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Pre-requisite:
The dunning functionality has to be enabled as defined in the How to set up an Automated Dunning Process guide.

SAP Business One can be set up to automatically calculate interest and/or apply a dunning fee during the execution of the dunning wizard.  However, neither the calculated interest nor any fee applied to the dunning letter is reflected in the business partner account balance. Yet, both fee and interest amounts can be included in the physical letter sent to the customer. When the customer accepts liability and pay the interest/fee, these monies received must be declared to the tax authority as additional income. As a consequence the dunning fee and interest payments must be manually added to the business partner (BP) account balance. The example below uses a manual journal entry (JE) to adjust the BP balance on the day the dunning letter is issued. This journal is reversed upon receipt of payment and replaced by a service type invoice with the posting date of when the payment is received.
Taking the dunning letter below as an example, the amount due on the invoice is GBP 115.00 and a fee of GBP 10.00 has been applied to it. The tax code is O1, which is the standard UK tax code with a rate of 15%.


 The BP account balance at this point does not include the fee.




It depends on the business process of the company how this fee is handled. If this fee is to be applied to the BP balance as soon as the dunning letter is created, either a service type invoice or a journal entry (JE) can be posted. Since it is not guaranteed that the customer will actually pay the fee, it would be unwise to include a tax posting in this transaction. It would render our company liable for sales tax before having received anything from the customer.
In this example a manual JE without tax is used to adjust the customer account balance. Posting, Due and Document Date is the date of Dunning Wizard run, here 16.06.2009. In the Remarks field a simple explanation of why a manual JE has been posted to the BP account is given. The company accountant must decide which off-setting account to use. Here, a Dunning Fee account had been created:




 When the customer pays GBP 125.00, our company becomes liable for the tax on the fee. Therefore, at this point in time the JE adjusting the BP balance should be called up and cancelled. Right-click in the header area of the JE and select Cancel from the menu displayed or go to Data -> Cancel.


 This brings the BP account balance back to GBP 115.00. With Posting, Due and Document Date of the day when the payment is received, a service type invoice using the appropriate account and tax code should be created. Again, the company accountant must decide which account to use. In this service -type invoice the document total is GBP 10.00.
In this example, payment for the invoice and the dunning fee is received on 18.06.2009. Using the field 'Gross Price' allows a user to enter the full amount; the application will automatically calculate the net and the tax amounts. If the field is not visible, use the Form Settings  (Tools-> Form Settings or CTRL+Shift+S) to pull it into the document rows.



 Once the document is added, the posting to the sales tax account takes place:

 In the Incoming Payment window both the overdue invoice and the fee invoice are available for selection and can be used as basis for the payment:


 The tax report for the tax code O1 with a posting date range 01.05.2009 - 18.06.2009 represents correctly our company's liabilities: