Collection departments of tax authorities can have strict rules and regulations to manage installment plans: interest calculation, reassignment to different G/L accounts at year-end closing, and clearing control when processing a payment or a credit.
In this blog, I explain the core standard functionalities available in SAP S/4HANA PSCD to handle interest calculation and installment plans, with screenshots from an SAP S/4HANA system.
The user stories are
As a collection agent, I can create an installment plan and
set the number of installments
set the start date of the installment plan
set the periodicity of the installments (weekly, monthly...)
set the amount to be paid per installment
calculate and distribute my charges and interest according to the legislation
display the installments or the original items in the account balance of the taxpayer
As a collection agent, I can receive the payment of an installment that can be
partial or complete
in advance or in time
before collection activities (considering the grace period) such as sending a dunning notice for the installment
after collection activities
As a collection agent, I can dun overdue installments
As a collection agent, I can deactivate an existing installment plan
As a collection agent, I can reclassify installments and related interests that are due in the next year to another G/L account.
Note: The installment plan can also be created by a call center agent, in the SAP Financial Customer Care.
Now let's create an installment with the following characteristics:
As a collection agent, I create an installment plan and
set five installments
set the start date of the installment plan to the first day of the next month
set the periodicity of the installments to monthly
set the amount to be paid per installment
calculate and distribute my charges and interest proportionally on all installments
Note: we do not explain here interest calculation on contract accounts, only interest calculation to be included in an installment plan.
First, let's create two overdue open items on a contract account of a business partner and check the account balance in the Business Partner Overview (transaction FMCACOV).
Business Partner Overview - Two open items are overdue
Now let's create the installment plan in the F5720 - Manage Installment Plans Fiori App.
F5720 - Manage Installment Plan Fiori App
The initial screen can then be filled with the required information
the business partner
the contract account
the posting parameters
Important: Please note that only open items belonging to the same contract account can be assigned to an installment plan. If you need to group open items from different contract accounts please evaluate the SAP Promise to Pay.
Create Installment Plan - Initial Screen
In the next screen, we can then
select the two overdue open items
set the parameters of the installment plan
Installment Plan Type Z001 has been defined in customizing and contains the default parameters for our installment plan
A charge amount of 50 EUR has been added as administrative fees
ask the system to distribute the charges and the interest proportionally on the installments
Installment Plan Creation - Selecting items and Setting the Parameters
In the next screen, the system has calculated the installments and shows a proposal. Several actions are possible at this stage:
Adding/Deleting an installment
Change the amount of an installment
Calculate installment plan surcharge
Distribute the difference amount over the installments
Calculate the interest
Installment Plan Creation - Managing the installments
We now want to calculate the interest for the installment plan. In customizing it's possible to define how the interest calculation takes place. Most of the configuration is managed in customizing activity Define Default Values for Interest on Installment Plans
Installment Plan Customizing - IMG Path
In our case, we have
set an interest document type IN
set an interest rate of 5% via the interest key Z1
Installment Plan Customizing - Setting the Document Type and the Interest Key
Two important parameters must also be defined according to your business requirements:
The Interest from Original Items: setting this indicator has the effect that the interest is calculated from the original items and not the installment plan items.
The No Interest on Arrears controls the calculation of interest on an installment plan, at creation time, and for a charge for late payment.
If the indicator is set, the interest is always calculated until the due date for the installment.
If the indicator is not set, the system corrects the interest upon receipt of payment.
Interest is charged on open items at least until the current date. When clearing an installment, both early and late receipts of payment are taken into account.
Interest is calculated on the payment date.
For payment after the due date of the installment, interest receivable is charged on receipt of payment.
For payment before the due date, an interest credit memo is created.
In our case, we calculate interest from the original items and we do not correct the interest upon receipt of payment.
When hitting the Calculate Interest button and confirming the interest calculation parameters, the interest amount is calculated and distributed proportionally to the installments.
Installment Plan Creation - Calculating the interest
In the Excel extract below you can check that the interest was calculated properly.
Interest Calculation in Excel
The installment plan can now be saved and get an installment plan number.
Installment Plan has been saved successfully
Note the fact that two CA documents were created
a charge document
an interest document
The Manage Installment Plans Fiori App now shows the newly-created installment plan
Manage Installment Plans - Searching for the installment plan
From the Display Installment screen of the newly-created installment plan, you can access the installment plan history.
The document type specifies which type of receivables were included in the installment plan history when it was created:
SPACE: Original receivable(s)
Z: Interest document
G: Charges document
F: Installment plan surcharge
C: Inflation surcharge
Manage Installment Plan - Displaying Installment Plan History
in the Business Partner Overview, the five installments are not displayed in place of the two original items.
Business Partner Overview - Item list with installments
Practically, installments are statistical items created next to the (original) source items. Of course, only the installment plan items OR the source items are displayed at a time in the account balance.
The original documents can be displayed in the Account Balance (transaction FPL9)
Account Balance Display - List of Receivables
This Display Source Items option is available in the Account Balance as a parameter of the Detail list type.
Account Balance - Choosing between Installments and Source Items in the Detail List type
In the Analyze Installment Plans Fiori App, the newly-created installments are displayed and split by quarters in our example below.