cash payment means) 1-1-1 Create an A/R Invoice. Create an A/R invoice for any domestic customer, for example, C20000. To make sure that discount is not applied for prompt payment, change the Due Date and select a date that is over one month in the past (this is for the exercise only). Leave the Posting Date as today. Select any item. Add the invoice and ignore the warning message about the due date. 1-1-2 Post an incoming cash payment. The customer pays the invoice in cash. Post an incoming payment using the cash payment means. 1-1-3 Check the Posting. Check the journal entry posted by the payment.

2-1

1-2

Incoming Payment with Cash Discount (using check payment means) 1-2-1 Create an A/R Invoice with Cash Discount Create an A/R invoice for any domestic customer. Post this invoice with a payment term that allows cash discount. Tip: To check the payment terms for a customer, click the orange navigation arrow on the Payment Terms field. If the Cash Discount field is blank, select a cash discount from the dropdown list. To see the terms for the cash discount, click the orange navigation arrow. 1-2-2 Post an incoming check payment. The customer pays the invoice amount less the discount using a check. Post the payment using the check payment means. 1-2-3 Check the Posting. Check the journal entry to see if the cash discount was applied.

1-3 Partial Incoming Payment (using cash payment means) The customer pays part of his debt on an open A/R Invoice. 1-3-1 Create an A/R Invoice Create an A/R invoice for any domestic customer, for example, C20000. Change the Due Date and select a date that is over one month in the past. Leave the Posting Date as today. Select any item. Add the invoice and ignore the warning message about the due date. 1-3-2 Post partial incoming payment The customer has cash flow problems and cannot pay the invoice in full. Select the invoice and post an incoming payment with cash payment means for part of the invoice amount. 1-3-3 Post an incoming cash payment for the remaining invoice sum The customer pays the remaining sum of the invoice in cash. Select the invoice and post an incoming payment. Tip: Use CTRL+B to enter the remaining balance in the payment means window.

2-2

1-3-4 Check the customer Account Balance Check the customer’s account balance to see if the invoice has been completely reconciled.

2-3

2-4

Manual Payments - Solutions Unit: Banking Topic: Incoming Payments

1-1

Incoming Payment (using cash payment means) 1-1-1 Create an A/R Invoice Choose Sales – A/R

A/R Invoice.

Field Name or Data Type

Values

Posting Date



Select any item (from the Contents tab). Choose the Accounting tab. Check if the default payment term allows discounts. Tip: To check the payment terms for a customer, click the orange navigation arrow on the Payment Terms field. If the Cash Discount field is blank, select a cash discount from the dropdown list. To see the terms for the cash discount, click the orange navigation arrow. Approve the system message. Choose Update. Choose OK, then Add. 1-2-2 Post an incoming check payment. The customer pays the invoice amount less discount using a check. Choose Banking Incoming Payments Incoming Payments. Field Name or Data Type

Values

Code



Select the open invoice you posted in the previous step. Choose Goto

Payment Means.

2-6

Choose the Check tab. Press Tab to move to the Amount field in the row. Select CTRL + B to copy the payment amount to the Amount field. Choose OK. Choose Add and confirm your entries. Tip: The default check clearing account appears automatically in the Payment Means window, at the top. If the customer bank details were defined in the customer master data, under the Payment Terms tab, it will appear as the default check details here. 1-2-3 Check the Posting. Open the payment document that you just created and navigate into the journal entry through the Transaction No. field. Check the automatic cash discount posting. 1-3 Partial Incoming Payment (using cash payment means) The customer pays part of his debt on an open A/R Invoice. 1-3-1 Create an A/R Invoice Choose Sales – A/R A/R Invoice. Field Name or Data Type

Values

Posting Date



Due Date



Post this invoice to the vendor with any item.

2-17

3-2-3 Use the payment wizard. Use the payment wizard to pay your vendor liabilities by bank transfer. Assume that you run the payment wizard once per week. Choose Banking

Payment Wizard.

