Jul 173 min read

Payment Terms in SAP S/4 HANA

What is Payment Terms in SAP ?

Payment Terms are the conditions agreed upon between a company and its business partners (Customer & Vendor) regarding the payment of invoices. Payment terms is defined 4 digit code in system. They define the period within which payment is expected to be made and any discounts that may apply for early payment. Once the system defines them, you can assign these terms to the vendor master or customer master.

To Maintain Payment Terms in SAP - T.Code OBB8

Payment Terms : Payment terms is defined 4 digit code in SAP system. Payment terms are the conditions agreed upon between a company and its business partners regarding the payment of invoices.
Day Limit : Day of the month until which the corresponding terms are valid.
Account Type : Customer : If payment term is intended to use for “Customer” select check box. Vendor : If payment term is intended to use for “Vendor” select check box.
Block key : Block Key in payment terms is used to control the processing of invoices and payments. It serves as a way to prevent certain invoices from being included in the payment run or to apply specific conditions to them
Payment Method : The payment method determines how payments are to be made, e.g. by check, bank transfer or bill of exchange.
Default for Baseline Date : Number of days following the baseline date for payment after which the payment must be made in order to make use of the corresponding cash discount terms and/or to pay within the due date for net payment period. No Default - Indicator that no default value is required for the baseline date for payment. You then have to enter the base date manually during document entry. Document Date - If you receive a Invoice from a vendor, the invoice is having a date which is called as document date. Posting Date - Posting Date is when you post that document in the SAP system that is called posting date. Entry Date - Entry date is the date on which you are actually posting the document in SAP you can not change this date because system capture current date automatically.
Cash Discount Percentage Rate : The Cash Discount Percentage Rate is part of the payment terms configuration and refers to the discount offered to a customer if they pay their invoice within a specified, Discount Periods Specific time frames during which different cash discount rates apply.

To Maintain Cash Discount Taken GL in SAP - T.Code OBXV

Path to Configure : SPRO > IMG > Financial Accounting > Accounts Receivable and Accounts Payable > Business transactions > Outgoing payments > Outgoing payment global settings > Define accounts for cash discount taken.

How Payment terms works in SAP ?

Let's take an example of a vendor invoice posted with 1,000 INR with terms that

if payment is made within 15 days then vendor will give 15% discount,

if payment is made within 20 days then vendor will give 10% discount,

if payment is made after 30 days then No discount at the time of payment.

Vendor Invoice with above Payment Terms

Vendor Payment made against above Invoice

Document Posted :

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