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Handling customer returns and credits is a crucial process for any organization. As an SAP controller or finance manager, you play a key role in facilitating returns to ensure proper financial treatment, inventory updates, and customer satisfaction.
I want to provide you with clear, comprehensive guidance on how to post sales returns credit memos in SAP. Whether processing a few manual credits or high volumes of daily returns, accurate and efficient posting of credit documents protects your books while maintaining good relationships.
In this guide, I’ll share:
- Key metrics on returns rates
- Pain points we often encounter
- Step-by-step instructions to post memos
- Best practices for smooth processing
- Innovations improving returns management
Let’s get started!
Why Efficient Returns Processing Matters
Companies in all industries face product returns from customers – some more than others depending on the nature of goods sold. But no matter what you produce or sell, properly handling returns has meaningful business impacts including:
Financial Accuracy – Posting accurate and timely credit documents ensures your AR and financial reporting remains reliable. This helps leadership have visibility into performance and supports auditability.
Inventory Integrity – Linking specific returned items to inventory records provides transparency into true stock levels, prevents losses, and drives better planning.
Customer Loyalty – When customers encounter a smooth, painless returns experience, it drives satisfaction and loyalty for future purchases.
Expense Control – Optimizing handling of returned goods limits transportation costs, restocking expenses, write-offs and more. Efficient processing directly benefits the bottom line.
Returns metrics also give insights into quality, supply chain, and sourcing opportunities – but only with quality data through rigorous financially-tied processing.
Industry Returns Benchmarks
Returns rates vary widely depending on the industry. For context, here are average return rates across US retail sectors:
| Industry | Return Rate |
|---|---|
| Clothing/Shoes | 30-40% |
| Luxury Apparel | 25-30% |
| Consumer Electronics | 8-20% |
| Home Goods | 7-10% |
| Food/Beverage | <5% |
Rates in B2B can be lower on average depending on products/services. But for companies selling direct to consumers, returns must be planned for and handled smoothly at significant volumes.
And remember returns processing costs also tally up. Industry metrics estimate the total cost of processing, transportation and handling ranges from $15-$25 per return on average. With slim margins, finding efficiency in crediting really matters.
Common Pain Points in Processing Returns
Before we get to the step-by-step guide for posting credit memos for sales returns in SAP, I want to outline a few frequent pain points organizations encounter:
Inconsistent Data — If sales and finance teams use different systems or values for customers, materials, etc. it leads to inaccuracies or manual work reconciling data.
Lack of Automation — No linkage from returns desk inputs to SAP postings results in rekeying and delays issuing final customer credits.
Reporting Gaps — When credits are posted late or not connected properly, reporting gives incomplete views on returns performance, customers, and inventory.
Audit Challenges — Years later, retrieving all documentation tied to a customer credit without shared references can prove extremely difficult.
Unclear Ownership — With returns touching finance, customer service, warehouse and more, unclear responsibilities cause delays and frustration.
Many of these result from information gaps between steps in the physical returns process and SAP postings. So let’s walk through how it should work end-to-end.
Walkthrough of the Sales Return & Credit Memo Process
Let me illustrate the typical workflow when an customer decides to send back purchased products:
1. Customer Requests Return
The customer contacts your company via phone, email, web portal, etc. indicating their desire to return an order. Details like original order number, items, quantities, and reason are provided.
Your returns policy may dictate how far after sale a return is acceptable and any use limitations based on condition.
2. Returns Team Provides RMA Info
Your returns processing team validates eligibility of requested return per policies. If approved, they issue a Return Material Authorization (RMA) form detailing exact products authorized for return and provide the customer return shipping instructions.
The RMA approves what the credit will cover when later posted.
3. Customer Sends Back Products
Per provided return instructions, the customer ships back the returned goods to your company’s designated returns processing warehouse.
Some companies provide prepaid labels or localized drop-off locations to ease the process.
4. Warehouse Receives and Inspects
Once received, warehouse staff inspect quantities/condition of returns against the RMA. Details like receipt date, actual counted quantities returned, any damages or quality issues are documented.
5. SAP Credit Memo Posted
The key accounting step occurs next – finance staff references the customer return data from the RMA and return inspection documents and posts a Credit Memo with inverted information from original sale in SAP.
This is the piece we will focus the step-by-step instructions on below.
6. Customer Informed of Credit
With the return fully processed in the books, customer service closes the loop with the buyer that credit is posted to account which can offset future purchases.
And then the physical side continues:
7. Inventory Counts Updated
Warehouse staff ensure stock keeping units (SKUs) are reconciled properly based on actual returned items. This ties out financial credit to inventory system.
8. Root Cause Analysis
For defective or damaged returns, additional inspection may yield useful details on failure modes related to suppliers, shipping, manufacturing errors, etc., so improvements can be explored.
Phew, okay – now that we’ve aligned on the full process, let’s tackle the key activity of posting credit memos in SAP for customer returns.
Step-by-Step: How to Post a Sales Returns Credit Memo in SAP
When finance receives the validated RMA and return inspection receipt from the earlier logistics steps, follow these steps to post the customer AR credit in SAP:
Step 1: Enter T-Code FB75 in SAP Command Field
All customer and vendor credit documents are posted via the specific SAP transaction FB75. To open the screen, enter the T-code “FB75” into any SAP command prompt and hit return.
Pro Tip: I like to pin my most common transactions like FB75 to my SAP Easy Access menu. Add it under your favorite Transactions folder so it‘s always handy when you need it on a daily basis.
Step 2: Fill Out Credit Memo Header Information
The header section populates the basic information needed to identify the customer, date, amount and other details of the credit memo:
- Company Code – Enter your organization’s code identifying the business unit / entity. This connects to the correct GL set.
