Overview

What is a lockbox? A company can create accounts called 'lockbox' accounts at its bank (or banks) that act as payment collection accounts for customer payments. The company then informs their customers that all open item payments for their accounts must be submitted to one of the established bank lockbox accounts. The bank collects these payments along with the customers' remittance information that indicates what open items the customer payments intend to clear. Data entry clerks at the bank manually enters the information into an electronic file for transmission to the company to which the lockbox account belongs. These files are typically transferred nightly to the various lockbox owners (companies). The files adhere to one of two customized, 30year old Bank Administration Institute banking industry transmission formats. The original, created in 1970, was known as BAI Lockbox Communications Standards. It provided only basic payment details, without invoice details. Since that time, modifications have been made by users to this BAI Lockbox standard format and this modified version has become known as "BAI2". This new 'non Bank Administration Institute' sanctioned format now included full invoice details with payments, and is considered the latest, most robust format for lockbox transmissions. What is the difference? As defined by SAP, as well as by the lockbox staff at most banks, BAI and BAI2 formats differ in their level of information detail. BAI format does not separate out the incoming check line items by invoice subtotal reference. Instead, one check total amount simply has all invoices listed underneath it. Thus, in BAI format files, the entire check amount must match perfectly (or within configured payment difference tolerances) the total amount for all invoices listed. Otherwise, the entire check will enter into SAP as: 1. An "On account" posting (if the payment and invoice totals don't match, but a customer is identified by MICR), or 2. An "Unprocessed" posting (if no customer account and documents could be identified from the transmission). In these scenarios, your Accounts Receivable cash application clerks will have to perform semi-manual postprocessing application within SAP to clear unmatched payments against open items on the proper accounts. Conversely, BAI2 format splits the check total into separate invoice references and associated payment amounts. Thus, within a large batch, BAI2 format files will allow a "Partially applied" status in which some identifiable payments within the check total will be matched and cleared, others will land on account. As a result, your 'hit rate' percentage of payment-to-invoice matching from each transmission is likely to be higher when using BAI2 rather than BAI formats. What format should you use? This decision is dictated by a cost-benefit analysis. BAI2 is a more robust file format, but you pay more for this information richness. BAI is cheaper, but may not offer you a suitable 'hit rate' for automatically matching payments to customer open items. If you receive a large volume of lockbox payment transmissions each day, especially if many items are paid per single check and deductions occur commonly, it is recommended that you use BAI2. Otherwise, a significant portion of your A/R staff time and effort will be spent on applying failed lockbox payments. However, if you only receive a small portion of your customer payments via lockbox transmissions, then BAI format is likely to provide adequate results. You will have to inquire with your bank to ensure that they still utilize the BAI format.

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CONFIGURATION OF LOCKBOX IN SAP

First we have to create house bank accounts Configuration: Defining House Banks Functional Area: Finance Path: IMG Select Financial Accounting (New) Bank Accounting Bank Accounts Define House Banks Path T-Code: FI12 Configuration Item: Defining House Banks

Procedure0

1.

Follow menu path

2. Enter company code U009

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3. Click on the

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4. Double click on

5. House Bank has been created with Bank Account.

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Configuration: Defining Lockbox Accounts for House Banks Functional Area: Finance

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Path: IMG Select Financial Accounting (New) Bank Accounting Bank Accounts Define Lockboxes for House Banks T-Code: OB10 Configuration Item: Define Lockboxes for House Banks Description: In this step, you define your lockbox accounts at the house banks. Thus, on the outgoing invoice you can inform your customer of the lockbox to which payment is to be made. By specifying this, you can optimize the payment transactions. The lockbox procedure is currently used only in the USA. Activities 1. Specify your lockbox links (company code; key of the lockbox to house bank ID; lockbox number at your house bank). which the customer is to pay;

2. For customer master data, you can determine to which lockbox number the customer is to pay in the application menu ("Payment Transactions / Company code data").

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Procedure0

1.

Follow menu path

2.0

Select Execute

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3.0

Double-click Save.

Enter House Bank, Lockbox and Lockbox number then press

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So here we have created The Co Code to which lockbox belongs A name of the lockbox to be used in customer master Name of the house bank to which lockbox belongs Lockbox (account number) at the house bank

Assign the same in customer master data.

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Result You have successfully created the lockbox identifiers.

