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September 9, 2021 By qiado

Clearing of Vendor Postings

Focusing on Open Itens, we talk about how to clear them, their types and management strategy.

 

Open Items, or simply OPs, are defined as incomplete transactions in the SAP system. There are several approaches to define a document as an OP, such as outstanding vendor payment, pending customer payment, etc. OPs have different points of view, like General Ledger (GL) and Accounts Receivables (AR), but the emphasis in this article is on Accounts Payable (AP).

 

 

How to Clear OPs

For a transaction to be considered cleared, it is necessary to post an offset value to an item, consequently resulting in the balance equalizing 0. In other words, the clearing practice consists of matching a Debit with a Credit of the same amount to balance the Vendor Account (AP) and this allows the closure of the OP in the sub-ledger. Those transactions will generate a clearing document in SAP.

 

 

Types of OP clearing

There are two types of OPs clearing in SAP: Posting with Clearing and Account Clearing. For the first case, what generates the OP item may be an invoice posting against a Vendor Account. What may well close of the OP is the payment to the Vendor and, as a result, the OP will be closed in SAP since the invoice is cleared with the payment and the result is a 0 balance. It is interesting to notice that Posting with Clearing is a procedure that allows the execution for multiple accounts and currencies at the same time as well as the usage of the automatic clearing program.

 

Manual x Automatic clearing

For the Vendor manual clearing, all the procedures are executed manually, and the key user must insert essential information, such as the selection criteria, additional criteria, as well as selecting the OPs to be cleared, and checking that the Not Assigned field is balanced. After saving the progress, the clearing has been successfully performed.

For the Vendor’s automatic clearing in case, the balance in local currency is equal to zero, then SAP will automatically clear the OPs and generate the clearing documents. There are some prerequisites for using this approach though. First, the designated accounts to be cleared need to be managed on the OP basis and, secondly, those accounts must be specified and existent. In addition, it is important to notice that this approach does not function for all OPs. Cases such as statistical postings (only used for information purposes and cannot be allocated to other cost objects), noted items (one-sided entries), certain G/L transactions (down payments and bills of exchange), and items with tax withholding tax entries, are among the ones where the automatic clearing approach will not perform successfully.

For the Vendor’s automatic clearing, just like in the manual clearing approach, the transaction requires the input of the trivial information and the checkbox Select Vendors. After executing the transaction, the system will display the list of the clearing document numbers and respective document numbers as a confirmation of success.

 

 

Clearing Vendor with Customer

There is another modality for clearing a Vendor Account in the SAP system named Clearing Vendor with Customer. In practical terms, the same company code can have a certain customer that is simultaneously a vendor. In such cases, OPs from the AP side may be counterbalanced with the OPs from the AR side for this account. Here, a clearing transaction will offset the accounts. There are, however, a series of setups that need to be programmed in the system beforehand, which allow the functionality to be executed to clear the OPs in this scenario. First, in the customer master record (control section), input the vendor account number. Second, in the vendor master record (control section of the general data), enter the customer account. Finally, in the company code data section of both vendor and customer master records, select Clearing with vendor and Clearing with customer checkboxes.

 

OP Management Strategy

Each corporation is unique, thus the most efficient approach to operate an OP list depends on the operations, team, and even technology. However, Qiado knows 3 best practices that will support your company handle OPs more efficiently.

  • Distribution: in a growing accounting department, different individuals are utilizing the same tool during a period. A very commonly used distribution system is the sharing of emails containing OP lists between team members or even through cloud-based solutions, where each person has access to the documentation.
  • Controls: appropriate internal controls maintain all efficacious, trustworthy, and accurate. The integration of certain straightforward controls can ensure the team is regularly and carefully addressing them. For instance, a control list with a table + bar chart that indicates a few OP statuses and amounts, such as In Progress, Done, Still Open, and All.
  • Frequency: it is ideal to avoid the increase of effort, resource, and time required to handle OPs and, unfortunately, this normally happens by allowing OPs to accumulate. A simple solution is a definition of a frequency of reporting (maybe once a week), in which the analysis throughout the week can be diluted and not overload the usual workflow.