OverviewWhat 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. Page 1 of 24 Page 2 of 24 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 Page 3 of 24 . Click on the Page 4 of 24 .3. 4. Double click on 5. Page 5 of 24 . House Bank has been created with Bank Account. Configuration: Defining Lockbox Accounts for House Banks Functional Area: Finance Page 6 of 24 . key of the lockbox to house bank ID.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. Thus. you can optimize the payment transactions. Page 7 of 24 . you define your lockbox accounts at the house banks. on the outgoing invoice you can inform your customer of the lockbox to which payment is to be made. 2. Activities 1. The lockbox procedure is currently used only in the USA. which the customer is to pay. you can determine to which lockbox number the customer is to pay in the application menu ("Payment Transactions / Company code data"). Specify your lockbox links (company code. By specifying this. For customer master data. lockbox number at your house bank). Procedure0 1. Follow menu path 2.0 Select Execute Page 8 of 24 . 0 Double-click Save.3. Enter House Bank. Lockbox and Lockbox number then press Page 9 of 24 . Page 10 of 24 .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. 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 Page 11 of 24 .Result You have successfully created the lockbox identifiers. It includes the following: Procedure0 1.Description: In this activity you store control data for the lockbox procedure. Currently. This data is needed for importing lockbox files sent by banks. Then Double click on format Page 12 of 24 . Currently. Follow menu path 2. Press Execute 3. only the procedure LOCKBOX is supported. only BAI and BAI2 file formats are supported by SAP. 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. 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. Page 13 of 24 . Your bank must agree on this format information. 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. if you want the system to generate G/L account postings (debit bank. credit cash receipt account). Explanations of other field are as under G/L account posting: Activate it (recommended). 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. It is important if invoice can not found that check can be applied to customer based on MICR information. Insert bank details : activate it . 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. 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.Partial Payment: With this indicator. - 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. Click on and enter new Destination and Origin and other Bank Information Page 15 of 24 . Press Execute 3. 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. Description: In this activity you store information needed to process particular lockbox data and generate postings.4. 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: Page 16 of 24 . Then Press Save button Control Parameters will be created. 8. For unmatched items credit remains in bank clearing account to be settled manually. 2. Afterwards EBS will debit our bank main account and credit check deposit clearing account. This posting key is used in lockbox processing when posting residual Items or differences to customer accounts. 5. The payment amount is given for that entire check. 7. A/R posting – Initial entry made by lockbox is debit check deposit clearing account and credit bank clearing account. and 9. specify the document types and posting keys for these postings. the file can use the “6 Record” to hold the first three invoices. System then debit bank clearing account and credit customer AR account for all customers matches it able to make. Page 17 of 24 . In addition. per check.• • G/L posting . The BAI and BAI2 formats use the same record types and formats for Records 1. not for each individual invoice as well as the check payment total. 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.check deposit clearing account) for the lockbox holder in the company code.G/L account number (bank and/or bank sub-account. and consecutive “4 Records” to hold the overflow of up to 6 invoices each. (Field name 3. it costs more. A red asterisk indicates a conditional change item. This level of detail in the BAI2 record improves the “hit rate” for the lockbox program. (Field name HR005) 7.In the BAI2 format. the file uses the “6 Record” as an identifier of the check dollar amount(net). Most customers use left-justified. Spacing is critical because the Lockbox program reads the file based on character position.