Comments

Configuration: Defining Lockbox Control parameters for House Banks Path: IMG Select Financial Accounting (New) Bank Accounting Business Transactions Payment Transactions Define Lockbox Define Control Parameters T-Code: OBAY Configuration Item: Define Lockbox Control Parameters

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Description: In this activity you store control data for the lockbox procedure. Currently, only the procedure LOCKBOX is supported. This data is needed for importing lockbox files sent by banks. Currently, only BAI and BAI2 file formats are supported by SAP. It includes the following: Procedure0

1.

Follow menu path

2. Press Execute

3. Then Double click on

format

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BAI Record Format: Specify the length of the document numbers (10 in the standard SAP System) and the number of document numbers in record types 6 and 4 of the BAI file. Your bank must agree on this format information. BAI2 Record Format: It is not necessary to specify the length of the document and the number of document numbers in record types 6 and 4. This is because BAI2 file is designed that each document number is on a different record type 4 with its corresponding payment and deduction amounts. Your bank must agree on this format information.

Explanations of other field are as under G/L account posting: Activate it (recommended), if you want the system to generate G/L
account postings (debit bank, credit cash receipt account).

Incoming Customer payment: Activate it (recommended), if you want the system to execute
incoming payments postings to customer sub ledger accounts to clear customer account and create residual postings.

Insert bank details : activate it , if you want to create a batch input session (text session name) that update bank details (MICR) of customers in their master records for whose who either changed their bank or did not have information. It is important if invoice can not found that check can be applied to customer based on MICR information.
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Partial Payment: With this indicator, you can specify that payments received with this flag active will be posted
as partial payments in that case where the payment is insufficient for full clearing. The default behavior is to generate residual items with such payment receipt.

Configuration: Defining Lockbox Posting data for House Banks Path: IMG Select Financial Accounting (New) Bank Accounting Business Transactions Payment Transactions Define Lockbox Define Posting Data T-Code: OBAX Page 14 of 24

Configuration Item: Define Lockbox Posting Data

Procedure0

1.

Follow menu path

2. Press Execute

3. Click on

and enter new Destination and Origin and other Bank Information

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4. Then Press Save button Control Parameters will be created.

Description: In this activity you store information needed to process particular lockbox data and generate postings. The Destination and Origin are routing information and defined by your bank. Destination: This field contains the destination code the bank submits to you in your lockbox file. Origin: This field should contain your lockbox (bank account) number at bank.

For every unique destination/origin, posting information is needed to create the following postings:

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G/L posting - G/L account number (bank and/or bank sub-account- check deposit clearing account) for
the lockbox holder in the company code.

A/R posting Initial entry made by lockbox is debit check deposit clearing account and credit bank clearing account. System then debit bank clearing account and credit customer AR account for all customers matches it able to make. For unmatched items credit remains in bank clearing account to be settled manually. Afterwards EBS will debit our bank main account and credit check deposit clearing account.

In addition, specify the document types and posting keys for these postings.

This posting key is used in lockbox processing when posting residual Items or differences to customer accounts.

ANNEXURE-1

LOCKBOX BAI2 TEMPLATE FOR USE WITHIN IMPORT PROGRAM

Sample Lockbox file:

THE

LOCKBOX DATA

100YPCCDESTINYPCCORIGIN9812151202 2YPCCDESTINYPCCORIGIN 50020010012345981215YPCCDESTINYPCCORIGIN 60020020000090000011000390556677889 010203419 4002003601716000002 00000100000000000000gh 4002004602918000018 00001000000000000000gh 700200500123459812150020000090000 80020060012345981215000200000900009 0090000 0090000 9000002
The Principle: What is different between the BAI and BAI2 formats?

In the BAI format, the file can use the 6 Record to hold the first three invoices, and consecutive 4 Records to hold the overflow of up to 6 invoices each, per check. The payment amount is given for that entire check, not for each individual invoice as well as the check payment total. The BAI and BAI2 formats use the same record types and formats for Records 1, 2, 5, 7, 8, and 9. Page 17 of 24

In the BAI2 format, the file uses the 6 Record as an identifier of the check dollar amount(net), the MICR number and the check number. No invoices are contained in this record. Following the 6 Record are a series of 4 Records which contain one invoice each, providing the invoice number, invoice open item amount (gross), deduction amount and external reason code. This level of detail in the BAI2 record improves the hit rate for the lockbox program. Thus, it costs more. Why? Because the bank has its clerks enter in more information into the file, which takes more time/effort. However, cost-benefit analysis should be performed by each customer to justify the decision. The following pages provide a breakdown of the lockbox BAI2 file components. By identifying what elements go in which place, you can insert your own specific MICR and invoice numbers, lockbox number, date, payment amount(s), check number(s), and batch numbers to create a valid test file. The record data is color-coded below to make it easier to interpret this file. All files should be saved in a text tab-delimited format (.txt).