- Customer Number – Input the customer ID number exactly as formatted on previous sales documents.
- Posting Date – Set the date you want the credit memo posted in the books. Typically the current date works to record timely.
- Amounts – The RMA and return inspection receipt detail the exact items, quantities returned and values to credit so input:
- Total Credit Memo Amount – The full amount to be credited back to customer’ a/r account
- Tax Amount – System calculated or manually enter based on tax applicability
- Calculate Tax – Check this box to leverage SAP’s tax calculation engine based on customer tax groups. Helps prevent incorrect rates.
These header details link the credit to the corresponding customer and original sale information so it offsets properly in reporting.
Pro Tip: When applicable, reference the original sales document number in the header Reference section. Then when you post, the credit memo accounting lines will auto-populate for you saving manual lookups and tying accurately.
Step 3: Enter Line Item Details for Each Returned Product
Next, navigate to the accounting item lines that make up the body of the credit memo. On each individual line, specify information to represent every unique item or product being returned for credit by the customer:
- GL Account – Identify the specific Sales Revenue recognition General Ledger account that was originally credited when item was sold. This properly inverts those entries.
- Amount – The individual monetary amount or value related to that item being returned by customer. Components of total credit.
- Tax Code – Identify the tax classification that applies to this item, which drives proper net/gross tax calculations.
- Text – Can list actual material ID or specifications of returned item for added clarity
While tedious, accurately enumerating each credited item ties the true sales reversal to inventory and provides transparency into why customers return products.
Recommendation: If high volume daily credits, explore leveraging electronic data inputs to auto-populate these accounting entry details in FB75 based on returns desk data.
Step 4: Perform Completeness & Accuracy Checks Before Posting
With so many data inputs between systems and returns steps, mistakes can easily happen causing downstream issues. So prior to posting credit documents, comprehensively validate that:
- Credit memo header Customer ID + Date aligns to original invoice
- Line item Revenue Accounts credited match initial sale
- Material / Inventory IDs and amounts align to expected RMA
- Tax codes comply with customer tax grouping
- Total amount equals sum of accounting line items
- Quantities of each material on lines match the return inspection receipt
Catching any errors such as pricing discrepancies, incorrect taxes, wrong materials or customers means you post accurate clean credits the first time.
Step 5: Post the Completed Credit Memo in SAP
When all the information has been entered correctly into the FB75 document, simply click on the Post icon on the SAP toolbar to process and record the accounting transaction.
The status bar will display confirmation that document posting succeeded.
Step 6: Record SAP Credit Memo Document Number
Upon successful credit memo posting, the SAP system assigns an automatic sequential document number, visible again in the status notification.
Important: Log this posted memo document number for your records. Cross reference it on the physical return inspection receipt used. The number can provide audit traceability and assists in accounting research.
And with that key step complete, you‘ve posted the essential credit document back to the customer account in SAP to account for the returned items!
Best Practices for Posting & Processing Sales Credit Memos
Beyond the standard step-by-step instructions, adopt these recommended practices for efficient, continuous returns and credit memo processing:
Configure Workflows for Returns Desk → FB75 – Connect data from initial customer return requests to reduce rekeying. Auto-trigger required FB75 docs for finance and eliminate delays waiting.
Standardize Data Formats – Enforce data conventions on naming, materials codes, tax ID, etc. Matching formats between systems (CRM, SAP) reduces miscues posting credits.
Monitor & Measure – Track performance metrics for returns cycle time, T-code usage, first pass yield on documents posted cleanly. This drives process improvements over time.
Communicate with Stakeholders – Keep customers, account managers informed on credit status updates to demonstrate great service. Notify procurement and inventory leads on returns patterns.
Centralize Credits Expertise – Rather than ad hoc processing, train specialized finance team with FB75 expertise. They become savvy managing nuances, exceptions, ensuring proper linkage.
Now that we’ve covered the key steps to post credit memos and practices to sustain efficiency, let’s discuss a few innovations that leading companies implement to enhance overall returns and credit processing.
Innovations and AI to Optimize Returns Processing
Legacy returns processes bogged down by information handoffs and fragmented systems lead to rising costs and customer dissatisfaction over time.
As returns volume and customer expectations increase across industries, we need better approaches. Emerging innovations can drive step-function improvements:
Unified Cloud Platforms – Rather than distinct portals and data siloes across order/inventory/finance functions, unified systems on cloud share reference data spanning the chain for transparency.
Predictive Analytics – AI-powered algorithms can forecast return likelihood even at order entry stage based on product, geography and other attributes. This allows companies to optimize handling proactively.
Automated Credit Documents – Robotics and AI engines can instantly trigger accounting credit memo creation in SAP based on digitized return center inputs. Removing lags waiting for finance posting accelerates customer refund cycle times.
Real-Time Inventory Updates – Instead of batch processing returns to update stock counts, IoT connected warehousing immediately registers exact items returned into inventory for financial visibility.
As returns volume continues to rise across retail and eCommerce, investing in technologies that integrate data and automate processing provides a path to scale efficiently.
The right mix of unified platforms, analytics, IoT sensors and machine learning can alleviate much of the manual difficulties we face with legacy returns processes. Leading companies are already realizing millions in cost savings, so the ROI justification is extremely high.
If you see opportunities to introduce these types of capabilities within our organization, I’m happy to partner with you to build the business case! Future returns processes can feel a lot different.
Now, over to you! Does this overview give you the adequate understanding to post routine sales returns credit documents in SAP via FB75? What questions do you still have or what parts needed more detail? I’m here to make sure you feel fully equipped, so please ask me anything.
And if additional credits questions come up later after you’ve been processing for awhile, just reach back out. Happy to help explain nuances and irregularities when tricky real-world examples arise!