(Field name HR003) 4. There will only be one Record Type 1 in the Lockbox file. However. The record data is color-coded below to make it easier to interpret this file.e. – 6. The date is in YYMMDD format and time is in HHMM format. “1” is “01”). This is the first record of the Lockbox. The item in dark red is the Immediate Destination for the Lockbox. (Field name HR001) 2. and batch numbers to create a valid test file. Page 18 of 24 . payment amount(s). the MICR number and the check number. cost-benefit analysis should be performed by each customer to justify the decision. The item in blue is the Record Type indicator. which takes more time/effort. The next item in black is the Origin of the Transmission. invoice open item amount (gross). No invoices are contained in this record. All files should be saved in a text tab-delimited format (. Most customers will use left-justified. Thus. check number(s). blank-padded right format. blank-padded right format. This item may contain up to 10 characters (again filling up all ten characters/spaces). Following the “6 Record” are a series of “4 Records” which contain one invoice each. Record 1: 3 Table FLB01 4 5 6 7 100DC026 79960 9910200012 (customer-specific format example) 100YPCCDESTINYPCCORIGIN9812151202000001111122222333334444455555666667777 78888899 * * * * 1. By identifying what elements go in which place. (Field name HR004) HR002) • 5. Following that are the File Date in dark blue and the File Time in purple. The following pages provide a breakdown of the lockbox BAI2 file components. lockbox number. The remainder of the record is made up of 47 characters of filler in gray. Why? Because the bank has its clerks enter in more information into the file. you can insert your own specific MICR and invoice numbers. This will contain up to 10 characters (use blank spaces to fill up excess space if less than 10 characters exist in this item).txt). * * 1 2 All items marked with an asterisk are items that you will change each time you run the lockbox with this file. They will have six and four characters respectively. deduction amount and external reason code. The item in green is the Priority Code of the Lockbox. Record Type 1 is the “Header Record”. This item will have 2 characters (must fill both spaces. date. i. (Field name HR006) The total length for this record is 80 characters. providing the invoice number. (Field name SR004) Following that is the Record Length. there will be four 5 Records. but may be filled with information. If there are four batches. The remainder of the record is made up of 40 characters of filler. Record 2 is the “Service Record”. The item in blue is the Record Type indicator. The item in dark red is the Reference Code for the lockbox. For example.(Field name SR003) NOTE: SAP does not need the next five fields. which will use 3 characters/spaces. Record 2: Table FLB02 ------SAP Lockbox DOES NOT NEED TO USE RECORD 2 ----1 2YPCCDESTINYPCCORIGIN 2 3 * * 1. but they are listed here for info. there can only be one Record Type 2 per lockbox transmission. but rather be a restatement of the Record 1 (as shown above). There will be one Record Type 5 in each batch within the Lockbox file. This will contain up to 10 characters. There can be many batches in a lockbox transmission. This item will use 3 characters/spaces. It is not generally used. if your Origin of Transmission only uses 8 characters. There can be many lockbox transmissions within a single file. The next item in this format is the Service Code for the lockbox. the 2 Record is not a mandatory record for lockbox importing.Therefore. From an SAP perspective. use spaces or zeros to make up the excess space not used by an item within the record. Record 5 is the “Detail Header Record”. (Field name DH001) Page 19 of 24 . Sometimes the information contained within this record will not adhere to the ‘proper’ definition. The item in blue is the Record Type indicator. which the banks use for their own purposes to identify the transfer as a lockbox transfer. Some banks will utilize a 2 Record. This item will have 2 characters. (Field name SR007) name SR008) (Field name The Format Code for the lockbox follows in order(1 characters/spaces). (Field name SR001) 2. 