Choose Next. Select Start New Wizard. Field Name or Data Type

Values

Posting Date



Select Outgoing. Select Bank Transfer. Choose Next. Choose Add. Choose OK. Only select the vendor V10000. Choose Next Field Name or Data Type

Values

Due Date (Not Including Tolerance Days)



Choose Next. Select the payment method Outgoing BT. Choose Next. The system displays the recommendation report. Select the payments that you want to generate. Choose Next. Choose Execute. Choose Next. A window appears that states The Payment Wizard has been executed successfully. Choose OK. Check if the system has correctly created the payment documents. Choose: Banking Outgoing Payments Outgoing Payments. Navigate to the last data record. The indicator Created by Payment Wizard is set in the outgoing payment document.

2-18

Bank Statement Processing - Solutions

4-1

Unit:

Banking

Lesson:

Managing External Reconciliations in the Bank Account - Bank Statement Processing

Select a company with Bank Statement Processing Choose a company where Bank Statement Processing is already installed and implemented. Choose Administration

Choose Company.

Select the database name supplied by your instructor. Choose OK.

4-2

Define an Offsetting Account to the Bank Account for Interest Amounts Define an offsetting account to the bank account when an interest amount is posted by the bank statement. Choose Administration Setup Banking Bank Statement Processing Internal Bank Operation Codes Double click the bank interest row and enter the bank interest G/L Account code for bank transfer transactions. Field Name or Data Type

Values

G/L Account

650000 (Bank Interest Paid)

Choose Update in the Operation Details window and in the Internal Bank Operation Codes window. 4-3

Create A/R Invoices with past Due Date In order to process the incoming payments from the bank statement; you need to post A/R invoices in the system. Post these A/R invoices with a past Due Date to customer C20000. 4-3-1

Create two A/R invoices; each with a total invoice amount of 500. Choose any item and manually change the unit price to 500.

2-19

Choose an exempt tax group. Choose Sales – A/R

A/R Invoice.

Field Name or Data Type

Values

Customer

C20000

Posting Date

Today’s date

Due Date

Today`s date minus 1 month

Item No.

Choose any item

Unit Price

500

Tax Code

X0 (exempt)

Choose Add. Approve the system messages. Repeat these steps with the same values to create the second A/R invoice. 4-3-2

Create one A/R invoice with a total invoice amount of 2,000. Choose any item and manually change the unit price to 2,000. Choose an exempt tax group. Enter a customer reference number: 666333 Choose Sales – A/R

A/R Invoice.

Field Name or Data Type

Values

Customer

C20000

Posting Date

Today’s date

Due Date

Today`s date minus 1 month

Customer Ref. No.

666333

Item No.

Choose any item

Unit Price

2,000

Tax Code

X0 (exempt)

Choose Add. Approve the system messages.

2-20

4-4

Enter the Bank Account Statement Summary information. You receive a bank statement from your house bank “Barclays Bank”, bank code 12345678. Select the bank details. Choose Banking Bank Statements and External Reconciliations Statement Processing.

4-5

Field Name or Data Type

Values

Country

United Kingdom

Bank

Barclays Bank

Account



Enter the bank statement details. Choose the Create New button. Enter the following information in the bank statement details window: Field Name or Data Type

Values

Statement No.

1

Statement Date

Today’s date

Starting Balance

0

Ending Balance

2,940

2-21

Bank

Enter the details that appear on your bank statement. Tip: Step-by-step instructions follow after the table. External Bank Operation Code

G/L Account/Doc. Identification No.

Incoming Amount

051 “Bank Transfer”

BP Code

60

808 “Account Interest” 051 “Bank Transfer”

Outgoing Amount

Your A/R invoice Customer Reference Number from step 4-3-2: 666333

2,000

1,000

2-22

C20000

Step-by-Step Instructions: Enter the items in the account statement: 1st item Field Name or Data Type

Values

External Code

808

Outgoing Amt

60

2nd item Field Name or Data Type

Values

External Code

051

G/L Account / Doc. Identification No.

Choose the selection list icon. In the screen that opens, enter the following information: Document Identification

Enter your A/R invoice Customer Reference Number from step 4-3-2: 666333

Incoming Amt

2,000

3 rd item Field Name or Data Type

Values

External Code

051

Incoming Amt

1,000

G/L Account / Doc. Identification No.

