SAP Lock Box Process

LockBox Process in
SAP
This document depicts a Implementation,
Automation of Incoming Account Receivable
process in SAP, called as “LockBox Process”
Surya Padhi
[Friday, 24/May/2013]

www.SuryaPadhi.Com | Surya@SuryaPadhi.Com
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Lock Box functionality in SAP ECC 6.0
OVERVIEW:
Banks offer lockbox service to help companies process incoming check payments. A company
with a lockbox account asks its customers to send check payments directly to the bank. The bank
processes the payment and transits the payment data electronically to the company either in the
BAI or the BAI2 format. The information in the Lockbox file is matched to the accounts
receivable information in the R/3 system to clear the payments against the open items.
BAI and BAI2 formates defined by the Bank Administration Institute. In practice, the standards
published by this organization are not followed strictly. Banks usually offer several variations of
each format, including the BAI and BAI2 formats that R/3 reads.
The BAI2 format is newer and contains more information than the BAI format. The main
difference between the two formats is the invoice information associated with each check.
• BAI Check, amount, invoice, invoice,...
• BAI2 Check, amount, invoice_and_amount, invoice_and_amount, ...
The extra information on the BAI2 format allows better automatic matching of payments to
customer open items when the data is imported. If automatic matching fails, your accounts
receivable (A/R) clerk must manually clear the payments against open items.
When importing a BAI format file, unless the check amount matches exactly the total open
invoice amount in R/3 (or within configured payment difference tolerances), none of the invoices
clear and the entire check enters R/3 either as an:
• “On account” posting (if the payment and invoice totals do not match)
• “Unprocessed” posting (if no customer account and no documents could be identified)
With BAI2 format files there is also a “partially applied” status. A check is partially applied
when the import program can match and clear some, but not all, of the invoices within the
check total. As a result, the hit rate—the percentage of matched invoices in each transmission—
is higher with BAI2 than with BAI.
Advantages
• Quicker check collection, thus reduces customer check flot time.
• Improves cash liquidity of payee.
• Payees need spend less time on processing payments. Thus maximize man power
utilization and reduces cost related to cash collection application.
Let us take a business case to explore the lock box functionality of SAP ECC 6.0.
Case : XYZ Inc. in manufacturere of desisel engines, sales its products in the retail market. For
better cash management and speed of cash realisation, XYZ Inc. opened a lock box account with

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its banker say Bank. All sales invoices of XYZ Inc has an endrosement for customer remit all
payment to Post Box. No. 12345, Lasalle Ave, Chicago, 60001.
So every day, bank collects remittences from the lock box and process these remittences by
credit to XYZ Inc.
At the end of the day bank generates a BAI2 file and transmit to a designated place normally a
web server. XYZ Inc. Daily collects this BAI2 file from the web server and posts customer
collection.
As a business pratice, XYZ Inc has set up a tolerence 1% for overpayment and underpayment.
If XYZ receives customer payment within 1% of tolerance, these difference will be posted to
under payment or over payment account by clearing customer open items.
If the customer remittence is outside of the tolerence then the said collection will be posted to
customer as a on account payment. Subsequently on account payment will be cleared by account
receivable clark based on futher information.
If system didn’t find customer information or didn’t match customer information, then the
remittence will be credited to unapplied cash account and that can be cleared subsequently based
on available information.
In the following page, I will explain various steps involved in the lock box prcess. These steps
may vary depends on bank you are dealing with, the file format used by bank, file handling
process, middleware used for conversion of bank transmitted file and configuration done.

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PROCESS:
StepsStepsStepsSteps ProcessesProcessesProcessesProcesses
StepStepStepStep----1111 Customer: When XYZ Inc. bills customer ABC Inc. XYZ Inc. directs customer to mail check(s) along
with remittance advice to a post box owned by bank.
StepStepStepStep----2222 Bank: Everyday bank collects the checks mailed by customer from the designated post box and process
the check by giving credit to XYZ Inc.
StepStepStepStep----3333 Bank: Once checks are processed by bank, bank creates a flat file generally either BAI or BAI2 file and
send over to XYZ Inc. How the BAI / BAI2 file reaches to customer depends on service agreement
between bank and XYZ Inc.
StepStepStepStep----4444 XYZ Inc.: Once file received by XYZ Inc., XYZ Inc. imports BAI / BAI2 file through T.Code : FBL2. In
this step, SAP imports data and map the imported data
StepStepStepStep----5555 System generates (1) GL posting and (2) payment advices AR.
StepStepStepStep----6666 Payment Advices are used to clear AR open Items, if system matches customer and customer open items.
StepStepStepStep----7777 a. If system finds customer but amount doesn't match AR open items then, it post to customer as onononon
account paymentaccount paymentaccount paymentaccount payment.
b. If system does not find customer then amount remains un-applied. Then in subsequent step user
processed unapplied cash manually ( T.Code: FLB1)
StepStepStepStep----8888 System updates customer master data for new bank information.

