Terms of Payment for Customers and

Vendors
Contents
Overview.....................................................................................................................................................1
Details..........................................................................................................................................................2

Overview
 Terms of Payment or Payment Terms composed of cash discount percentages and payment
periods.
 This is applicable in the cases where we pay/receive money. For example, invoice and Credit
memos for both AR and AP.
 The Net Due Date is calculated as Baseline Date + No of Days in Payment Terms.
 This is generally maintained in Customer or Vendor Master Record and when invoice/credit
memo is posted for them, it is defaulted in in customer/vendor line item from master data. It is
possible to enter payment terms manually during posting.
 IMG path – Financial Accounting  Account Receivable and Accounts Payable  Business
Transactions  Incoming Invoices or Credit Memos OR Outgoing Invoices or Credit Memos 
Maintain Terms of Payment.
Both Incoming and Outgoing path leads to same screen.
 T code : OBB8

Details
OBB8 Screen:
 Payment Terms: 4 Char alpha numeric key value of the payment terms.

 Sales Text: 30 char short text to explain the payment terms.

 Own Explanation: Explanation of the terms of payment which is different to the automatically
created explanations.

 Day Limit: Day of the month up until which the corresponding terms are valid.
If ‘5’ is entered, then this payment terms will be valid if Baseline date is on or before 5 th of the
month.
For terms of payment which depend on whether or not the baseline date is after or before the
15th of the month, we can define a two-part payment term under the same terms of payment
key. The terms of payment key is expanded by the day limit entered here. Thus there are two
entries in which different terms can be specified. 1 st part with ‘15’ as Days limit will be applicable
if baseline date is on or before 15th of the month, else 2nd part with ‘0’ as Days limit will be
applicable.
 Customer: This is checked if Payment Terms will be used for AR.
 Vendor: This is checked if Payment Terms will be used for AP.

 Fixed Day: Calendar day with which the system overwrites the day of the baseline date for
payment of the line item. If ‘25’ is provided, then Baseline date will always be 25 th of the current
month.
 Additional Months: Number of months which the system adds to the calendar month of the
baseline date for payment. This is generally used in conjunction with Fixed Day.
If Fixed day = 25 and Additional Months = 1, then Baseline Date will be 25 th of the next calendar
month.

 Block Key: Default value for the payment blocking key.

If Payment Terms is entered in Customer or Vendor master record and Block Key is maintained
in payment Terms, then while entering invoice/credit memo postings, the blocking reason is also
proposed along with payment terms.
If the Payment Terms is specifically entered in line item, then this field has no effect.

 Transfer Payment Block When Changing Terms of Payment : If the indicator is set, the payment
block is transferred from the terms of payment when the item is first entered and when the
terms of payment key is changed. If the indicator is not set, the payment block is only
transferred from the terms of payment when the item is first entered.

 Payment Method: If this is specified, then the method specified here overrides the one
maintained in Customer/vendor master.

 Transfer Payment Method When Changing Terms of Payment: If the indicator is set, the
payment method is transferred from the terms of payment when the item is first entered and
when the terms of payment key is changed. If the indicator is not set, the payment method is
only transferred from the terms of payment when the item is first entered.
 Default of Baseline Date: This defaults the Baseline Date and it has following options:
 Payment Terms:

The 1, 2, 3 serial numbers are applicable when we split the payment terms based on different
discount percentages. For example – 10% till 20 days and 5% till 25 days.
1. Percentage – Cash discount percentage rate which is granted for payment within the
specified period.
2. No of days - Number of days following the baseline date for payment after which the
payment must be made in order to make use of the corresponding cash discount terms and/or
to pay within the due date for net payment period.
Example: If this is 25, then Net Due date is Baseline Date + 25 Days.

Vendor Invoice:
 FBL1N:

3. Fixed Day: Fixed calendar date of the month as part of the date on which the first or second
cash discount period ends and/or the Net Due Date.

 4. Additional Months: Number of months which the system adds to the calendar month of the
baseline date for payment. This is generally used in conjunction with Fixed Day.
If Fixed day = 25 and Additional Months = 1, then Net Due Date and the last date of Cash
Discount Date validity will be 25th of the next calendar month.

 Explanations: This is system generated explanations. An entry in own explanation overwrites

this.