Purpose Codes in Payment Media in SAP S/4HANA Cloud

[Michal_Pandoscak]

When making a payment, purpose codes from both the house bank (sender) country and receiver bank country are required in order to comply with regulatory reporting requirements of banks or local authorities. The new field Payment Reason stores the necessary information that is later used to derive purpose codes. Purpose codes are then populated into the payment medium file and serve as instructions for the payee bank. During the payment run, the payment reason is transferred from the invoice using the Manage Automatic Payments app and based on the mapping specified in the Map Payment Format Data configuration step, it is inserted in the payment medium.

To make settings related to payment reason codes, a new configuration object was added to Configure Your Solution in the Manage Your Solution app. The new configuration step can be found under settings related to Payment Medium Formats and it is called Define Payment Reasons (105311).

This configuration step allows you to define payment reasons to classify the type of the payment transaction (such as salary payment, purchase of goods, purchase of services and so on) that you transfer from one bank to another. It is possible to send two different purpose codes (for example one on the credit side and the second on the debit side) while the maximum character limit is 70 (35 characters for each code). Go to this activity to specify the combination of the payment reason and the payment reason codes.

Define Payment Reason

On the Payment Reason Definition screen, define payment reason and its description.

Enter a 4-character long payment reason that can be used during the payment processing to identify the payment type, and describe the payment reason, according to legal requirements in your country/region.

Maintain Combinations of Payment Reason Codes

On the Payment Reason Codes Combination screen, you can maintain combinations of the payment reason codes (purpose codes).

On this screen, assign data as follows:

1. Choose an application area you entered in the payment medium format you are going to use.

Note: The application area is assigned to each payment medium format in the Create Payment Medium Formats configuration step. You can (re)define it in your custom payment formats in the app. Look for the field called “User for Instructions”. See step Update the Payment Format.

2. Assign the payment reason specified in the previous step.

3. Specify the two-character ISO code of the sender and receiver bank's country/region as follows:

You enter the ISO code of both the sender and the receiver bank. This means that for each payment transferred from then sender bank (in the specified country/region) to the receiver bank (in the specified country/region) the purpose codes entered in the further two columns (Payment Code of Sender Bank and Payment Code of Receiver Bank) are inserted. The sender and receiver bank's country/region can be the same.

When the payment file is generated, these code combinations are called using the following priority order:

a) The system searches for assignments of both the sender and the receiver bank.

b) If no entry found, then the system searches for entries of the sender bank.

c) If no entry found, then the system searches for entries of the receiver bank.

Combination examples:

Example 1:

You want to transfer payments from a bank in SK to a bank in DE because both banks require a special set of purpose codes. To identify the payment, the sender and the receiver bank require different purpose codes. You enter both Sender Bank Country/Region and Receiver Bank Country Region and the necessary purpose codes in the Purpose Code of Sender Bank and/or Purpose Code of Receiver Bank fields in this activity.

Example 2:

You want to transfer payments from the bank in SK to any bank in any country/region and because the bank in SK requires a special set of purpose codes you enter the purpose codes required by the sender bank in the Purpose Code of Sender Bank and/or Purpose Code of Receiver Bank field in this activity. The purpose codes are used for each payment from the sender bank to any receiver bank in any country/region.

Example 3:

You want to transfer payments from any bank to a bank in DE because the bank in DE requires a special set of purpose codes. To identify the payment, you enter the purpose codes required by the receiver bank in Purpose Code of Sender Bank and/or Purpose Code of Receiver Bank fields in this activity. The purpose codes are used for each payment from any sender bank to the receiver bank.

Whether you use Purpose Code of the Sender Bank or Purpose Code of the Receiver Bank or both depends purely on your business requirement.

Update the Payment Format

Make sure that the payment format to be used has the correct Application Area (User for Instructions) assigned (that is in our cause App. Area “ISO”). Changes to a payment format can be done in configuration step Create Payment Medium Formats (102569) under settings for Payment Medium Formats.

Assign the correct Application Area in Setting for Instructions.

Change the Format Mapping

You also need to map the new fields where the bank requires purpose codes. In our example, we will map them both as atoms within <RgltryRptg><Dtls><Cd>.

Changes to a payment format mapping can be done in configuration Map Format Data for Payments (100558) under settings for Payment Medium Formats.

Available fields are: FPAYHX-SND_CTRY_CODE and FPAYHX-REC_CTRY_CODE.

Updating the Payment Method

To test our solution, we will assign the payment format to the payment method we will use for testing (in our case that is payment method “Z”).

You can do that in configuration step Set Up Payment Methods for Each Country/Region for Payment Transactions (101972) under settings for Automatic Payments.

Updating Payment Reason in Vendor Master Data

To update payment reason in vendor master data, open the Maintain Business Partner App and go to a Business Partner in the role Supplier (Fin. Accounting).

First, update the Payment Reason on the General Data tab:

And then on the Company Code tab:

Posting a Vendor Invoice with Payment Reason

To post an invoice with payment reason, use the Create Incoming Invoices App and select a payment reason in Payment tab.

Testing Our Solution

Vendor Invoice without Payment Reason

To test our solution, we will also post a vendor invoice without payment reason. For this invoice, we select the same Business Partners as the one where we updated Payment Reason on master data. To post a vendor invoice without payment reason we simply leave the field Payment Reason empty.

Payment Run

We will now create a payment run for the two invoices posted above (Vendor Invoice with Payment Reason and Vendor Invoice without Payment Reason).

As we expected, the invoices are going to be paid separately because Payment Reason is a grouping criterion.

 

Tip: You can also display the Payment Reason directly in the Payment table:

Payment Medium

Payment medium is created automatically from payment run on SAP S/4HANA Cloud. Therefore, we only inspect the generated file. As expected, correct values are in the file.

 

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