Settlement profile & : "Can be settled" -> Enter settlement rule

What causes this issue?

Sender settlement profile &V1& specifies that <LS>actual costs / cost
of sales can be settled</>
If this indicator is set, you can settle the actual costs and the cost
of sales for the sender, but this is not a requirement.
If you did not enter a distribution rule for the sender, and attempt to
settle the sender, then the system displays error message KD205,
stating "Enter the settlement rule for the sender"
If the balance of the sender is not zero, and you attempt to close the
sender, or set the deletion flag, then the system displays a warning.
You can close the sender with a balance. (This is not possible if the
"Actual costs / cost of sales to be fully settled" indicator is
activated.)

How to fix this error?

To settle the sender, enter a settlement rule. If required, note the
long text for message KD205: "Enter the settlement rule for the
sender".
If you do not want to settle the actual costs and cost of sales for the
sender, activate the <LS>Actual costs / cost of sales not for
settlement </> indicator in settlement profile &V1&.
This leads to the following:
The actual costs and the cost of sales are no settled, even if
settlement is triggered for the object.
Error message KD205 is no longer displayed.
WiP and variances can still be settled.
When you close the sender, or when you set the deletion flag, the
system does not display a message if the balance of the object is not
zero.

Error message extract from SAP system. Copyright SAP SE.