8/10/2019 Ach Iat Payment Method http://slidepdf.com/reader/full/ach-iat-payment-method 1/23 Generated by Jive on 2014-12-30+01:00 1 Implementation of ACH IAT payment method in SAP ECC 6.0 Any company in international business today must deal in international transactions. Until a few years ago, overseas payments originating out of the US were sent via wire transfers or checks. Automated Clearing House (ACH) is an electronic fund transfer network in the US that enables financial institutions and organizations to deal in electronic payments. Domestically in the US, there is one clearing system, with standardized settlement times and initiation formats. Internationally, however, not all countries have an ACH-like clearing system, and those with clearing systems have different settlement times and formats. Earlier ACH payments used to be difficult as the sender needed to have a foreign banking relationship with the bank at the other end of the transaction, which, in turn, should have been a member of the foreign country’s clearing system. Over the past few years, the National Automated Clearing House Association (NACHA) has worked with the Office of Foreign Assets Control (OFAC) to amend ACH operating rules, minimize vulnerabilities in the ACH network and prevent entities banned by OFAC from using the network as a conduit to send or receive overseas funds. In 2009, the NACHA International ACH Transaction (IAT) rule change included a new kind of payment system – IAT which made international payments easier, more cost effective and more secure. All participants in the ACH network – from financial institutions, ACH Operators and corporate practitioners had to comply to the new system by September 18, 2009 with the regulatory mandate. Now international payments from and to banks in US are easily possible without having a foreign bank account. If more than a particular number of international payments are made to countries with ACH clearing systems, business can save money by making / receiving payments via IAT. Though wire transfer still remains the best payment method for immediate, non-urgent payments, IAT payment method was introduced to enhance the security of the international transactions. In addition to potential cost savings and payment security aspects IAT payments can also be used for following purposes: • Negotiate better payment terms with vendors • Provide better, more reliable and predictable cash flow projections • Eliminate the necessity of maintaining multiple country specific payment formats • Ability to combine payment categories (payroll, accounts payable and royalties) into a single payment file • Integrate with an ERP system or in-house treasury system, providing a single-point of data entry and a single vendor / payroll master database to maintain
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Implementation of ACH IAT payment methodin SAP ECC 6.0
Any company in international business today must deal in international transactions. Until afew years ago, overseas payments originating out of the US were sent via wire transfers or
checks. Automated Clearing House (ACH) is an electronic fund transfer network in the US that
enables financial institutions and organizations to deal in electronic payments. Domestically in
the US, there is one clearing system, with standardized settlement times and initiation formats.
Internationally, however, not all countries have an ACH-like clearing system, and those with
clearing systems have different settlement times and formats. Earlier ACH payments used to
be difficult as the sender needed to have a foreign banking relationship with the bank at the
other end of the transaction, which, in turn, should have been a member of the foreign country’s
clearing system.
Over the past few years, the National Automated Clearing House Association (NACHA) has
worked with the Office of Foreign Assets Control (OFAC) to amend ACH operating rules, minimize
vulnerabilities in the ACH network and prevent entities banned by OFAC from using the network
as a conduit to send or receive overseas funds. In 2009, the NACHA International ACH Transaction
(IAT) rule change included a new kind of payment system – IAT which made international
payments easier, more cost effective and more secure. All participants in the ACH network –
from financial institutions, ACH Operators and corporate practitioners had to comply to the new
system by September 18, 2009 with the regulatory mandate.
Now international payments from and to banks in US are easily possible without having a foreign bank account.If more than a particular number of international payments are made to countries with ACH clearing systems,
business can save money by making / receiving payments via IAT. Though wire transfer still remains the best
payment method for immediate, non-urgent payments, IAT payment method was introduced to enhance the
security of the international transactions. In addition to potential cost savings and payment security aspects IAT
payments can also be used for following purposes:
• Negotiate better payment terms with vendors
• Provide better, more reliable and predictable cash flow projections• Eliminate the necessity of maintaining multiple country specific payment formats
• Ability to combine payment categories (payroll, accounts payable and royalties) into a single payment
file• Integrate with an ERP system or in-house treasury system, providing a single-point of data entry anda single vendor / payroll master database to maintain
Implementation of ACH IAT payment method in SAP ECC 6.0
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Figure 1: ACH IAT payment process
Implementation Steps of ACH IAT paymentSAP had introduced several OSS Notes for ACH IAT payment method listed below:
• SAP Note : 1343600
• SAP Note : 1362993
The overall configuration steps emphasize on the introduction of the following information in the final DME
(output) file which will be eventually processed by the bank:
• Name and physical address of the originator
• Name and physical address of the receiver (beneficiary)• Originating bank name, identification number and branch country code• Correspondent bank name, identification number and branch country code (if applicable)
• Receiving bank name, identification number and branch country code• Reason for the payment
SAP recommends use of Payment Medium Workbench compared to Classic Payment medium as it provides
superior control, verification of the payment procedure and better performance with mass payments. It also
makes it easier to adapt to a customer or bank specific formats.
