Difference between Paying Company Code vs Sending Company Code

1. Paying company code is a company make payment on behalf of Sending Company Code
2. Sending company code who is actually paid the amount and paying company code, who is responsible to pay amount on behalf of sending company code. (means payment was done for sending company code)
3. Many times Paying company code pays amount for both sending and paying company code.

In n SAP FICO, the concepts of Paying Company Code and Sending Company Code are critical for intercompany transactions and shared service scenarios. Here’s the difference between the two

Paying Company Code:

• Definition: The company code responsible for making payments on behalf of itself or other company codes.
• Purpose: Used in cases where multiple company codes are part of a single organization, and payments are centralized to one company code for efficiency.
• Key Features:
  • Centralizes payments to reduce duplication of efforts.
  • A payment program configuration links the paying company code to the company codes for which it can process payments
  • All payment-related documents, like payment orders and payment files, are generated in the paying company code.
  • The paying company code must be defined in the Payment Method/Country

Example: If Company Code A and Company Code B exist in an organization, and all vendor payments are managed through Company Code A, then Company Code A is the paying company code.

Sending Company Code

• Definition: The company code that initiates a transaction or request for payment but does not necessarily handle the payment.
• Purpose: Used to reflect the original company code that incurs the expense or liability.
• Key Features:
• Identifies the origin of the financial obligation
• In intercompany transactions, the sending company code’s details are included for proper accounting
• The sending company code is reflected in financial statements, even though the payment may be processed by a different company code.

Example: If Company Code B needs to pay a vendor but payments are processed by Company Code A, then Company Code B is the sending company code.

Key Differences                                                                                                                                               

In summary, the Paying Company Code is operationally responsible for payments, while the Sending Company Code is conceptually responsible for initiating the transaction and maintaining financial accountability

Below are the configuration steps for setting up Paying Company Code and Sending Company Code in SAP FICO

Configuration of Paying Company Code

• Assign Paying Company Code:

Path: SPRO → Financial Accounting → Accounts Receivable and Accounts Payable → Business Transactions → Outgoing Payments → Automatic Outgoing Payments → Payment Methods/Bank Selection for Payment Program → Set Up Paying Company Codes

• Enter the Paying Company Code and define the following:
• Minimum and maximum amounts for payments.
• Whether payment advice is required.
• Currency settings.

Assign Company code to Paying Company Code

• Path: SPRO → Financial Accounting → Accounts Receivable and Accounts Payable → Business Transactions → Outgoing Payments → Automatic Outgoing Payments → Payment Methods/Bank Selection for Payment Program → Set Up Company Codes for Payment Transactions
• Assign the company codes that will use the paying company code.
• Specify:
• Paying Company Code.
• Payment Currency and tolerance limits.
• Bank determination.

Maintain Payment Methods

• Path: SPRO → Financial Accounting → Accounts Receivable and Accounts Payable → Business Transactions → Outgoing Payments → Automatic Outgoing Payments → Payment Methods/Bank Selection for Payment Program → Set Up Payment Methods per Country for Payment Transactions
• Configure payment methods like check, bank transfer, etc., for the paying company code.

Define Bank Accounts for the Paying Company Code

• Path: SPRO → Financial Accounting → Bank Accounting → Bank Accounts → Define House Banks
• Link the paying company code to the house bank and bank account for payment processing.

Configuration of Sending Company Code

The Sending Company Code is indirectly involved in payments but tracks the financial transactions initiated by it. Configuration includes intercompany transactions.

Define Intercompany Relationships

• Path: SPRO → Enterprise Structure → Definition → Financial Accounting → Define Company
• Create a relationship between the sending company code and paying company code

Assign Intercompany Clearing Accounts

• Path: SPRO → Financial Accounting → General Ledger Accounting → Business Transactions → Open Item Clearing → Prepare Intercompany Clearing Accounts
• Assign GL Accounts for intercompany clearing between sending and paying company codes.

Configure Cross-Company Code Transactions

• Path: SPRO → Financial Accounting → General Ledger Accounting → Business Transactions → Cross-Company Code Transactions
• Activate cross-company code transactions and assign document types for intercompany postings.

Testing the Configuration

• Create an invoice in the Sending Company Code.
• Run the Payment Program (Transaction F110) using the Paying Company Code.
• Verify the payment documents are posted correctly and intercompany clearing entries are generated.

Other Related topic to Read

1. Define Company and Company Code
2. Assign Company Code to Company