SAP B1 blog

Basics of loan posting in SAP Business One

SAP Business One does not offer any separate functionality for loans. They are entered using general financial accounting functions:

• journal entriesManual, flexible posting without system logic.
• bank processingfor inflows and outflows directly via bank transactions.
• Bank statement processingfor automated posting from imported bank data.

All loan transactions appear in the standard reports such as the balance sheet and income statement.

Creation and maintenance of relevant G/L accounts

The basis for systematic posting is a correctly set up chart of accounts. The following are necessary:

• Liability account for the liability (e.g. account 0650: liabilities to banks > 5 years).
• Interest expense account (e.g. 2120: long-term interest expenses).
• Bank account or interim account (e.g. 1200: house bank).
• Prepaid expenses and deferred charges for discount (e.g. 0986).

New accounts can be created under Administration > Organisation > Finance > chart of accounts create.

Comparison of loan types

Annuity loan

The annuity loan is one of the most frequently used forms of financing in the corporate sector. Its main characteristic is the constant instalment amount over the entire term. The instalment therefore consists of an interest component and a repayment component, with the ratio changing over time: The interest portion decreases continuously as the remaining debt decreases, while the amortisation portion increases accordingly. This model ensures a calculable burden in the Liquidity planning and is often used for investments in long-lived assets.

Loan postings in SAP Business One:
The monthly instalment is split: The amortisation portion is posted in the Target to the corresponding liabilities account for liabilities (e.g. account 0650 "Liabilities to banks (> 5 years)"). The interest portion is also recognised in the Target is recognised in the interest expense account (e.g. 2120 "Interest expenses for non-current liabilities"). The entire loan amount is recognised in the Have from the bank account (e.g. account 1200 "Hausbank").

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Repayment loan

With an amortising loan, in contrast to an annuity loan, the repayment portion of each instalment remains constant. As the interest is calculated on the basis of the respective remaining debt, the interest payable decreases over the term, resulting in a decreasing total instalment. Companies often use this type of loan when a targeted repayment of the liability with predictable repayment amounts is desired, for example in the context of subsidised loans or structured investment financing.

Loan bookings in SAP Business One:
The booking system basically corresponds to that of the annuity loan. The only difference is the variability of the total instalment. Here, too, the constant repayment portion in the Target to the liability account, the interest portion to the interest expense account and the entire payment in the Have deducted from the bank account.

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Maturity loan

This type of loan is characterised by a one-off payment at the end of the term. Only interest payments are made during the term. The capital is then repaid in one instalment, which requires appropriate liquidity management. Companies often choose this option to bridge financing bottlenecks in the short or medium term or to provide flexible capital for planned projects.

Loan postings in SAP Business One:
The regular interest payments are recognised as Debit interest expenses (account 2120) against Bank in credit (account 1200). Repayment is made accordingly once at the end of the term with a posting Debit liabilities, Bank in credit.

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Loan with discount / premium

A discount exists when the company does not receive the full nominal amount of the loan. The retained amount is referred to as a loan discount and is recognised as an asset in the accounts. Prepaid expenses and deferred charges (RAP) which is amortised over the term. A premium means that the repayment is higher than the amount received. Both variants also influence the actual interest charge and require differentiated recognition.

Posting in SAP Business One:
The payment is made, for example, as Bank to liabilitieswhereby the discount is recognised separately as Discount to RAP (0986) is recognised. Amortisation is carried out on a straight-line basis with the posting Interest expense (debit) to RAP (credit).
There is also a tax option: the amount can either be recognised as an expense immediately or spread over the term.

Booking methods in SAP Business One

Manual journal entry

• Call about: Financial accounting > Journal entry
• Manual entry of posting date, amounts and G/L accounts
• Allows foreign currencies
• Flexible for more complex cases without invoice reference

bank processing

• Incoming/outgoing payments via menu item bank processing
• Selection of payment method (e.g. payment on account)
• Direct booking to house bank account

Bank statement processing

• Automation through import of bank data
• Generation of payment documents and automatic allocation

Notes on practice

• Loans should always be documented with an appropriate contractual basis.
• The allocation to Current or non-current liabilities is relevant for accounting purposes.
• Calculations for the interest and amortisation portion are ideally carried out outside of SAP Business One, e.g. via Excel or an external loan calculator.
• The installation of suitable booking templates can standardise the booking process.

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Important note: The specific accounting treatment of loans may vary depending on local regulations and company policies. We recommend coordinating with an experienced accountant or SAP Business One consultant for the correct setup of accounts and posting of loan transactions in SAP Business One.