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Instructions
Instructions help the originating company to exactly state the purpose of the international transaction. Forautomatic payment transactions this field along with house bank country and particular payment method control
the information given to banks for carrying out the payment process. Instruction keys are maintained either in
customer/vendor master record or in the system configuration for house bank. The following rule holds true: If
instruction key is maintained in the vendor/customer record (sub-ledger account) then this record is preferred
(gets populated in the output file) over house bank record. If no instruction key exists in the master record then
default one maintained in the house bank is used. If the instruction keys are maintained in the master record
during the F110 process the system will prompt for these instructions during vendor selection and proceed with
the payment.
Instruction keys for house banks are maintained per country and payment method usingtransaction OB47. The instruction key have been maintained for country US and payment
method ‘J’ – ACH IAT. Instruction key is maintained as 01 for this payment method. This has to be
maintained in the first place in order to maintain the range of payment instructions for the DME
file.
Figure 8: Instruction key format for the payment method
Instruction keys 1,2,3,4 are used to cater to the requirements of specific countries like Germany,
Austria, Japan and Netherlands where additional information are required mostly for foreign
payments. They can also be used to generate additional information for other transactions as
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the company and the bank. The pre-agreed information is populated real time in the output DME
file during program execution.
Along with the maintenance of the payment medium format some other important parameters are maintained
simultaneously as shown below:
• Data Medium Exchange• Payment Summary
• Error Log• Appropriate file path for the output file storage
• Form for the payment medium
Payment TransactionDuring document (invoice) entry, an appropriate reason of the invoice should be given. In most real-world
setups that we analyzed, this instruction function was found suppressed during invoice entry. Instructions can
be defined at any of the following places:
• The (invoice) document• The customer/vendor master record using an instruction key
• The house bank DME data using the default instruction key
The instructions specified in the document over-ride any other instruction keys available from any master data,
provided that one of the four fields (see figure no. 12 below) has been filled out. The instruction key is linkedwith the corresponding GL account involved with this transaction. In the case of a vendor invoice document,
this GL would be the corresponding reconciliation account. When the field status of the instruction key is
modified for the reconciliation account category (see figure no. 11 below), then the instruction key will appear
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Figure 15: Appropriate Code Page maintenance for the format
The final output DME file gets its data from various master and transactional tables. Like any
other regular payment process in SAP, after a successful payment process all the related
information gets populated in the REGU*tables. The file refers master data tables like T001,
ADRC, LFA1 and KNA1. Information related to the payer and receiver’s banks are populated usingthe BNKA table. The information related to Foreign Correspondent Bank is populated real time
during file generation. Some information is hardcoded by the standard SAP program. Detailed
analysis of each line item of the file is shown below. Although a general ACH IAT file format exists,
the required information varies depending on the actual Bank involved. For certain banks, certain
fields and in some cases complete line items are omitted as those data fields are not necessary
for that bank. I will cover some of the important data fields in the line items along with how they
get populated. This will help in trouble-shooting for the reader
Header: File header record introduces the file. It designates the physical file characteristics and identifies the
sender and the receiver of the file. This record starts with record type 1.
• Position 4-13 is the bank routing number or the house bank number populated from table REGUH(field UBNKL)
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• Position14-23 gives the company identification which is used for creating the ACH file. The particular
identification to be used is mutually decided between the bank and the company. This information ismaintained in the program variant which gets populated real time to the output file
• This record also introduces the date, time and the file identification fields to specifically identify aparticular file. They are populated from REGUT table (fields TSDAT and TSTIM)
• It also populates the immediate originating bank name from BNKA (field BANKA) and the originating
company name from T001(field BUKRS)
Company / Batch Header Record: Identifies the originator and briefly describes the purpose of the entry. This
record starts with record type 5.
• Position 41-50 populates the originator bank id• Position 54-63 gives the description of the purpose of the entry. In this case it is "VENDOR
PMT" (Vendor Payment). These values are maintained in the program variant and gets populatedreal time during program execution.• Position 64-69 gives the ISO 4217 code for the originating and destination currency.
• Position 80-87 incorporates the routing number or the bank number from REGUH (field UBNKL) buthere only first eight characters get populated
IAT Entry Detail record – Original Entry: This record contains information about the receiver
and receiver’s financial institution. It starts with record type 6.