Leave blank

BP Code

C20000

2-23

4-6

Process the bank statement. Create a posting proposal and assign the two A/R invoices for 500 to the uncleared incoming amount of 1000: Choose Posting Proposal for Uncleared Rows. The first two items are automatically cleared and selected. Select the column Cleared/Selected for each of the A/R invoices with an amount of 500. The system matches to the incoming amount of 1000 and sets the status to Cleared/Selected.

4-7 Finalize the bank statement and check the G/L posting.

Choose Finalize to post the payment transactions and to reconcile the open line items. Approve the system message. The bank statement detail window should switch to collapsed mode. If it does not, choose Collapse All. For each line in the finalized bank statement, choose the orange arrow in the G/L Account/Doc. Identification No. field. Check that the postings in your system match to the table: Line

Document posted

1

Outgoing payment for 60

2

Incoming payment with the A/R invoice for 2000 selected.

3

Incoming payment with two A/R invoices for 500 selected.

2-24

Exercises Unit:

Banking

Topic: Managing External Reconciliations in the Bank Account – Manual Reconciliation At the conclusion of this exercise, you will be able to: Use the manual reconciliation function

To verify the transactions recorded in SAP Business One against the balance received from the bank, and to create adjustments if required use the manual reconciliation function.

5-1

Type the ending balance of the external bank statement, according to a certain date Let us say you received an external bank statement for the bank account, with an ending balance of XXX. The bank statement is updated for today. Enter the ending balance supplied by your instructor.

5-1-1 Enter the bank statement details Choose the bank account code. Enter the ending balance supplied by your instructor Enter the current date as the end date. Choose OK to open the Reconciliation Bank Statement window.

5-2

Clear two transactions The table displays the open transactions as recorded in your books. That is, transactions recorded in SAP Business One. Select two transactions you would like to clear with the current ending balance. 2-25

Your instructor will specify one Payment transaction and one Deposit transaction.

You can see that the Cleared Book Balance field is updated according to the selected rows. The Difference field is updated respectively. 5-3

Create adjustments. You can see that there is a difference of XX between the cleared transactions and the ending balance. In this case, we can create adjustments. Enter a Check for Payment you know is the missing amount. 5-3-1 Choose Adjustments to open this window. Choose Checks for Payments. Choose OK. 5-3-2 Checks for Payments. Choose a vendor. Tip - Choose a vendor using CTRL + Tab. Choose the bank account for the credited G/L account. In the remarks field enter: “Payment on Account”. Enter the difference amount as the check amount. Choose the details of the check and bank for the check created through this window. 5-3-3 Back to the Reconciliation Bank Statement window See that in the table, the adjustment journal entry was added automatically and selected as cleared. The difference is now zero.

5-4

Reconcile the Bank Account Once we are sure that our selection is correct, we can reconcile the chosen transactions recorded in SAP Business One against the balance received from the bank 5-4-1 Choose Reconcile. The reconciliation has ended successfully.

2-26

Bank Statement Processing - Solutions Unit:

Banking

Topic: Managing External Reconciliations in the Bank Account – Manual Reconciliation

5-1

Type the ending balance of the external bank statement, according to a certain date Let us say you received an external bank statement for the bank account, with an ending balance of XXX. The bank statement is updated for today. Enter the ending balance supplied by your instructor. 5-1-1 Enter the bank statement details Choose Banking Bank Statements and External Reconciliation Manual reconciliation. Field Name or Data Type

Values

Account Code

161000

Ending Balance

Supplied by your instructor

End Date

Today

Choose OK to open the Reconciliation Bank Statement window.

5-2

Clear two transactions The table displays the open transactions as recorded in your books. That is, transactions recorded in SAP Business One. Under the Cleared column, select the boxes for two transactions you would like to clear with the current ending balance. Your instructor will specify one Payment transaction and one Deposit transaction.