* *
1 2

All items marked with an asterisk are items that you will change each time you run the lockbox with this file. A red asterisk indicates a conditional change item.

Record 1:
3

Table FLB01
4 5 6 7

100DC026 79960 9910200012 (customer-specific format example) 100YPCCDESTINYPCCORIGIN9812151202000001111122222333334444455555666667777 78888899

* *

1. This is the first record of the Lockbox. The item in blue is the Record Type indicator. There will only be one Record Type 1 in the Lockbox file. Record Type 1 is the Header Record. (Field name HR001) 2. The item in green is the Priority Code of the Lockbox. This item will have 2 characters (must fill both spaces, i.e. 1 is 01). (Field name 3. The item in dark red is the Immediate Destination for the Lockbox. This will contain up to 10 characters (use blank spaces to fill up excess space if less than 10 characters exist in this item). Most customers use left-justified, blank-padded right format.(Field name HR003) 4. The next item in black is the Origin of the Transmission. This item may contain up to 10 characters (again filling up all ten characters/spaces).
Most customers will use left-justified, blank-padded right format. (Field name HR004)
HR002)

5. 6. Following that are the File Date in dark blue and the File Time in purple. They will have six and four characters respectively. The date is in YYMMDD format and time is in HHMM format. (Field name HR005) 7. The remainder of the record is made up of 47 characters of filler in gray. (Field name HR006) The total length for this record is 80 characters. Spacing is critical because the Lockbox program reads the file based on character position. Page 18 of 24

Therefore, use spaces or zeros to make up the excess space not used by an item within the record. For example, if your Origin of Transmission only uses 8 characters, then it should be followed by two blank spaces. Most customers do not need the values in HR006.

Record 2: Table FLB02

------SAP Lockbox DOES NOT NEED TO USE RECORD 2 ----1

2YPCCDESTINYPCCORIGIN

1. The item in blue is the Record Type indicator. Record 2 is the Service Record. From an SAP perspective, the 2 Record is not a mandatory record for lockbox importing. Some banks will utilize a 2 Record, others will not. Sometimes the information contained within this record will not adhere to the proper definition, but rather be a restatement of the Record 1 (as shown above). If used, there can only be one Record Type 2 per lockbox transmission. There can be many lockbox transmissions within a single file, thus many 2 Records within the file. (Field name SR001) 2. The item in green is the lockbox Destination/Origin. This item will have 2 characters. (Field name SR002) 3. The item in dark red is the Reference Code for the lockbox. It is not generally used, but may be filled with information. This will contain up to 10 characters.(Field name SR003) NOTE: SAP does not need the next five fields, but they are listed here for info. The next item in this format is the Service Code for the lockbox, which the banks use for their own purposes to identify the transfer as a lockbox transfer. This item will use 3 characters/spaces. (Field name SR004) Following that is the Record Length, which will use 3 characters/spaces.
(Field name SR005) SR006)

Next is the Block Size of the lockbox (3 characters/spaces).

(Field name SR007) name SR008)

(Field name

The Format Code for the lockbox follows in order(1 characters/spaces). The remainder of the record is made up of 40 characters of filler.
(Field

The total length for this record is 80 characters. to spacing!

Be sure to pay attention

Record 5: Table FLB 05

1 2 3 4 5 6 7 8

501200179960 991020DC026 79960 (customer-specific format example) 50020010012345981215YPCCDESTINYPCCORIGIN11111222223333344444555556666677

* *

1. The item in blue is the Record Type indicator. There will be one Record Type 5 in each batch within the Lockbox file. Record 5 is the Detail Header Record. There can be many batches in a lockbox transmission. If there are four batches, there will be four 5 Records. (Field name DH001) Page 19 of 24

2. The item in green is the Batch Number for the Lockbox. This item will have 3 characters. (Field name DH002) 3. The item in dark red is the Batch Item Number for the Lockbox. This will contain up to 3 characters (and must fill all 3 spaces). (Field name DH003) 4. The next item in black is the Lockbox Number. This item will use 7 spaces. Most customers prefer to have the number left-justified and blank-padded right. However, the bank may require that you include significant leading zeros if that is part of their own internal lockbox numbering scheme. (Field name DH004) 5. Following that is the Deposit Date in dark blue, which will use 6 spaces.
(Field name DH005)

6. In purple is the Immediate Destination of the Lockbox (10 chars/spaces). Most customers will use left-justification and blank-padding right. (Field 7. In dark yellow is the Origin of Transmission transit routing (10 chars/spaces). DCI will use left-justification and blank-padding right.
(Field name DH007) name DH006)

8. The remainder of the record is made up of 40 characters of filler in gray. DCI will not use this field. (Field name DH008) The total length for this record is 80 characters. Be sure to pay attention to spacing!

Record 6: Table FLB26

1

60120020001800000051000020321654987 CK991412 (customer-specific format example) 60020020000090000011000390556677889 010203412

* *

1. The item in blue is the Record Type indicator. Record Type 6 can appear numerous times in the Lockbox file or in each batch, but only once per check. A new 6 Record marks the start of a new item number. Record 6 is the Detail Record which applies to a particular check in the Lockbox. 2. The item in green is the Batch Number for the Lockbox. This item will have 3 characters. (Field name DR002) The bank sets the rules for how a batch is defined. For example, some banks will deliver up to a maximum of 50 checks in one batch. If there are 51 checks in a lockbox, thus there would be at least 2 batches. 3. The item in dark red is the Batch Item Number for the Lockbox. This will contain up to 3 characters (and must fill all 3 spaces). (Field name DR003) 4. The next item in black is the Remittance Amount for the Lockbox Record. This item will use 10 characters/spaces (use zeros if necessary in front of the amount).
(Field name DR004) (Field name DR001)

5. Following that is the Remitter Identifier: Transit Routing No. in dark blue, which will use 9 characters/spaces. (Field name DR005) 6. In purple is the Remitter Identifier: Account Number (10 characters/spaces). In the event that account numbers are less than 10 digits, customers will use left-justification and blank-padding right. (Field name DR006) AN IMPORTANT NOTE: it has been a recent trend (due to Page 20 of 24

mergers) that some large banks are now moving to 13-digit customer bank account numbers. As a result, you have two options (until SAP makes table/field changes to increase the size of the account field): ask your banks to concatenate the number back to a 10-digit number, or make your own field length modification to the related Data Element REID2_FLB with SAP registration. Both carry their own inherent risks, but it is probably best to make a field length change and protect the change until the standard field length is changed by SAP. 7. In dark yellow is the Check Number (9 characters/spaces). If the customers check number is greater than 9 characters, then customers will request the last 9 characters of the check number in this field. (Field name DR007) After the check number is the Data Element for the Article field, a userdefined field. The total length for this record is 35 characters. You may use dummy numbers to fill out this record, or you may leave it blank. Its best not to use this field. Further, if the customer account number (DR006) is expanded to accommodate account numbers of greater than 10 characters, then this final field will be encroached upon. (Field name DR008)

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Record 4: Table FLB24

1

401200360171800000041 example) 401200440171800000065 4002003401716000002 4002004402918000018

4 5

00006000000000000000 00012000000000000000 00000100000000000000 00001000000000000000gh

10

(customer-specific format

1. The item in blue is the Record Type indicator. Record Type 4 can appear numerous times in the Lockbox file. Record 4 is the Item Record and it is used to hold one invoice each. (Field name OR001) 2. The item in green is the Batch Number for the Lockbox. This item will have 3 characters. (Field name OR002) 3. The item in red is the Batch Item Number for the Lockbox. This item will have 3 characters/spaces. (Field name OR003) 4. The item in purple Type of Overflow record (1 space). In this case, it is a 4 record because it contains only its own item, not an item overflowed from a preceding 6 Record. SAP does not pay particular note to the value in this field. (Field name OR004) 5. Bright green is the Sequence Number for the record (2 spaces). SAP does not pay particular note to this field. (Field name OR005) 6. The item in yellow is the End Indicator for the Lockbox. A 9 indicates the last record of a Lockbox (1 space). SAP does not pay particular note to this field. 7. The next items in black are the Invoice Numbers (16 characters/spaces each). Only 1 invoice is placed into each 4 Record. (Field name IVCNR) The best field format convention would be to use left-justification, blankpadding right for the invoice number(as shown in the Record 4 above). Customers will sometimes receive payments for SAP document numbers (10digit) and also legacy system invoice numbers. 8. In dark yellow are the Payment Amounts per invoice (10 chars/spaces). (Field
name PYAMT) (Field name OR006)

