What is supplier payment clearing and why is it used?
In S/4HANA Cloud, supplier payments are incomplete transactions which need to be cleared once the payment has been processed by the related House Bank. Moreover, payments are managed as open items on the balance sheet until either the related bank statement is processed in the system or the item has been cleared otherwise. Clearing of these items requires posting the value to offset the amount, creating a balance of 0, and can happen either automatically or manually. This happens automatically through Electronic Bank Statement (EBS) processing and clearing, and manually through the reprocessing of bank statements or manual clearing. In simple terms, the clearing process matches supplier payments generated by the system and the outgoing payments from the bank statement to close off any outstanding debts or accounts.
By clearing items which have a related offsetting entry, the process to analyse what is outstanding in a G/L account is made easier. Additionally, this is required to prove the reconciliation process is up to date for audit purposes. This is particularly relevant in the case of bank account reconciliation.
Automatic clearing is only relevant for G/L accounts that are flagged for Open Item Management. It’s important to note that once this flag is turned on, you will not able to turn it off.
For supplier payments the optimal design is that the open items generated as part of the payment process are cleared automatically during the processing of Electronic Bank Statements. A manual clearing process can be used alternatively or just for those outstanding items. The process for this can be found in test script for Accounts Receivable (J59) or Accounts Payable (J60) found on the Best Practices Explorer.
During payment creation the following accounting is created in S/4HANA Cloud:
In the above example two invoices are posted to a supplier account, which are shown by the documents highlighted with (1) During payment processing these invoices are cleared and entry is created on the Bank Sub Account linked to the House Bank (document highlighted with 2). Once the payment has been processed by the bank and the bank statement is loaded to the system, the open item is cleared automatically by the system.
How is clearing handled in S/4HANA Public Cloud?
Processing Bank Statements
After importing the Electronic Bank Statement, S/4HANA Cloud scans the file for the information that it requires to begin the automatic clearing process. The system will determine the type of transaction, how it should be handled/posted in the system and match the document information, such as invoice reference number, to clear open customer or supplier items.
The exact logic used for clearing can depend on several factors including:
- the format of the payment file sent to the bank (SEPA, BACS, ACH etc)
- statement format received (MT940, CAMT53 etc)
- any specific bank requirements
Although SAP provide a sample file for common use, adjusting the outbound file format to meet specific bank requirements is a normal project activity.
For items not cleared by the automated process the app Reprocess Bank Statement Items is provided to manage and apply rules to items that need to be reprocessed. Here you can review the Bank Statement items that have not been cleared.
What can I configure?
In S/4HANA Public Cloud, the SSCUI can be used to configure tolerances for automatic clearing for Customers and Suppliers.
Electronic Bank Statement Integration
Self Service Configuration UI (SSCUI) are provided to map the external transaction codes provided by the bank as part of the bank statement and linking these to posting rules and determination algorithm in order to support the automatic clearing process.
Account symbols specify which G/L account it is posted to. These can however be adapted to mask the accounts according to your COA changes. For example if your bank account is 1000000 and your clearing account is 1000001, the account symbols would be set up as:
Symbol = BANK_MAIN; GL Account = ++++++++++
Symbol = BANK_CLEARING; GL Account = +++++++++1
External Transaction Type
External transactions are keys supplied by banks that identify the line items in the bank statement. The +/- sign differentiate external transactions by setting “+” or “-” signs for them. If the external transaction code has a “+” sign in front of it, it is a cash credit. Likewise the “-” sign represents a cash debit.
Posting rules represent the type of bank transaction – credits, debits, wires out, bank fees, etc. In S/4HANA Public Cloud standard postings rules are provided by SAP and are mapped to the external transaction types of the bank.
In order to clear open items automatically, the information contained in the note to payee lines of the electronic bank statement is interpreted. The interpretation algorithm enables the search of your incoming and outgoing payments in the bank statement, based on information supplied by your suppliers and/or your house bank and entered in the note in the bank statement. The system uses this information to determine which algorithm it will use to search the note to payee lines of the electronic bank statement for clearing information. The interpretation algorithm is configured through the SSCUI. For example, if using interpretation algorithm 021: Reference Document Number Search the system will find the necessary information for this in the note to payee lines in the statement; using the document number or the reference document number to clear the document (s).
Please also note that relevant G/L accounts should also be flagged for Open Item Management.
To support the above clearing process, information must be provided to the bank during the payment process which is then returned by the bank. SAP provides a number of fields which can be used for this (supported by the algorithms). An example of a field that may be used is the clearing document number generated as part of the payment process. Maintenance of the payment format is available as part of SSCUI 100558.
Firstly the ID sent to the bank in the file format can be set to your own mapping. In the example below, the end-to-end ID from the IS020022 format in order to have a consistent ID through the end to end process from payment media generation to importing of the bank statement.
This mapping can be an SAP field or mapped to the note to payee. An example of the note to payee mapping is shown below:
In this example the clearing document number is added to the end-to-end ID in the file. This is then returned by the bank for the relevant transaction (in the note to payee of the bank statement item) and automatically cleared using the algorithm.
More documentation on how to configure payment formats through to processing electronic bank statement can be found using the below link: