What is letter of credit in SAP PSM-FM - Funds Management?

SAP Term: letter of credit

• Component: PSM-FM

• Component Name: Funds Management

• Description: Letter issued by a bank, guaranteeing payment for goods or services to a foreign supplier. Payment is made if and when the goods or services have been supplied as stipulated.

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• Key Concepts: 
  A letter of credit is a financial instrument used in international trade to guarantee payment from a buyer to a seller. It is issued by a bank on behalf of the buyer and is payable to the seller upon presentation of specified documents. In SAP, the letter of credit is managed in Funds Management (FM) as part of the Public Sector Management (PSM) component. 
  
  How to use it: 
  In SAP, the letter of credit is managed in Funds Management (FM) as part of the Public Sector Management (PSM) component. The FM module allows users to create and manage letters of credit, as well as view and analyze their status. The module also provides tools for managing payments and settlements related to letters of credit. 
  
  Tips & Tricks: 
  When creating a letter of credit in SAP, it is important to ensure that all relevant information is included in the document. This includes details such as the amount, currency, expiry date, and any special conditions that must be met for payment to be made. Additionally, it is important to ensure that all documents required for payment are included in the letter of credit. 
  
  Related Information: 
  For more information on managing letters of credit in SAP, please refer to the official SAP documentation on Funds Management (FM). Additionally, there are many online resources available that provide detailed information on how to use SAP for managing letters of credit.