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2 Replies Latest reply: Jan 7, 2013 12:10 AM by Sanjay Desai RSS

Recognize Penalty Against Supplier

833670 Newbie
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I need to know the best practice to recognize penalty against a supplier, using Credit Memo and making a price correction, or recognize the reduced amount as discount when payment?
the case:
a supplier delay the delivery and a penalty have to be applied.
in this case, the desired action not a price correction specially it will effect the invoice price variance as i know, also it's not a discount.
So, what's the best practice for this case?
  • 1. Re: Recognize Penalty Against Supplier
    Ivruksha Pro
    Currently Being Moderated
    Hi,

    Penalty is going to reduce the Liaiblity amount that needs to be paid to the supplier ...From accounting perspective, if you are using Price Correction option or Discount option at payment stage, in both the cases the penalty amount would not be accounted for in a different account code, it might make the changes on the transaction account itself in case of price correction and in case of discount the account code would be taken from Financial options / supplier site configuration ...

    The better approach would be to have a credit memo created for the penalty amount and record it in a different account code and then make a zero payment to the base invoice adjusting the credit memo. By this way, you can know the amount of penalty charged against the supplier till date differentiating between discounts and penalties..

    Regards,
    Ivruksha
  • 2. Re: Recognize Penalty Against Supplier
    Sanjay Desai Journeyer
    Currently Being Moderated
    Hi,

    For your knowledge, I am explaining the test case of our organization .
    Supplier has to apply LD clause if he supply the goods late means delivery date > Need by date.

    To accomplish the same, we have stored the LD % at header level.
    If goods received late than penalty is applied to supplier with LD% . Here Debit memo is automatically generated using interface in AP.

    HTH
    Sanjay

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