2-27

You can see that the Cleared Book Balance field is updated according to the selected rows. The Difference field is updated respectively. 5-3

Create adjustments. You can see that there is a difference of XX between the cleared transactions and the ending balance. In this case, we can create adjustments. Enter a Check for Payment you know is the missing amount. 5-3-1 Choose Adjustments to open this window. Choose Checks for Payments. Choose OK. 5-3-2 Checks for Payments Field Name or Data Type

Values

To Order of

Choose a vendor Using CTRL + Tab

Credited G/L Acct

161000

Remarks

Payment on Account

Amount

The difference of XX

Country

United Kingdom

Bank

Choose a bank

Choose Add. 5-3-3 Back to the Reconciliation Bank Statement window See that in the table, the adjustment journal entry was added automatically and selected as cleared. The difference is now zero. 5-4

Reconcile the Bank Account Once we are sure that our selection is correct, we can reconcile the chosen transactions recorded in SAP Business One against the balance received from the bank 5-4-1 Choose Reconcile. The reconciliation has ended successfully.

2-28

Bank Statement Processing - Exercise Unit:

Banking

Topic: Managing External Reconciliations in the Bank Account – Reconciliation At the conclusion of this exercise, you will be able to: Use the reconciliation function

The reconciliation functions enable you to perform reconciliations for G/L accounts and business partners manually, automatically or using a wizard. In this exercise we will practice the manual option. 6-1

Record the External Bank Statement received from the bank. You have received by mail a printed Bank Statement from your bank. 6-1-1

Note: if the Process External Bank Statement menu option is not displayed in the main menu, display it, using the Form Settings icon of the main menu window and open it. Choose the bank account G/L Account. Enter few rows manually: Supplied by your instructor. For each row enter: Date, Reference, Details, Credit Amount/ Debit Amount. Choose Update.

6-2

For the bank account, reconcile the External Bank Statement transactions with the transactions recorded in your books in SAP Business One. 6-2-1

Open the Reconciliation window. Choose the bank account code and ensure that Manual option is selected. Enter today date as the due date. Choose Reconcile.

2-29

6-2-2

Reconcile externally the transactions you have just recorded in the External Bank Statement and if required, perform balancing transactions to match your data with the bank’s data.

6-2-3

Create a manual journal entry as the balancing transaction to record the amount of the fee or interest.

2-30

Bank Statement Processing - Solutions

6-1

Unit:

Banking

Topic:

Managing External Reconciliations in the Bank Account – Reconciliation

Record the External Bank Statement received from the bank. You have received by mail a printed Bank Statement from your bank. 6-1-1

Enter few rows manually: Choose Banking - Bank Statements and External Reconciliation Process External Bank Statement (if the menu option is not displayed in the main menu, display it, using the Form Settings icon of the main menu window). Field Name or Data Type

Values

G/L Account

161000

Date

Supplied by your instructor

Reference

Supplied by your instructor

Details

Supplied by your instructor

Credit Amount/ Debit Amount

Supplied by your instructor

Repeat these steps with different values to record few more rows. Choose Update. 6-2

For the bank Account, reconcile the External Bank Statement transactions with the transactions recorded in your books in SAP Business One. 6-2-1

Open the Reconciliation window. Choose Banking Reconciliation.

Bank Statements and External Reconciliations

2-31

The External Reconciliation – Selection Criteria window opens. Field Name or Data Type

Values

G/L Account

161000

Option

Manual

Due Date To

Today

Choose Reconcile. 6-2-2

Reconcile externally the transactions you have just recorded in the External Bank Statement and if required, perform balancing transactions to match your data with the bank’s data. The bank transactions recorded in your books in SAP Business One appear on the left. The transactions recorded by your bank appear on the right. On the right side, locate the rows you entered manually in the Process External Bank Statement window. Double-click the rows to move them to the bottom tables. On the Books side, find the corresponding transactions in SAP Business One. Double-click the rows to move them to the bottom tables. Make sure you select the extra row of fee or interest in the External Statement side. Click Reconciliation.

6-2-3

Create balancing transaction. The system displays the message: Reconciliation is not balanced. Create balancing transaction? Choose OK to open the Journal Entry window. The bank account with the amount of the fee or interest is already displayed. Select an offsetting account to complete the journal entry. Click Add. The rows are reconciled.