• Position 04-12 contains the routing number that identifies the US RDFI in which the receiver
maintains the account. It populates from REGUH table(field ZBNKL)• Position 13-16 gives the number of addenda records with the entry details record i.e. the number
of line items starting with 7 and 8 present in the file. This value was getting suppressed when the
function module "FI_PAYMEDIUM_ACH_DETAILS" was activated as mentioned previously• Position 30-39 gives the document amount from REGUH table(field RBETR)
• Position 40-74 gives the foreign receiver’s account number from REGUH table (field
ZBNKN)
• Position 80-94 is the trace number assigned by ODFI to uniquely identify each entry within a batch.
Receiver Information 1: IAT Addenda Record 710 identifies the receiver of the transaction and the dollar
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Position 04-06 identifies the type of transaction which gets populated from the instruction field while submitting
an invoice. The instruction codes get stored from the REGUH table in field DTWS1. It takes this value and goes
to table T015W1 and matches this value with value in field DTWSX for the specified application area. Then the
system populates the corresponding information in field CODE. For inbound payments along with the options
available a secondary SEC code may also be used.
Position 47-81 populates the name of the receiver / vendor from the REGUH table(field KOINH)
Originator Information: Addenda Records 711 and 712 contain information related to the originator of the
entry. They contain the originator name and it's detailed address. To populate these two rows system links two
tables - T001 and ADRC. For the originator company code the system goes to the master table T001 and picks
up the value from the field ADRNR. The system maps this value in table ADRC with field (ADDRNUMBER) and
populates the relevant fields in the output file.
Originating Financial Institution: Fourth IAT Addenda Record line item is populated with record 713. This
contains information of the financial institution originating the entry.
• Position 04-38 contains the name of the foreign originating DFI for an inbound IAT entry.• Position 41-74 contains the original DFI Identification number
• Position 75-77 contains the identity of the country in which the bank branch where the entryoriginated is located.
All the entries are populated from the BNKA table.
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Foreign Correspondent Bank Information: Record No. 718 gives information about the Foreign
Correspondent Bank through which the payment gets routed from the originator to the receiver. It contains the
following information:
• Foreign Correspondent Bank Name
• Foreign Correspondent Bank Identifier Number Qualifier• Foreign Correspondent Bank Identification Number
• Foreign Correspondent Bank Branch Country Code
All these information are directly maintained in the program variant. When the payment program is executed
with that particular variant, the Foreign Correspondent Bank information is populated in the output DME file
real time. Position 84-87 represents the addenda sequence number. This number is consecutively assigned to
each Addenda Record following an Entry Detail Record. The first addenda sequence must always be "1". Each
Foreign Correspondent Bank Involved in the processing of an IAT entry must be identified with an AddendaRecord for IAT Foreign Correspondent Bank Information.
Batch Control Record: The Company / Batch Control Record (Record Type 8) summarizes the information in
the file. This record shows the number of transactions and the total value of all transactions in a particular IAT
batch file.
• Position 05-10 indicates the tally of all entry records and addenda records processed in this file. Thecount here is "30" because the file has 27 addenda records (beginning with "7") and 3 entry records(beginning with "6"). If multiple payments are made in the same file then this value will increase
accordingly.• Position 11-20 indicates the Routing Number of the vendor bank which accepts only 8 characters.
• Positions 21-32 and 33-44 give the total debit and credit amounts respectively in the file.• Position 45-54 convey the same information contained in the original identification field of the
Company/Batch header record.• Position 80-87 incorporates the routing number or the bank number from REGUH (field UBNKL) but
here only the first eight characters get populated.
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File Control Record: The File Control Record summarizes the information carried in the Company / Batch
Control Records. It contains the amount, entries and total accumulations of the Company / Batch control
records in the file. It also contains count of the number of blocks and the number of batches within the file.
• Position 02-07 gives the value of the batch count field equal to the Company / Batch header recordsin the file.
• Position 08-13 gives the number of transaction blocks within the file.• Position 14-21 gives the tally of each Entry Detail and Addenda Record processed within the batch.
• Position 22-31 indicates the Routing Number of the vendor bank and accepts only 8 characters.
• Positions 32-43 and 44-55 give the total debit and credit amounts in the file respectively.
Conclusion
ACH IAT payment medium has seen several new incorporations in it's payment rules. NACHA had decided
to introduce modifications to the IAT file in a phased manner identifying three dates to complete these
implementations of the changes.
Effective March 16, 2012: Changes incorporated to clarify and enhance the rules to support more efficient
processing of IAT entries.
Changes effective on Required Change
16-Mar-2012 Verification of originator and receiver against OFAC
sanctions cannot be used to delay processing of IAT