Retention

This function enables the use of retention (formerly called “withholds”) in procurement documents. Retention is available at header and item level on the following SAP Supplier Relationship Management (SAP SRM) Procurement for Public Sector (PPS) document types:

Purchase order
RFx
RFx Response
Contract

Integration

Information about retention is transferred from the originating SAP SRM procurement document to SAP ERP for the invoice and payment processes.

Prerequisites

In SAP SRM, you have done the following:

You have activated the business function SRM, Cross-Industry Functions (SRM_CROSS_INDUSTRY_1). Note that you can only use this business function in conjunction with the business function SRM, Procurement for Public Sector (SRM_PUBLIC_SECTOR_1). In other words, you must activate both business functions.

You have defined transaction types in Customizing for Supplier Relationship Management under Start of the navigation path SRM Server Next navigation step Cross-Industry Functions Application Settings Payments Retention Define Transaction Types for Retention End of the navigation path .

In SAP ERP, you have done the following:

Activated the business function MM, Integration of Materials Management and Financial Accounting (LOG_MMFI_P2P) in the Customizing activity Activate Business Functions.
Performed the following Customizing activities for Materials Management under Logistics Invoice Verification Incoming Invoice Retention :
- Define Default Due Date for Retention
  In this Customizing activity, you define how long security retention is retained for each material group.
- Define Tax Handling for Retention
  In this Customizing activity, you define country-specific parameters for tax calculation in the security retention document.
- Define Control Parameters for Retention
  In this Customizing activity, you define company-code specific settings for retention.

You can further customize retentions using the following Business Add-Ins (BAdIs):

You can disable retention fields in Customizing for Supplier Relationship Management under SRM Server Cross-Industry Functions Customer Enhancements (BAdIs) Payments Disable Retention Fields .
You can define default values and input parameters for retention in Customizing for Materials Management under Logistics Invoice Verification Maintain Customer Exits and Business Add-Ins BAdI: Default Values and Input Parameters for Retention .

Features

Retention refers to the ability to hold back a portion of a requested or planned payment. Terms and conditions are agreed upon in the contract, and as long as the special conditions set out in the contract are not met, the receiving invoices are not completely paid. When the retention period passes, the agreed percentage is paid. You can set a default percentage or a definite amount to hold back from invoices and payment, either on a pre-tax or a post-tax basis, but you can always manually change retention amounts on invoices, purchase orders, or payments. Also, you can apply retention to new line item structures, including cost-reimbursement line item types.

When you order the purchase order, two documents are created: the receiving invoice and the retention document. The retention document posts the calculated retention amount from the supplier to a special ledger account. By default, retention amounts appear at header level of the special ledger account. The retention amount is paid at the time of the due date entered in the incoming invoice and can be posted with or without tax.

In some cases, the retention amount is not paid out as a lump sum. Under certain circumstances, a partial payout of a retention amount is necessary. For example, under terms of a contract, you retain 5% from each of 12 invoices to a contractor. If the contractor has unplanned expenses after the sixth invoice, a partial payout of the retained funds to the contractor is possible, after which you can return to normal processing.

You can choose from the following retention options:

Not Applicable
Select this option if you do not wish to use retention in your procurement document.
Secured by Guarantee
Select this option if you want retentions to be covered by bank guarantee and not by money withheld from an invoice. If you secure your retention by guarantee, the retention amount is zero. The supplier submits a “Bank Guarantee on First Demand” that gives the purchaser the right to withdraw money from the bank in case of incidents that require payments under the retention terms of the contract.
Applicable (Header)
Select this option if you want to enter a retention percentage at header level of a procurement document. The retention percentages are copied to each line item and cannot be changed at line item level. Use this option if you want to apply the same retention percentage to all line items in a procurement document.
Applicable (Item)
Select this option if you want to enter a retention percentage at line item level of a procurement document. Retention percentages are maintained at line item level. Retention percentages can differ from line item to line item depending, for example, on the type of service being rendered.

Example

Retention is common practice in certain areas, for example, construction. In construction projects, it is standard to withhold a percentage of the invoices sent by contractors because, at the time of invoice, the quality of the goods cannot be assessed. Typically, about six months after construction projects are finished, quality issues appear and can be assessed. If no quality problems arise, the money that was withheld is paid to the contractor.