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RFEBLB00: Transaction code FLB2 calls import program RFEBLB00. This is a umbrella
program, carries following activities in the lock box process.
• Imports the file into bank date storage or from the specified location,
• Generates the payment advices for clearing of subsidiary ledgers and does GL postings,
and
• Generates a log of the checks and postings.
This program internally calls RFEBLB20 & RFEBBU00
RFEBLB20: This program map the imported data to standard SAP data structure such as
FLB01, FLB02 etc according to BAI or BAI2 format. It then reads the data and uses data to
create payment advices as per check submitted via lock box.
Each payment advice contains important data about incoming check such as amount, invoice
number etc. Payment advices are stored in table AVIP
This program internally calls program RFEBLB30.
RFEBLB30: RFEBLB20 triggers this program through a batch job. This job generates a batch
input session that can change customer master receords to insert new MICR numbers, whenever
the customer is identified and MICR number is new. This functionality can be activated or
deactivated based on the configuration.
RFEBBU00: program RFEBLB00 triggers program RFEBBU00. It carries out what SAP calls
area specific postings depending on the configuration. Based on configuration this program post
GL posting and utilizes payment advices created through program RFEBLB20 to clear
customer open items. This configuration is available in the following path IMG ► Financial
Accounting ►Bank Accounting ► Business Transactions ► Payment Transactions ► Lockbox
►Define Control Parameters
While performing posting, this program generates following account transctions based on
configuration.
• General Ledger Posting:
Bank Incoming Clearing Account Dr.
Unapplied Cash Cr.
• Subsidiary Ledger Posting:
Unapplied Cash Dr.
Customer Cr.
While processing pament advice, system uses payment advice information and search cusromer
open item in the following sequence.
• Document number
• Reference number

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If the system don’t find customer based on MICR number or based on Document Number or
Reference number system updates AVIK. Based on customer open item search and maching
found system updates the payment advice status as follows.
- Applied: System comes up with applied status when system able to find customer and able to
find customer open items and open item matches with incomming payment.
- Partially Applied: Checks that are partially applied may require further processing. For
example Customer has paid a check for 5 invoices, but system able to match 4 invoice and one
invoice did not match. In this case system clears 4 invoices. The payment amount for the 5th
invoice would be put on-account and would have to be post processed to clear.
- On account: In this case system is able to find customer but not the the open items( None). If
the bank keyed in the correct invoice number, the Lockbox Import Program posts the payment on
account. In the post processing step, you access the payment advice and correct the document
number and upon saving the changes, the post process function clears the open item, deletes the
payment advice and sets the check status to applied.
- Unprocessed: Any payment that could not be identified either by customer MICR number
(check) or the document number would remain Unprocessed. Once the payment is researched
and the customer and invoice is identified, it would be applied during post processing.
Now let us see, how to configure lock box functionality in SAP.
CONFIGURATION:
1. Define House Bank:
a. Transcation Code:FI12
b. Menu Path: IMG ► Financial Accounting ►Bank Accounting ► Bank
Accounts ► Define House Banks
In SAP a bank account is represented through with the combination of bank ID and account ID.
House bank represented by bank ID while bank account is represented by a account ID. Bank
ID and account ID are used for various banking transactions for example automatic payment
program etc. In this step (1) you will create a bank master record (2) under that bank master
master record you will create a bank account and (3) assign bank cash concetration GL account
to bank account.

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2. Define Lockboxes for House Banks:
a. Transcation Code:OB10
b. Menu Path: IMG ► Financial Accounting ►Bank Accounting ► Bank
Accounts ► Define Lockboxes for House Banks
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.
3. Define Control Parameters:
a. Transcation Code:OBAY
b. Menu Path: IMG ► Financial Accounting ►Bank Accounting ► Business
Transactions ► Payment Transactions ► Lockbox ►Define Control
Parameters
In this activity you maintain control parameters for the lockbox procedure. Currently, only
LOCKBOX procedure is supported by SAP and at the same time SAP understands only BAI
and BAI2 format. Figure XX given below depicts what are control parameters you are going to
maintain in this configuration step
As shown in figure above, SAP comes with pre delivered lockbox procedure LOCKBOX and
input format BAI and BAI2. As per business requirement you can choose either BAI or BAI2.
In this paper, I have considered BAI2 format.

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Figure 1 Lock box control parameter -2
• Record format section is not applicable to BAI2 format. However if you are using BAI
format, you need to maintain this section. Incase of BAI 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.
• In the posting section,
o Check the check box for G/L account posting,
o Check the check box Incoming customer payments for AR posting for cash
application.
NOTE: It is recommended that both choices are selected if you are using the
general ledger and accounts receivable modules.
o Check the check box insert bank details to change customer master record to
update MICR and account no.
o Gl account posting type: you can choose any one of the three options listed
below based on business process.
1 One posting per check to the bank account
2 One posting per lockbox to the bank account (check total)
3 One posting per batch number to the bank account
o Partial Payment: In case of active check box, if the customer payment is
insufficient system will post partial payment.

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o If you checked Insert bank details, then you need to give batch sessions name,
with which system will create a batch session to update the customer master
with new or missing bank information.
NOTE: while the BAI and BAI2 formats are supposedly standard, experience has shown that
they can vary by bank and many SAP clients have contracted for a customized format. The
format received will need to be mapped to reconcile with the SAP delivered data dictionary
layout (Tables FLB01, FLB05, FLB06, etc.) to ensure proper processing. If the format does not
reconcile and the user does not want to have the bank change the format, SAP recommends that
a user-written ABAP be used to reformat the file or alternatively the SAP data dictionary can be
modified (this is a repair that will need to be re-applied in future releases).
Important Note: The lockbox program first attempts to identify the customer with unique bank
information in the customer master record matching to MICR information on the check, so
maintenance of unique customer MICR information is important to ensure success. If there is
more that one customer with the same MICR bank and account, then the program cannot apply
the check to an account. This situation usually means that either the same customer has been set
up twice, or maybe what should have been only Ship-to or Sold-to customers for the same Payer
have actually been set up as separate Payers. Alternatively, it may be necessary to set up a
relationship where one customer is identified as the main Payer and has MICR info, and the
related customers do not have MICR info but instead have the main Payers customer number in
the Alternate Payer field of the customer master record.
The payment information provided in the bank data file will create a payment advice per
check. This payment advice will be used by the lockbox procedure to clear subledger open
items. For more information on payment advices, please read accounts receivable/accounts
payable Payment Advice Notes in the IMG or On-Line Help.
4. Define Posting Data
a. Transcation Code:OBAX
b. Menu Path: IMG ► Financial Accounting ►Bank Accounting ► Business
Transactions ► Payment Transactions ► Lockbox ► Define Posting Data
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. For
every unique destination/origin, posting information is needed to create the following postings:
• G/L posting - Debit bank account (incoming checks) and credit payment clearing account
• A/R posting - Debit payment clearing account and credit customer account

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In addition to above configuration, you may need few additional configuration based on business
requirement, few are listed below
5. Define Tolerance Groups for Employees:
a. Transcation Code:OBA4
b. Path: IMG ► Financial Accounting ► Accounts Receivable and Accounts
Payable ► Business Transactions ► Manual Payment Receipt ► Define
Tolerance Groups for Employees
This transaction is used to create tolerance groups for users. The tolerances are defined by
company code and at a minimum there must be one assigned to each company code otherwise no
postings can occur in the company code.

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Employees tolerenace group determines who is authorized for what and permitted payment
difference.
6. Define Tolerances (Customers/Vendors):
a. Transcation Code:OBA3
Payable ► Business Transactions ► Open Item Clearing► Clearing Differences
► Define Tolerances for Customers/Vendors
In this activity you define the tolerances for customers/vendors. The tolerances are used for
dealing with payment differences and residual items that may arise when payment clearing is
carried out. You specify the tolerances in one or more tolerance groups and assign a tolerance
group to each customer/vendor using the master record.