2-32

Chart of Accounts - Exercises Unit: Financials Topic: Manage the Chart of Accounts At the conclusion of this exercise, you will be able to: Create, change, and delete general ledger accounts

Your company has a new house bank and you need to create a balance sheet account for it in your chart of accounts. Your company has upgraded its Internet service. The Accounting department wants to post the costs for Internet service to a new expense account. 1-1

Transactions Which function do you use to change the properties for a G/L account? ___________________________________________________________ Which function do you use to remove an account from your chart of accounts? ___________________________________________________________

1-2

Create a balance sheet title and an active account. Your company has opened a new account at the National Bank. This means that the Accounting department has to add this information to your existing chart of accounts. 1-2-1 Create a new title. Choose the appropriate drawer in the chart of accounts. Add a new title account in the section of the drawer that contains bank assets. Provide a suitable account number and the name National Bank.

3-1

1-2-2 Define the bank G/L account. Under the new National Bank title, create an active account for the National Bank (Domestic) with a suitable account number. Manage the account in your local currency. Your local currency is the currency defined in the Local Currency field on the Basic Initialization tab under Administration System Initialization Company Details.

1-3

Create an expense account. The Accounting department wants to record the cost of accessing and using the Internet in a separate expense account. Define an Internet expense account with the account name Internet. Choose the operating expenses (costs) drawer and add the account under a suitable expenditure title. Manage the account in your local currency. Make sure that you specify the correct account type.

1-4

Delete an account. Select an existing asset account that has no postings. Remove the account.

3-2

Chart of Accounts - Solutions Unit: Financials Topic: Manage the Chart of Accounts

1-1

Transactions Which function do you use to change the properties for a G/L account? Financials Chart of Accounts Which function do you use to remove an account from your chart of accounts? Financials Edit Chart of Accounts

1-2

Create a balance sheet title and an active account. 1-2-1

Create a new title. Choose Financials

Edit Chart of Accounts.

Choose the Assets Drawer and choose OK. Select an existing Level 4 account in the Assets section and choose Add Same-Level Account. Make sure the Title radio button is selected. Enter the account details. Field Name or Data Type

Values

G/L Account



Account Name

National Bank

G/L Account Location



Choose Update to save the title.

3-3

1-2-2

Define the bank G/L account. Choose Financials

Chart of Accounts

Highlight the new National Bank title. Choose Data Add. Enter the following data. Field Name or Data Type

Values

G/L Account



Name

National Bank (Domestic)

Currency



Choose Add. 1-3

Create an expense account. Choose Financials

Chart of Accounts.

Choose the Operating Costs drawer. Select a suitable expenditure title under which you want to create the account. Choose Data

Add.

Select Active Account. Field Name or Data Type

Values

G/L Account



Name

Internet

External Code

leave blank

Currency



Account Type

Expenditure

Choose Add.

3-4

1-4

Delete an account. Choose Financials

Edit Chart of Accounts.

Select Assets. Choose OK. Choose an active account and right-mouse click to see the context menu. Choose Advanced then Delete Account. Choose Update. Note: Prerequisites for deleting G/L accounts No transactions have been posted to the account, including the opening balance. The account is not: o Defined as a control account o Included in G/L Account Determination

3-5

3-6

Journal Entries - Exercises Unit: Financials Topic: Enter Manual Journal Entries At the conclusion of this exercise, you will be able to: Post manual journal entries Reverse a posted journal entry Most transactions recorded in the general ledger are generated directly from SAP Business One documents. Additionally, the accounting department can use journal entries to make manual adjustments in the general ledger.

2-1

Post a journal entry. You want to transfer money from a different bank account to your new account at the National Bank. Post a bank transfer with a value of 10,000 to the National Bank (Domestic) G/L account that you created. Use an existing bank account as an offsetting account. Enter Bank Transfer as the Reference or Remarks.

2-2

Check whether the posting have been made correctly. 2-3-1 Check the balance of the National Bank (Domestic) account. 2-3-2 Starting from the balance display for the National Bank account, navigate to the journal entry.

2-3

Reverse a journal entry. Reverse the journal entry you made (in step 2-1) and then check what effect this reversal has. 3-7

3-8

Journal Entries - Solutions Unit: Financials Topic: Enter Manual Journal Entries

2-1

Post a journal entry. Choose Financials

Journal Entry.

Field Name or Data Type

Values

Due Date



Document Date



Choose Add to save the data record.

3-17

3-5-2 Execute the recurring posting. Choose Financials

Recurring Postings.

Choose Confirmation List to display the postings for execution. Select the recurring posting you just created. Choose Execute to post the entry. Choose Add to the system message.

3-18

Internal Reconciliations - Exercises Unit: Posting Periods Process Topic: Internal Reconciliations At the conclusion of this exercise, you will be able to: Internally reconcile G/L and business partner accounts using the manual, semi-automatic, and automatic reconciliation types Undo and correct internal reconciliations Many accounts are used during the end-to-end process of a business transaction. If you have not completed a business transaction, these accounts contain open items. In some cases, the accounts can still contain open items even though you have completed the transaction. In this case, you have to reconcile the account. 1-1

Questions 1-1-1 What type of accounts do you have to reconcile internally? _______________________________________________________ _______________________________________________________ _______________________________________________________ 1-1-2 What is the difference between system reconciliation and user reconciliation? _______________________________________________________ _______________________________________________________ _______________________________________________________

4-1

1-2

Internally reconcile a G/L account. The allocation costs account contains several open items for reconciliation. Your database may use several allocation cost accounts. You can find them in The warehouse definition (Administration Warehouses)

Setup

Inventory

The item group definition (Administration Item Groups)

Setup

Inventory

Choose the Accounting tab and use the Allocation account 1-2-1 Use the manual reconciliation type. Reconcile two items on the allocation cost account using the manual reconciliation type. 1-2-2 Use the semi-automatic reconciliation type. Reconcile two items on the allocation cost account using the semiautomatic reconciliation type. 1-2-3 Perform an automatic reconciliation. Let the system reconcile the remaining items automatically. 1-3

Cancel the reconciliations. Cancel the reconciliations using the Manage Previous Reconciliations function.

1-4

Internally reconcile a business partner. Reconcile the business partner C30000 using one or more of the reconciliation types.

4-2

Internal Reconciliations - Solutions Unit: Posting Periods Process Topic: Internal Reconciliations

1-1

Questions 1-1-1 What type of accounts do you have to reconcile internally? Internal reconciliations are generally required for clearing accounts, such as the Goods Receipt/Invoice Receipt account (Allocation account). The internal reconciliation reconciles debit items with credit items and thereby confirms that the business transaction has been completed. Internal reconciliations are required occasionally for business partner accounts if the account was not reconciled during payment processing. 1-1-2 What is the difference between system reconciliation and user reconciliation? System reconciliation is performed by the system when you assign a payment to an invoice. User reconciliation is performed by the user through the Reconciliation function.

1-2

Internally reconcile a G/L account. 1-2-1 Use the manual reconciliation type. Choose Financials

Internal Reconciliations

Reconciliation.

Choose the Manual reconciliation type. Field Name or Data Type

Values

G/L Account



Choose Reconcile. In the window displayed, choose one pair of matching debit and credit items. Choose Reconcile. Choose Yes to system message.

4-3

1-2-2 Use the semi-automatic reconciliation type. Choose Financials

Internal Reconciliations

Reconciliation.

Choose the Semi-automatic reconciliation type. Field Name or Data Type

Values

G/L Account



Choose Reconcile. The system displays open debit and credit items side-by-side. Doubleclick a debit or credit item. If the system finds any matching items, it displays them with a ranking. Select this item and choose Reconcile. The system now shows the next recommended item for reconciliation. At this point, do not reconcile any more items. Choose Cancel to close the window. Tip: if you do not agree with a recommendation, you can choose Skip or you can choose Cancel and go into Manual reconciliation. Note: if you do not see any recommendations, try setting the parameters as follows: Parameters

Weighting

Amount

High

Date

Medium

Ref. 1

High

Max. Deviation 31

1-2-3 Perform an automatic reconciliation. Choose Financials

Internal Reconciliations

Reconciliation.

Field Name or Data Type

Values

G/L Account



Choose the Automatic type. Choose Reconcile. The system automatically reconciles the remaining items (as far as this is possible). If this is not possible, select the Variation in Days rule and enter the number of days.

4-4

1-3

Cancel the reconciliations. Choose Financials Reconciliations.

