Collection departments of tax authorities can have strict rules and regulations to manage installment plans: interest calculation, reassignment to different G/L accounts at year-end closing, and clearing control when processing a payment or a credit.

In this blog, I explain the core standard functionalities available in SAP S/4HANA PSCD to handle interest calculation and installment plans, with screenshots from an SAP S/4HANA system.

The user stories are

1. As a collection agent, I can create an installment plan and
   • set the number of installments
   • set the start date of the installment plan
   • set the periodicity of the installments (weekly, monthly…)
   • set the amount to be paid per installment
   • calculate and distribute my charges and interest according to the legislation
   • display the installments or the original items in the account balance of the taxpayer
2. As a collection agent, I can receive the payment of an installment that can be
   • partial or complete
   • in advance or in time
   • late
     • before collection activities (considering the grace period) such as sending a dunning notice for the installment
     • after collection activities
3. As a collection agent, I can dun overdue installments
4. As a collection agent, I can deactivate an existing installment plan
5. As a collection agent, I can reclassify installments and related interests that are due in the next year to another G/L account.

This first blog covers the first user story.

Creating an installment plan

First and foremost, the standard SAP Help for Interest Calculation in Contract Accounting is our main source of information. You can also check the SAP Help for Credit and Collections Management.

The classic SAPGui transactions for managing installment plans are

• Create Installment Plan (transaction FPR1)
• Change Installment Plan (transaction FPR2)
• Display Installment Plan (transaction FPR3)
• Display Installment Plan History (transaction FPRH)

In this blog, we’ll be using the SAP Fiori Apps

• Manage Installment Plans (F5720)
• Analyze Installment Plans (F2363)

Note: The installment plan can also be created by a call center agent, in the SAP Financial Customer Care.

Now let’s create an installment with the following characteristics:

• As a collection agent, I create an installment plan and
  1. set five installments
  2. set the start date of the installment plan to the first day of the next month
  3. set the periodicity of the installments to monthly
  4. set the amount to be paid per installment
  5. calculate and distribute my charges and interest proportionally on all installments

Note: we do not explain here interest calculation on contract accounts, only interest calculation to be included in an installment plan.

First, let’s create two overdue open items on a contract account of a business partner and check the account balance in the Business Partner Overview (transaction FMCACOV).

Business Partner Overview – Two open items are overdue

Now let’s create the installment plan in the F5720 – Manage Installment Plans Fiori App.

F5720 – Manage Installment Plan Fiori App

The initial screen can then be filled with the required information

• the business partner
• the contract account
• the currency
• the posting parameters

Important: Please note that only open items belonging to the same contract account can be assigned to an installment plan. If you need to group open items from different contract accounts please evaluate the SAP Promise to Pay.

Create Installment Plan – Initial Screen

In the next screen, we can then

1. select the two overdue open items
2. set the parameters of the installment plan
   • Installment Plan Type Z001 has been defined in customizing and contains the default parameters for our installment plan
   • A charge amount of 50 EUR has been added as administrative fees
3. ask the system to distribute the charges and the interest proportionally on the installments

Installment Plan Creation – Selecting items and Setting the Parameters

In the next screen, the system has calculated the installments and shows a proposal. Several actions are possible at this stage:

• Adding/Deleting an installment
• Change the amount of an installment
• Calculate installment plan surcharge
• Distribute the difference amount over the installments
• Calculate the interest

Installment Plan Creation – Managing the installments

We now want to calculate the interest for the installment plan. In customizing it’s possible to define how the interest calculation takes place. Most of the configuration is managed in customizing activity Define Default Values for Interest on Installment Plans

Installment Plan Customizing – IMG Path

In our case, we have

• set an interest document type IN
• set an interest rate of 5% via the interest key Z1

Installment Plan Customizing – Setting the Document Type and the Interest Key

Two important parameters must also be defined according to your business requirements:

• The Interest from Original Items: setting this indicator has the effect that the interest is calculated from the original items and not the installment plan items.
• The No Interest on Arrears controls the calculation of interest on an installment plan, at creation time, and for a charge for late payment.
  • If the indicator is set, the interest is always calculated until the due date for the installment.
  • If the indicator is not set, the system corrects the interest upon receipt of payment.
    • Interest is charged on open items at least until the current date. When clearing an installment, both early and late receipts of payment are taken into account.
    • Interest is calculated on the payment date.
      • For payment after the due date of the installment, interest receivable is charged on receipt of payment.
      • For payment before the due date, an interest credit memo is created.

In our case, we calculate interest from the original items and we do not correct the interest upon receipt of payment.

When hitting the Calculate Interest button and confirming the interest calculation parameters, the interest amount is calculated and distributed proportionally to the installments.

Installment Plan Creation – Calculating the interest

Note: it is possible to control the distribution of interest to the individual installments when you create or change an installment plan – Please refer to SAP Note 902456 – Installment plan: changing interest dist to installments

In the Excel extract below you can check that the interest was calculated properly.

Interest Calculation in Excel

The installment plan can now be saved and get an installment plan number.

Installment Plan has been saved successfully

Note the fact that two CA documents were created

• a charge document
• an interest document

The Manage Installment Plans Fiori App now shows the newly-created installment plan

Manage Installment Plans – Searching for the installment plan

From the Display Installment screen of the newly-created installment plan, you can access the installment plan history.

The document type specifies which type of receivables were included in the installment plan history when it was created:

• SPACE: Original receivable(s)
• Z: Interest document
• G: Charges document
• F: Installment plan surcharge
• C: Inflation surcharge

Manage Installment Plan – Displaying Installment Plan History

in the Business Partner Overview, the five installments are not displayed in place of the two original items.

Business Partner Overview – Item list with installments

Practically, installments are statistical items created next to the (original) source items. Of course, only the installment plan items OR the source items are displayed at a time in the account balance.

The original documents can be displayed in the Account Balance (transaction FPL9)

Account Balance Display – List of Receivables

This Display Source Items option is available in the Account Balance as a parameter of the Detail list type.

Account Balance – Choosing between Installments and Source Items in the Detail List type

In the Analyze Installment Plans Fiori App, the newly-created installments are displayed and split by quarters in our example below.

Analyze Installment Plans Fiori App

The second part of this blog can be found here Installment Plans with Interest Calculation in SAP PSCD | Part 2 – Processing Payments and Credits,