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7. Define Accounts for Overpayments/Underpayments:
a. Transcation Code:OBXL
Payable ► Business Transactions ► Outgoing Payments ► Outgoing Payments
Global Settings ► Define Accounts for Overpayments/Underpayments
In this activity you define the numbers of revenue and expense accounts to which the system
posts if the following requirements are fulfilled:

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• There is a difference in payment. The difference can result from an underpayment or an
overpayment.
• The difference is within the tolerance limits for an automatic adjustment posting.
• The difference cannot be posted via cash discount adjustments.
After completion of configuration, you need to maintain customer master data. In order to
lockbox program to identify the custoer you must populate MICR and customer bank account
number in the General Data: Payment Transaction screen of costomer master data
After completion above configuration and master data set up, you are ready to upload BAI2 file
into system. To upload BAI2 file following following steps.
USE:
1. Maintain Customer Master:
a. Transcation Code:FD02
b. Path: SAP ► Accounting ► Accounts Receivable ► Master Records ► FD02 –
Change.
Inorder to identify customer, we need to maintain bank details in the customer master.

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The above screen shows that customer master has all necessary bank details. We can have
multiple bank account reference in the cistomer master record.
2. AP Open Items:
a. Transcation Code:FB70
b. Path: SAP ► Accounting ► Accounts Receivable ► Document Entry ►
Invoice.
Since though lockbox you are getting incoming payment against customer open items. It is
expected that before lockbox posting atleast one open items.

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In this step created a AR open item with document number as 1800000398. In our subsequest
step we’ll clear the open item through lockbox process.
3. Import the Lockbox File
c. Transcation Code:FLB2
d. Path: SAP ► Accounting ► Financial Accounting ► Banks ► Input ►
Lockbox ► Import
In BAI2 format the file uses “Record 6” as an identifier of the check dollar amount, 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 contains one Invoice each. These
provide the Invoice number, Invoice open item amounts ( gross), deduction amount and External
reason code.
Once you process lockbox BAI2 file system generated either of following 4 statuses for each of 6
record types.
1. Applied
2. Partially Applied
3. On Account
4. Unprocessed.
Refer previous section reason of havong various status.

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Above screen shows that we are importing a lockbox file from our desk top. Once the file is
sucessfully imported system will come up with screen appedned below.
Below screen shows the result of lock box import. It gives all information about lockbox file,
customer indification and application of lock box remittences.

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The above screen shows system has created 2 financial accounting document i.e 100013806 and
1400000239. Financial Document 100013806 is for GL posting while financial document
1400000239 is for sub ledger posting. On the above scree we can see the status is applied that
mean
• system found the customer;
• Systm was able to locate AR open items;
• Incoming payment matches with Open AR after taking into account employee and
customer tolerances.
We can see additional information on lockbox processing by choosing F3 two times. Below
lockbox log display main lockbox program log.
In below screen figure we can see system has selected the right customer by matching MICR
number.
Based on document number information system has identified the relevant AR open item.

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After sucessful lock box processing , we can see that customer open has been cleared as shown
below by document number 1400000239.
Accounting document 1400000239 was posted to 113109 by crediting customer 300299.

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Now further look into the lockbox information. To see more information execute tramsction code
FLB1 with origin and destination selection. On Lockbox : Proess check screen we can see all al
processed lockbox files arranged in date and time.
All sucessful processed file will appear as green indicator while unprocessd or partially
processed files will appear to be processed icon.

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Look into the sucessfully processed steps and expend it. Now we can see financial document
and payment advice what we have discussed earlier.
Here is the Sample Lock Box File I loaded;
100LOCKBOX0011343290421305141210
2LOCKBOX001999123450
50010011234567130514LOCKBOX001134329042
6001002000012000002100008955566677 77990019
400100360171800000398
700100412345671305140010000120000
8001005123456713051400010000120000900001200000000120000
9000008
Now move to the previous one which is not processed and partially processed, expend it. In this
case we can see that system has created two account document. In this case the subledger
document is appearing in PmtOnAcct field. Do you know what is the reason? To know the
reason docuble click on payment advice number.
In this case system found the customer and not the relevant opein item, hence posted on account,
which is shown below.