9. The items in gray are the Deduction Amounts per invoice (10 chars/spaces). Customers will not use these fields. (Field name DDAMT) 10. Dark Blue is the External Reason Code for the payment. Customers do not have to use these fields. (Field name RESTG) Up to the next 30 character spaces are available for short text. They may be left blank if desired. Most customers will not use these fields (Field name
OR011)

Record 7: Table FLB07

1 2 3 4 5 6 7

701200579960

9910200020001800000 (customer-specific format example)

700200500123459812150020000090000

* *

*
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1. The item in blue is the Record Type indicator. Record Type 7 appears only once per batch in the Lockbox file. Record 7 is the Batch Total Record which signifies the end of the batch within the lockbox. If you have five batches in a lockbox, you will have five 7 Records. (Field name 2. The item in green is the Batch Number for the Lockbox. This item will have 3 characters. (Field name DH002) 3. The item in dark red is the Batch Item Number for the Lockbox. This will contain up to 3 characters (and must fill all 3 character spaces). (Field 4. The next item in black is the Lockbox Number (7 characters/spaces). Customers will often use a left-justified and blank-padded right value.
(Field name DH004) name DH003) DH001)

5. Following that is the Lockbox Deposit Date in dark blue, which will use 6 characters/spaces. (Field name DH005) 6. In purple is the Number of Remittances Indicator (3 characters/spaces) for the batch within the lockbox. This should change based on the number of remittances in the lockbox file. (Field name DH006) 7. In dark yellow is the Remittance Dollar Total for this Lockbox (10 characters/spaces fill with spaces or zeros to take up space). These items should be changed to reflect the batch totals from the checks on the 6 Records in the lockbox. (Field name DH007) Filler spaces or characters may take up the remaining 47 positions. Customers dont often use this field. (Field name DH008)

Record 8: Table FLB08

1 2 3 4 5 6 7 8 9

801200679960

specific format example)

99102000020001800000 0090000 0090000

(customer-

80020060012345981215000200000900009

* *

1. The item in blue is the Record Type indicator. Record Type 8 appears only once in the Lockbox file. Record 8 is the Service Total Record which signifies the end of all Lockbox bundles. (Field name ST001) 2. The item in green is the Batch Number for the Lockbox. This item will have 3 characters. (Field name ST002) 3. The item in dark red is the Batch Item Number for the Lockbox. This will contain up to 3 characters (and must fill all 3 spaces). (Field name ST003) 4. The next item in black is the Lockbox Number (7 characters/spaces). (Field
name ST004)

5. Following that is the Lockbox Deposit Date in dark blue, which will use 6 characters/spaces. (Field name ST005) 6. In purple is the Number of Remittances Indicator (4 characters/spaces). 7. In dark yellow is the Remittance Dollar Total for this Lockbox (10 characters/spaces fill with spaces or zeros to take up space).
ST007) (Field name ST006) (Field name

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The following fields in the file are optional the file will function without any data provided in these fields, although they may appear in some files and thus will be read: 8. Last Record Indicator(1 space):
(Field name ST008) ST010)

A 9 indicates the end of the record.

(Field name ST009-

9. TM Amount and MTD Amount for the Lockbox (11 spaces each). 10.

The remainder of the record is made up of 22 characters of filler in gray.

(Field name ST011)

The total length for this record is 79 characters. to spacing! SAP does not require that these fields be filled in.

Be sure to pay attention

Record 9:
1 2 3

900001085555555555555lkjasflkj589880000000000000000000000000000000000000000 0000 1. The item in blue is the Record Type indicator. Record Type 9 appears only once in the Lockbox file. Record 9 is the Trailer Record which signifies the end of the Lockbox file. (Field name TR001) 2. The item in green is the Number of Records indicator. This item will have 6 characters. (Field name TR002) 3. Following this record item, there will be a Filler Record of 73 spaces, which can be either filled with characters or left blank. (Field name TR003) Following this record item, there will be a Filler Record of 73 spaces, which can be either filled with characters or left blank. (Field name TR003)

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