Ease Reporting by Enhancing Your Security Deposit Conversion Process in FI-CA

  • by Roshan Agrawal, Consultant, Deloitte Consulting Pvt. Ltd.
  • Vaibhav Bansal, Sr. Consultant, Deloitte CON India Pvt. Ltd.
  • March 20, 2017
Learn about the enhanced functionality of the security deposit conversion process based on security deposit request reasons in SAP contract accounts receivable and payable (FI-CA). The enhancement involves the posting of security deposits in the SAP system so that they can be easily identified on the basis of request reasons through standard SAP reports. The accounting of the deposit amount then is posted in the correct general ledger for each request reason.
Learning Objectives

Reading this article, you will learn how to:

  • Create a security deposit request reason
  • Create a new account determination ID
  • Assign general ledger (G/L) accounts against the account determination ID
  • Enhance the standard security deposit conversion functionality
  • Assign an interest key based on the security deposit request reason
Key Concept

A security deposit is a refundable amount of money held by a company to offset any loss that may occur in the future. Security deposits are requested from customers based on different business conditions that are configured as request reasons in the SAP system. Request reasons are the reason for taking the security deposit from the customer (for example, a new customer, load enhancement, or a customer category change). Load enhancement is a term used when a utility customer requests services in a higher quantity. For example, an electricity customer requests an upgraded 7KW meter connection in comparison to the existing 5KW meter connection. Since a deposit is a liability to the company, a company may give interest to the customer on such deposits. An interest rate at a fixed percentage is configured in interest keys, which are assigned at the contract account level. An interest key is an indicator configured in an SAP system to determine the rate of interest and is assigned at the contract account level. For example: Z1 is defined for a 10 percent rate and Z2 for 12 percent.

Security deposits are an integral part of SAP contract accounts receivable and payable (FI-CA). There can be various request reasons to collect security deposits from customers during the year. Utility companies can convert security deposits from one request reason to another request reason during different phases of a service agreement. Normally, there is only one general ledger (G/L) for all request reasons, but in a scenario in which a security deposit is accepted in phases, you need to post the security deposit in a separate G/L for each phase.

Utility companies face a challenge in dealing with such cases as they already have accounted for a security deposit in one particular G/L. Standard SAP security deposit conversion functionality (i.e., a change in the security deposit request reasons) does not provide a method by which G/L accounts can be changed based on the request reason during conversion from one reason to another. We describe a way to enhance the security conversion functionality so that you can use it for the scenario explained above.

Enhancing the security deposit conversion functionality based on security deposit request reasons in FI-CA can help improve a company’s standard deposit conversion process. It enables the company to convert security deposits based on request reasons and also to change financial information (G/L accounts) automatically at the time of conversion. Enhanced functionality provides better year-end or interim reporting on the security deposits based on request reasons. The year-end process is streamlined in terms of having separate G/L information for each request reason. In a standard conversion process in an SAP system, this type of reporting is not possible because the deposit amount is clubbed in a single G/L account for all the request reasons.

This enhancement reduces the complex manual effort of segregating dollar values of each security deposit type from a single G/L account.

This enhancement can also be implemented in FI-CA for the industry-specific solution for telecommunications (IS-T) and other industry-specific applications to SAP ERP where security deposit functionality exists. An organization can also use this process in an SAP ERP system, provided that standard security deposit functionality exists in the system.

Business Case

In a typical US-based water utility company, there is a business segment called land development in which the company provides water service to customers for land development. The agreement or contract to provide water services to a customer for land development purposes for a definite time span is defined as a project. In this service, security deposits are collected from the customer at different phases of the project. This type of customer has a unique account determination ID to segregate the type of customer. (An account determination ID is a characteristic used to segregate customers based on either region or customer group—for example, a domestic customer or an industrial customer). It's a free field in which the SAP system gives you the space for grouping your customers (for example, grouping residential customers in one space and industrial customers in another). This helps in automatic determination of G/L accounts.

The land development process includes collecting a security deposit amount from a customer at the start of a land development project as a land development advance (which is one request reason). This deposit amount is reduced during the project on the basis of certain conditions, normally after a certain percentage of project completion. It is then called a performance bond (another request reason). At the end of the project this deposit is further reduced and named a maintenance bond (another request reason).

In the SAP system, these three types of deposits are configured as different request reasons, but use the same account determination ID as the customer is same. Thus only a single G/L account can be assigned. Because only a single G/L account can be assigned and determined automatically, a business has to use the same posting parameters. All deposits are lumped together and posted as land development advance deposits. Since they are not accounted for individually, the business has no way of reporting on each of the three different kinds of deposits at the end of the year. The finance department finds it difficult to reconcile the amount posted to the G/L account during the year based on the type of deposit received. There were three types of security deposits, but all these amounts were posted in one deposit account.

At the end of the financial year, you can use an SAP standard report (FPD1) to determine a breakdown for different kinds of security deposits. Unless different G/Ls and account determination IDs are assigned to each request reason, these reports do not give exact results to the finance department for the amount of deposits posted to a particular G/L account. Through a configuration change and enhancement of two events, you can achieve the functionality of using a different G/L for each request reason. 

We describe the detailed view of each process starting from the security deposit through its conversion based on the request reason selected.

Roshan Agrawal

Roshan Agrawal is a member of The Institute of Chartered Accountants of India (ICAI). He has around 11 years of overall experience including nine years of SAP-ISU consulting experience with deep expertise in FI-CA. His consulting experience spans utilities industries including electricity, water and gas. His project exposure includes three end-to-end implementations, rollouts, technical upgrades, and application support assignments.

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Vaibhav Bansal

Vaibhav Bansal is a member of The Institute of Chartered Accountants of India. He has around five years of overall experience including five years of SAP-ISU consulting experience with extensive knowledge in FI-CA. His consulting experience spans the utilities industries, including electricity, water, and gas. His project exposure includes technical upgrades and application support assignments. 

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