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Overview/Purpose: 1. Banks offer lockbox service to help companies process incoming check payments. 2. Lockbox is similar to post box, which is used in USA only. 3. Company creates Lockbox accounts at its bank which acts as a payment collection accounts for customers. 4. Company informs the customers to submit all open item payments to the designated lockbox accounts. 5. Bank collects the payments from the customers along with remittance which indicates what open items to be intended for clearance. 6. Data entry clerks at the bank manually enter the information into electronic file for transmission to the Company. 7. The files are in one of the 2 standard banking industry transmission formats: BAI , BAI2 8. BAI is Bank administration Institute. 9. The information in this file is matched to the accounts receivable information in the R/3 system to clear the payments against the open items.

Advantages: 1. Manual handling of checks can be avoided. 2. Checks can be processed in time. 3. Easy reconciliation 4. Clearing errors can be avoided.

LockBox Process ( Business Flow) Payment Advice BANK LOCKBOX


Check Transfer BAI/BAI2 file format

SAP Client Remit -to

SAP imports transmitted data from bank and create its own internal payment advice documents to match payments to open items

BAI Vs BAI2: Lockbox uses any one of these 2 formats. 1. Differ in level of information detail. 2. BAI file has one check total amount has all invoices listed underneath it. 3. In BAI format entire check amount must match perfectly the total amount of all invoices listed. It will lead to manual processing through FLB1 ("On account" posting (if the payment and invoice totals don't match), or "Unprocessed" posting (if no customer account and documents could be identified from the transmission).

4. BAI2 splits the check total into separate invoice references and associated payment amounts. 5. BAI2 file format will allow Partially applied status in which some identifiable payments within the check total will be matched and cleared, others will land on account. 6. Hit percentage of payment invoice processing in BAI2 format is higher than BAI format.

Sample Lockbox file of BAI: 100YPCCDESTINYPCCORIGIN9812151201 2YPCCDESTINYPCCORIGIN 50010010012345981214YPCCDESTINYPCCORIGIN 60010020001000000011000390997755331 000912302001800001900180000200018000021 400100360171800002200180000230018000024001800002500180000260 018000027 400100460190018000028 700100500123459812150100001000000 80010060012345981215001000010000009 9000010 1000000 1000000

Sample Lockbox file of BAI2

100BOA01LOCKBBANKOFAMER1204251000 21200000000004000800801

500100051072 120424BOA01LOCKBBANKOFAMER 600100100014531101211051560120004980 4001001601 2000000206 00014531100000000000000

7001000005107212020300300001453110 8001000005107211112200030000145311000000000000000000000 9000011

Lockbox Configuration: Define House Banks SAP IMG -> Financial Accounting -> Bank Accounting -> Bank Accounts -> Define House Banks (Transaction Code: FI12)

Define Lockboxes for House Banks SAP IMG -> Financial Accounting -> Bank Accounting -> Bank accounts -> Define Lockboxes for House Banks T code : OB10

Define Control Parameters SAP IMG -> Financial Accounting -> Bank Accounting -> Business Transactions -> Payment Transactions -> Lockbox -> Define Control Parameters T code : OBAY Table: T049B

Define Posting data SAP IMG -> Financial Accounting -> Bank Accounting -> Business Transactions -> Payment Transactions -> Lockbox -> Define Posting data T code : OBAX Table: T049A

Customer Master FD03 We need to assign the Lockbox Key in Payment Transaction tab of company code segment.

After preparing the lockbox file (for test purpose) execute the following transaction to test the lockbox configuration:

Import Lockbox File: FLB2

Customer Invoice: F-22

Document 2000000118 was posted in company code 1036

Sample file:

LB file for Trng.txt

When LB file is imported in Lockbox Program FLB2, if customer is identified with MICR number with the document number, then it will clear the open item of the customer and check will show the status as Applied.

Journal entries: The control data and posting data settings enable the system to perform the following postings when reading a lockbox transmission file. GL Document: 40 Bank A/c Dr 1000 50 Bank Lock Box clearing a/c 1000

A/R Document posting : 40 Bank Lock box Clearing A/c 1000 15 Customer A/c 1000

The file is uploaded into SAP and G/L entries are posted. SAP creates payment advices for customer items, and compares them against the customers bank details and open items in an attempt to automatically clear items. If open items are successfully found and cleared, and shows the status as: Applied (Customer MICR number and all items are matching ) Partially Applied (Some items are matched and cleared, the items which are not found will be)

On account (if the payment and invoice totals do not match) Unprocessed (if no customer account and no documents could be identified)

Post processing Lockbox Data: FLB1

Payment Advice Note: T code - FBE3

A payment advice note contains the incoming payment details required for allocating and clearing the relevant open item. One payment advice is created per check. Payment advice note headers contain: Payment amount, payment date, and other information about the payment, and document number, reference number.

Lockbox Program: Main Lockbox Program - RFEBLB00