Internal Reconciliations

Manage Previous

Field Name or Data Type

Values

G/L Acc. / BP Code From …



G/L Acc. / BP Code to …

Tip: If you do not enter an account number in this field, you will see all reconciliations, not just the reconciliations for the account.

Choose OK. The reconciliations are displayed in the upper part of the window. Select user reconciliation. Choose Cancel Reconciliation.

1-4

Internally reconcile a business partner. Choose Business Partners

Internal Reconciliations

Field Name or Data Type

Values

Business Partner

C30000

Reconciliation.

Select one of the reconciliation types (Manual, Automatic or SemiAutomatic). Choose Reconcile. Select matching debits and credits. Proceed according to your selected reconciliation type. Note: If you use the Manual reconciliation type, you can select multiple payments for an invoice, or vice versa. You can also reconcile invoices and payments that include cash discount. The Automatic and Semi-Automatic reconciliation types do not recognize cash discount. Tip: You can also access internal business partner reconciliation from the business partner master data Account Balance.

4-5

4-6

Period-End Preparations - Exercises Unit: Posting Periods Process Topic: Period-End Closing At the conclusion of this exercise, you will be able to: Run the Period-End Closing utility

At the end of a posting period you need to clear the balances for the sales and expenditure accounts. Balances are transferred to the retained earnings account.

2-1

Close out the Profit and Loss Accounts Use the Period-End Closing utility to close out the profit and loss accounts for the current fiscal year, up to the end of the previous period.

2-2

Review the Posted Journal Entries. Review the journal entries that were posted to the retained earnings account.

4-7

4-8

Period-End Preparations - Solutions Unit: Posting Periods Process Topic: Period-End Closing

2-1

Close out the Profit and Loss Accounts Choose Administration

Utilities

Period-End Closing.

Choose the fiscal year and the posting periods (up to the end of the previous period). Choose the Retained Earnings account and the Period-End Closing account from the chart of accounts. Choose Execute. In the Period-End Closing screen, enter a Due Date and a Document Date, and an optional reference number. Select the accounts you want to close out (transfer balances to retained earnings). You can select all accounts. Choose Execute.

2-2

Review the Posted Journal Entries. Choose Financials

Journal Entry.

Choose the Previous Record icon from the top menu bar to page through the journal entries.

4-9

4-10

Aging and Dunning - Exercises Unit: Controlling Reports Topic: Aging and Dunning At the conclusion of this exercise, you will be able to: Generate aging reports for vendor liabilities and customer receivables Create reminder letters to customers using the Dunning Wizard The accounting clerk regularly checks the open vendor liabilities and customer receivables, and initiates the necessary payment transactions.

3-1

Run the Customer Receivables Aging report. Call up the Customer Receivables Aging report to display a list of all the accounts receivable for today's date. To make sure that the list is complete, do not enter any customer master records or time intervals. Let the system retrieve the due date from the sales documents and structure the report in intervals of 10 days. Note the name of a customer with open invoices, as well as the total open amount. Customer: _________________________________ Open receivables: ____________________

5-1

3-2

Run the Vendor Liabilities Aging report. Call up the Vendor Liabilities Aging report to display a list of all the open invoices for today's date. To make sure that the list is complete, do not enter any vendor master records or time intervals. Let the system retrieve the due date from the sales documents and structure the report in intervals of 10 days. Note the name of a vendor with open invoices, as well as the total open amount. Vendor: _________________________________ Open payables: ____________________

3-3

Dunning (Optional) 3-3-1 Create an A/R Invoice with past Due Date Create an A/R invoice for any domestic customer whose due date is one month past. You can post this invoice into the current posting period and just manually change the due date. Ignore the warnings that will come up. 3-3-2 Create a Dunning Term Create a dunning term with two dunning levels. The first one is effective after five days and the second one is effective after 15 days. To save postage, this dunning term should send one dunning letter per business partner. Enter this dunning term into the business partner to whom you posted the A/R invoice. 3-3-3 Use the Dunning Wizard Use the Dunning Wizard to create a dunning letter for the customer.

5-2

Aging and Dunning - Solutions Unit: Controlling Reports Topic: Aging and Dunning

3-1

Run the Customer Receivables Aging report. Choose Reports Financials Receivables Aging.

Accounting

Field Name or Data Type

Values

Aging Date