Which A/R Underpayment Option Should You Use: Partial Payment or Residual Item?

  • by Rohana Gunawardena, SAP Practice Director, Exium Inc.
  • September 15, 2003
When a customer makes a payment for an invoice that is a great deal less than the full invoice value, the A/R user has several choices of how to process the underpayment. Both users and consultants are often confused about the difference between two of those options - partial payment and residual item - because they can appear to have similar results. The author explains how they differ by taking the same invoice through both processes.

Anyone who has worked in A/R has come across underpayments by customers. Without a clean match from the payment to the invoice, you have to analyze why there is an underpayment. Did the customer make a mistake, is the customer disputing an item, or did the salesperson agree to installment terms and not tell accounting? The possibilities are endless.

When you match the underpayment to the invoice in A/R, you must do it in a manner that best reflects the business situation. When you post the underpayment, you need to consider the impact it will have on other A/R processes.

For example, should the original invoice be shown as paid or unpaid? Should the underpayment be treated as a full payment or short payment? Should all, some, or none of the invoice value be considered against the customer credit limit? How should the underpayment and original invoice be reflected on the A/R aging report?

The A/R user has several choices of how to process the underpayment when a customer makes a payment for an invoice that is a great deal less than the full invoice value. Both users and consultants are often confused about the difference between two of those options — partial payment and residual item — because they can appear to have similar results. (See Table 1 for a comparison.)

Rohana Gunawardena

Rohana Gunawardena heads the SAP practice division at Exium Inc. Exium is a leading business and technology consulting firm that enables companies to achieve their strategic business goals. Exium specializes in delivering superior IT solutions using ERP systems, with a special focus on SAP products. Rohana has been working with SAP since 1992. During his career he has assisted multiple clients on detailed system correction projects, such as correcting inventory balances, controlling area reorganizations, retrospectively activating group currency, and optimizing inter-company accounting transactions. He has spoken at many SAP conferences and has published more than 20 articles in Financials Expert, SCM Expert, and SAPtips on various aspects of SAP. His presentations have focused on Financials module selection, the order-to-cash process, global rollouts, business segment reporting, cross-module integration, and the financial impact of SCM transactions. Rohana is widely acknowledged as a leading SAP expert. Rohana is a Fellow of the Institute of Chartered Accountants in England & Wales. Previously Rohana has worked with the consulting practices of Accenture, Deloitte, and PwC.

Rohana will be presenting at the upcoming SAPinsider Financials 2017 conference, June 14-16, 2017, in Amsterdam. For information on this event, click here.

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