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 green is the lockbox Destination/Origin. (Field name SR005) SR006) • Next is the Block Size of the lockbox (3 characters/spaces). Most customers do not need the values in HR006. others will not. (Field name SR002) 3. thus many 2 Records within the file. If used. then it should be followed by two blank spaces. (Field The total length for this record is 80 characters. In the event that account numbers are less than 10 digits. (Field name DR006) AN IMPORTANT NOTE: it has been a recent trend (due to Page 20 of 24 . In purple is the Immediate Destination of the Lockbox (10 chars/spaces). In purple is the Remitter Identifier: Account Number (10 characters/spaces). DCI will use left-justification and blank-padding right. Most customers will use left-justification and blank-padding right. Following that is the Remitter Identifier: Transit Routing No. (Field name DH003) 4. A new 6 Record marks the start of a new item number. which will use 9 characters/spaces. This will contain up to 3 characters (and must fill all 3 spaces). (Field name DR005) 6. However.2. DCI will not use this field. some banks will deliver up to a maximum of 50 checks in one batch. The next item in black is the Lockbox Number. Record 6 is the “Detail Record” which applies to a particular check in the Lockbox. If there are 51 checks in a lockbox. The item in green is the Batch Number for the Lockbox. (Field name DR003) 4. Most customers prefer to have the number left-justified and blank-padded right. For example. 3. 2. the bank may require that you include significant ‘leading zeros’ if that is part of their own internal lockbox numbering scheme. (Field name DH007) name DH006) • 8. The remainder of the record is made up of 40 characters of filler in gray. This item will have 3 characters. This item will use 10 characters/spaces (use zeros if necessary in front of the amount). (Field name DH008) The total length for this record is 80 characters. In dark yellow is the Origin of Transmission – transit routing (10 chars/spaces). Record Type 6 can appear numerous times in the Lockbox file or in each batch. (Field name DR004) (Field name DR001) 5. This item will use 7 spaces. The item in green is the Batch Number for the Lockbox. thus there would be at least 2 batches. The next item in black is the Remittance Amount for the Lockbox Record. (Field name DH002) 3. Be sure to pay attention to spacing! Record 6: Table FLB26 1 60120020001800000051000020321654987 CK991412 (customer-specific format example) 60020020000090000011000390556677889 010203412 2 3 4 5 6 7 * * * * * * 1. in dark blue. The item in dark red is the Batch Item Number for the Lockbox. but only once per check. The item in dark red is the Batch Item Number for the Lockbox. This item will have 3 characters. This will contain up to 3 characters (and must fill all 3 spaces). (Field name DH004) 5. (Field 7. Following that is the Deposit Date in dark blue. (Field name DH005) 6. The item in blue is the Record Type indicator. (Field name DR002) The bank sets the rules for how a batch is defined. which will use 6 spaces. customers will use left-justification and blank-padding right. Further. or make your own field length modification to the related Data Element REID2_FLB with SAP registration. It’s best not to use this field. In dark yellow is the Check Number (9 characters/spaces). 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. You may use dummy numbers to fill out this record. but it is probably best to make a field length change and protect the change until the standard field length is changed by SAP. or you may leave it blank. then this final field will be encroached upon. The total length for this record is 35 characters. Both carry their own inherent risks. As a result. then customers will request the last 9 characters of the check number in this field.• mergers) that some large banks are now moving to 13-digit customer bank account numbers. (Field name DR008) Page 21 of 24 . a userdefined field. If the customer’s check number is greater than 9 characters. (Field name DR007) After the check number is the Data Element for the Article field. 7. if the customer account number (DR006) is expanded to accommodate account numbers of greater than 10 characters. Record 4 is the “Item Record” and it is used to hold one invoice each. (Field name OR005) 6. 8. The item in green is the Batch Number for the Lockbox. SAP does not pay particular note to the value in this field. (Field name PYAMT) (Field name OR006) • 9. (Field name OR004) 5. not an item overflowed from a preceding 6 Record. The next items in black are the Invoice Numbers (16 characters/spaces each). SAP does not pay particular note to this field. it is a ‘4 record’ because it contains only its own item. (Field name DDAMT) 10. Customers will not use these fields. (Field name OR001) 2. The item in yellow is the End Indicator for the Lockbox. 7. blankpadding right for the invoice number(as shown in the Record 4 above). Bright green is the Sequence Number for the record (2 spaces). Record Type 4 can appear numerous times in the Lockbox file. The item in blue is the Record Type indicator. (Field name IVCNR) The best field format convention would be to use left-justification. 