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Lock Box Processing in Sap

Lock Box Processing in Sap

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Published by: Sivaramakrishna Mandapati on Oct 22, 2012
Copyright:Attribution Non-commercial


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- Include details for Cross- Company processing
 A company can create accounts called 'lockbox' at its bank (or banks) that act as payment collectionaccounts for customer payments. The company then informs their customers that all open item paymentsfor their accounts must be submitted to one of the established bank lockbox accounts. The bank collectsthese payments along with the customers' remittance information that indicates what open items thecustomer payments intend to clear. Data entry clerks at the bank manually enter the information into anelectronic file for transmission to the company to which the lockbox account belongs. These files aretypically transferred nightly to the various lockbox owners (companies). The files adhere to one of twostandard banking industry transmission formats: BAI, BAI2 (Bank Administration Institute).
Advantages of Lockbox 
Following are some of the advantages of using the lockbox:Manual Handling of checks can be avoided Checks can be processed in time. Easy reconciliation ClearingErrors can be avoided
Difference between BAI and BAI2 
BAI and BAI2 formats differ in their level of information detail. BAI does not separate out the incomingcheck line items by invoice subtotal reference. Instead, one check total amount simply has all invoiceslisted underneath it. Thus, in BAI format files, the entire check amount must match perfectly (or withinconfigured payment difference tolerances) the total amount for all invoices listed. Otherwise, the entirecheck will enter into SAP as: an "On account" posting (if the payment and invoice totals don't match), or  An "Unprocessed" posting (if no customer account and documents could be identified from thetransmission). In these scenarios, your Accounts Receivable cash application clerks will have to performmanual application to clear payments against open items on the proper accounts.Conversely, BAI2 splits the check total into separate invoice references and associated payment amounts.Thus, within a large batch, BAI2 format files will allow a "Partially applied" status in which some identifiablepayments within the check total will be matched and cleared, others will land on account. As a result, your 'hit rate' percentage of payment-invoice matching from each transmission is likely to be higher when usingBAI2 rather than BAI formats.
Process Flow
Steps for lock box setting 
Lock Box setting: 
There are three lockbox settings:Defining lockboxesDefining control parametersDefining posting data
Define Lockboxes
: Financial Accounting -> General Ledger Accounting -> Bank-Related Accounting -> Bank Accounts ->Define Lockbox Accounts at House Banks. Transaction: OB10.In this transaction, you define your lockbox accounts at the house banks. Thus, on the outgoing invoiceyou can inform your customer of the lockbox to which payment is to be made. By specifying this, you canoptimize the payment transactions.To configure the lockboxes first specify the lockbox links (company code; key of the lockbox to which thecustomer is to pay; house bank ID; lockbox number at your house bank). Second enter a remit to addressthat will appear on the customer invoice.
Define Control Parameters:
SPRO -> Treasury -> Cash Management > Business Transactions ->Lockbox -> Define Control Parameters. Transaction: OBAYThe top "Record format' settings are unnecessary for BAI2 format, and should be left blank.Procedure - LOCKBOX (currently the only supported procedure in standard system)Record Format - BAI or BAI2Record Format Parameters: (Required for BAI Only)Document # length - length of the document # used to locate the open itemNumber of document numbers in record type 6 - maximum # of documents in detail recordNumber of document numbers in record type 4 - maximum # of documents in overflow recordPosting Parameters:G/L Account Postings: Identifies whether G/L Posting is created.G/L Account Posting Type: (1) = Posting / Check or (2) Posting / Lockbox Incoming Customer Payments:Identifies whether to post to customer accounts also.
BAI2 Format for Lockbox
 A wider knowledge about the file structure you are uploading to your SAP ERP allows you to avoid manyproblems those looks like to be application issues. In the following sections you will be able to understandbetter the BAI2 structure.
BAI2 Structure 
Record 1 - Header Record 2 - ServiceRecord 5 - Detail Header Record

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