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I hope you enjoyed it. Now it is very imporant to understand how BAI2 file is orgnized and its
layout.
Lockbox File Format: As I said earlier ECC 6.0 supports both BAI and BAI2 lockbox format.
Now it is very important to understand BAI and BAI2 format before before implememation or
support of lockbox functionalities. In this section I will try cover both lock box formats.
BAI format:
BAI is defined in the repository with the following record structures:
• FLB01: Header record
• FLB02: Service record
• FLB04: Overflow record
• FLB05: Detail header record
• FLB06: Detail record
• FLB07: Batch total record
• FLB08: Lockbox total record
• FLB09: Trailer Record.
You can set the number length and number of invoice numbers (or purchase numbers) in
customizing. These settings can deviate from structures FLB06 and FLB04. As long as you use

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FI document numbers in transmitting numbers, leading zeros are automatically added by the
program. The invoice numbers should be transferred in left-justified form.
BAI2: The BAI2 format is a US national standard for bank reporting. Most of the US Bank
supports the BAI2 format. Detailed information on the BAI2 report format can be downloaded
by visiting the Bank Administration Institutes website at http://www.bai.org/operations/faq.asp.
BAI2
The only difference between BAI2 and BAI is that BAI2 has a check record and an overflow
record. The SAP system contains the following table structures for these record types.
• FLB24: Overflow record
• FLB26: Detail record
BAI2 can transmit data about the invoice, such as the payment amount, deduction amount and
the reason code. Note that either the payment amount or the deduction amount can be transmitted
for an invoice. If both are transmitted, the deduction amount is ignored. Invoice numbers (or
purchase order numbers) should be transmitted in left-justified form. As long as FI document
numbers are used, the program will automatically add leading zeros.
Using BAI2, the system will usually be able to produce a greater number of clearing entries and
thus reduce the amount of time you will need to spend in the manual postprocessing transaction.
You can have your lockbox provider create the BAI2 format by poviding them with the record
description, or you can convert your lockbox provider's format to BAI2 by using a preprocessor.
Typical BAI2 lock file comes with below record layout.
BAI2 Lock Box Record Definitions:
• Type 1 - File Header Record
• Type 2 - Service Header Record

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• Type 4 - Overflow Record: Provides a means of handling variable quantities of detailed
information. When the remitter furnishes more remittance information than can be
recorded in the type 6 Detail record, the type 4 Overflow record is used for this data.
• Type 5 - Lock Box Detail Header: Used to reduce the size of detail records by carrying
the required information that is common in all the detail records that it precedes.
• Type 6 - Detail Record: Contains data belonging to 1 remittance (MICR account, check
amount, check number). In addition, some companies that use a Type 4 record often
utilize the blank portion of the Type 6 record for invoice information as continued in their
Type 4 records.
• Type 7 - Batch Total Record
• Type 8 - Service Total Record
• Type 9 - File Trailer Record
OSS Notes:
OSS note 105231: The lockbox program can search by either invoice number or reference
document number. It has performance issues, however, if it searches by reference document
number and the reference document happens to have a null value document number or is a
reversal document, which may inherit the same reference document number from the original
invoice.
OSS note 561171: This note should be applied when customers submit partial payments. If not
applied, whenever a check contains some invoices that are partially paid and all other invoices
are invalid document numbers, the lockbox program will terminate with the message Error in
Routine INPUT_PRUEFEN.
OSS note 451121,437490, 391311, 358959: These notes should be applied if customers make
multiple partial payments for one invoice at different lockbox runs. Without the note applied, the
second partial payment won’t be able to be applied to the original invoice. Instead, it will clear
off the first partial payment item and post the total amount of two partial payments to account.
OSS notes 458841, 407799, and 160257: These notes fix a clearing issue that is triggered when a
customer is referencing a credit memo, but only takes the credit amount partially. Error message
Exchange rate diff.accts are not defined for account & currency & appears in the lockbox posting
log. The error message makes no sense since there are no foreign currencies involved during the
whole billing and clearing process.
References:
• Lockbox functionality in Oracle Application, by Anil R Patel.
• Historical Development of BAI format, Wikipedia.
• Concept of Lockbox, wiki.sap.sdn

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Lockbox Table References:
FEBEP - Electronic Bank Statement Line Items
FEBKO - Electronic Bank Statement Header Records
AVIP - Payment Advice Line Item
AVIK - Payment Advice Header
Lockbox Transaction Codes:
FBE1 - Create Payment Advice
FBE2 - Change Payment Advice
FBE6 - Delete Payment Advice
FBE3 - Display Payment Advice
FBE7 - Add to Payment Advice
FLB2 - Import Lockbox File
FLB1. FEBA_LOCKBOX - Postprocessing Lockbox Data
FLBP - Post Lockbox Data.
If you are looking for sample BAI2 file and a tool to create your own BAI file visit
www.suryapadhi.com.

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