Prompt Payment Act: Customizing 
Use
Before you start work with SAP’s Prompt Payment Act (PPA) features, you must make specifications in customizing.
Procedure
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1. First, update the factory calendar in your installation, to ensure that it correctly reflects workdays and holidays. To do this, go to the implementation guide (IMG) and choose SAP NetWeaver ® General Settings ® Maintain Calendar.
2. Next, activate PPA. To do this in the IMG, choose Public Sector Management ® Functions for US Federal Government ® Payment Processing ®Prompt Payment Act ®Activate Prompt Payment Act.
3. In the Change View “Activate/Deactivate the Prompt Payment Act”: Overview screen, check the “Active” box for your company code.
4. Next, configure interest calculation indicator 99, which is the standard indicator for PPA interest calculations. To do this, go to the Financial Accounting IMG and choose Accounts Receivable and Accounts Payable ®Business Transactions ®Interest Calculation ® Interest Calculation Global Settings ® Define Interest Calculation Types.
5. In the resulting view, choose New Entries and specify the following:
¡ Interest ID: 99
¡ Name: Penalties (PPA)
¡ Check the box for Acct no. as IntCalcInd (Account Number as Interest Calculation Indicator)
¡ Interest Calculation Type: Z (penalty interest calculation).
6. Save your entries
7. Now you need to specify the penalty interest calculation indicator in the vendor master(s) you use. To do this, go to the Logistics part of the Easy Access menu and choose Materials Management ® Purchasing ®Master Data ®Vendor ®Central ®Change. In the fourth screen of each vendor master, enter indicator 99, which you have just configured.
8. Now return to the IMG for the PPA.
9. Define the account for penalties by choosing Define Account for Penalty Interest.
10. The system may ask you to specify a chart of accounts.
11. In the Maintain FI Configuration: Automatic Posting – Accounts screen, enter the account you need. The account should be a general ledger account. Note that the entry in the transaction field (“PEN”) is fixed; you cannot change it.
12. Save your entries.
13. In the step Enter Treasury Processing Time, you enter (in the Grace Days column) the number of days of the time lag between payments being processed at your agency and the payment run at Treasury. Do this separately for each company code.
14. Specify the interest rates to be applied, by choosing the step Define Interest Rates and CVFR.
15. In the Change View “Define Penalty Interest Rate and CVFR”: Overview screen, enter the penalty interest rate that the Treasury has published for this year. The table is not company-code dependent, so the rate entered applies to all your company codes.
16. You must also enter the current value of funds rate (CVFR). This is the rate compared to supplier discount when determining the economic justification of taking or not taking said discount.
17. Next, you need to maintain the minimum and maximum penalties for each company code. To do this, choose the step Maintain Minimum and Maximum Penalty Amounts.
18. In the Change View “Maintain Minimum and Maximum Penalty Amounts”: Overview screen, enter the amounts to apply to your company code. Note the following:
¡ If a penalty becomes due that is less than the amount you specify in the minimum penalty field, no penalty is paid.
¡ If a penalty becomes due that is more than the amount you specify in the maximum penalty field, the amount specified is paid. Do NOT leave this field blank: if you do, the system assumes that the maximum penalty is zero.
¡ The currency used in each case is the company code currency.
19. Save your entries.
20. Choose Create Penalty Interest Reason Codes.
21. In the Change View: “Reason Codes”: Overview screen, choose New Entries and enter and identifier and text for the code(s) you want to use. These codes describe why the payment is late and why penalty interest is being paid.
22. Maintain Rules for Invoice Line Item Handling
Some goods may fall into a special PPA category (see step 23 below) – for example, because they are dairy products. It may be that the same vendor supplies your agency with goods that fall into this category and with goods that do not. In this case, invoice splitting is required. It is best illustrated by means of an example.
You are billed for milk and widgets from the same vendor. The Prompt Payment Act requires that milk be paid for within seven days of the baseline date. The vendor’s own payment terms are net within 30 days.
In this case, you may choose to use invoice splitting. In the Funds Management Government IMG, choose Public Sector Management ® Functions for US Federal Government ®Payment Processing ® Prompt Payment Act ® Maintain Rules for Invoice Line Item Handling and stipulate “Automatically split” in the “Split” column for this vendor and your company code.
The system then processes the items for payment separately. The milk is paid for within seven days and the widgets after that but within thirty days.
Note: If you had chosen the “Pay at the earliest” option, both the milk and the widgets would have been paid for within seven days, adjusted for net due days.
23. If the goods you are paying for fall into a special PPA category – for example, if they are dairy products – you need to assign them to a material group. To do this, choose the step Assign Payment Term to Material Group.
24. In the Change View: “Material Group – Payment Terms Association”: Overview screen, enter the payment terms you require. Remember to specify a baseline date.
25. Save your assignment.
26. Finally, you need to set up a substitution rule in Financial Accounting (FI). This establishes a procedure for entering dates in invoice receipt documents when you do not enter the date directly yourself.
To do this, go to the FI IMG and choose Financial Accounting Global Settings ® Document ® Line Item ®Define Substitution in Accounting Documents.
27. Create and maintain substitution for the invoice receipt date (field “REINDAT”) at the document header level. When the value in this field in a line item is zero, the document date is substituted.
28. Save your entries.
Results
The following scenarios illustrate possible results of PPA customizing:
· Scenario 2: Invoice Received Before Goods
· Scenario 3: Special Goods (1)
· Scenario 4: Special Goods (2)
· Scenario 5: Economic Justification
See also:
· Fast Pay
· Configuring Improper Invoice Processing