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 * * * * * * Page 22 of 24 . The items in gray are the Deduction Amounts per invoice (10 chars/spaces). Dark Blue is the External Reason Code for the payment. In this case. Customers do not have to use these fields. A ‘9’ indicates the last record of a Lockbox (1 space). The item in purple Type of Overflow record (1 space). Only 1 invoice is placed into each 4 Record.Record 4: Table FLB24 1 401200360171800000041 example) 401200440171800000065 4002003401716000002 4002004402918000018 2 3 4 5 6 7 8 00006000000000000000 00012000000000000000 00000100000000000000 00001000000000000000gh 9 10 (customer-specific format “ * * * * 1. They may be left blank if desired. (Field name OR002) 3. (Field name RESTG) Up to the next 30 character spaces are available for short text. (Field name OR003) 4. In dark yellow are the Payment Amounts per invoice (10 chars/spaces). This item will have 3 characters/spaces. This item will have 3 characters. Customers will sometimes receive payments for SAP document numbers (10digit) and also legacy system invoice numbers. The item in red is the Batch Item Number for the Lockbox. SAP does not pay particular note to this field. The next item in black is the Lockbox Number (7 characters/spaces). This should change based on the number of remittances in the lockbox file. Record Type 7 appears only once per batch in the Lockbox file. (Field name DH005) 6. (Field name ST002) 3. (Field 4. (Field name 2. Following that is the Lockbox Deposit Date in dark blue. you will have five 7 Records. Customers don’t often use this field. (Field name ST001) 2. 7. (Field name DH004) name DH003) DH001) • 5. (Field name DH002) 3.1. Record 7 is the “Batch Total Record” which signifies the end of the batch within the lockbox. Record Type 8 appears only once in the Lockbox file. In dark yellow is the Remittance Dollar Total for this Lockbox (10 characters/spaces – fill with spaces or zeros to take up space). The item in green is the Batch Number for the Lockbox. which will use 6 characters/spaces. The item in blue is the Record Type indicator. This will contain up to 3 characters (and must fill all 3 spaces). (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. In purple is the Number of Remittances Indicator (3 characters/spaces) for the batch within the lockbox. (Field name ST003) 4. Record 8 is the “Service Total Record” which signifies the end of all Lockbox bundles. Following that is the Lockbox Deposit Date in dark blue. (Field name DH007) Filler spaces or characters may take up the remaining 47 positions. This will contain up to 3 characters (and must fill all 3 character spaces). These items should be changed to reflect the batch totals from the checks on the 6 Records in the lockbox. If you have five batches in a lockbox. (Field name ST005) 6. (Field name ST004) 5. (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). The next item in black is the Lockbox Number (7 characters/spaces). ST007) (Field name ST006) (Field name Page 23 of 24 . In purple is the Number of Remittances Indicator (4 characters/spaces). The item in dark red is the Batch Item Number for the Lockbox. Customers will often use a left-justified and blank-padded right value. The item in green is the Batch Number for the Lockbox. The item in dark red is the Batch Item Number for the Lockbox. which will use 6 characters/spaces. The item in blue is the Record Type indicator. This item will have 3 characters. This item will have 3 characters. Record Type 9 appears only once in the Lockbox file. (Field name TR003) Following this record item. The item in blue is the Record Type indicator. TM Amount and MTD Amount for the Lockbox (11 spaces each). (Field name TR002) 3. to spacing! SAP does not require that these fields be filled in. This item will have 6 characters.The following fields in the file are optional – the file will function without any data provided in these fields. Following this record item. (Field name ST011) The total length for this record is 79 characters. Be sure to pay attention Record 9: 1 2 3 900001085555555555555lkjasflkj589880000000000000000000000000000000000000000 0000 1. (Field name ST009- 9. (Field name TR003) • Page 24 of 24 . Record 9 is the “Trailer Record” which signifies the end of the Lockbox file. (Field name TR001) 2. which can be either filled with characters or left blank. 10. although they may appear in some files and thus will be read: 8. there will be a Filler Record of 73 spaces. The item in green is the Number of Records indicator. Last Record Indicator(1 space): (Field name ST008) ST010) A ‘9’ indicates the end of the record. • The remainder of the record is made up of 22 characters of filler in gray. there will be a Filler Record of 73 spaces. which can be either filled with characters or left blank.