Real-time integration between finance and logistics has always been SAP’s trump card. SAP ERP collects and combines data from the separate modules. The quality of the integration rests on quality of the configurations, master data and skills of the users. The decisions in logistics influence finance and vice versa.
A successful SAP implementation requires understanding of configuration choices and their consequences. The training courses teach you how to assign company codes to companies, controlling areas, sales and purchase organizations, plants. In real life you will be sitting in hierarchy workshops trying to figure out how to get the SAP organization model to correspond the company’s own structures and needs?
Answers to these questions are not always easy. Many companies have made costly decisions in the history. These structures are not easy to change.
What is plant in finance? What is the difference between profit center and cost center? What are cost elements? Are all accounts cost elements? How to pass product costs to profitability analysis?
Understand the Integration between logistics and the FI and CO components
To what extent should finance people know the other modules? Should they know how goods and information flow through logistics? It is sufficient to recognize the integration points, where the accounts are determined. This is located in places where goods arrive or leave the company or the value of the goods changes. The better finance knows the logic of these processes and the configurations behind them, the better they can rely on the quality of the generated postings.
FI-SD Integration – Order to Cash Process
SAP ERP Sales and Distribution (SD) provides a complete sales management solution, which comprises Sales Order, Delivery, Post Goods Issue and Billing. It is a part of the logistics module, starting from quotations, sales order and all the way towards billing the customer. Besides Financials (FI) and Controlling (CO) it is tightly integrated with the Materials Management (MM) and Production Planning (PP).
The SD-MM-PP integration follows the flow of goods and Order to Cash Process (FI, CO integration) the flow of money.
To what extent should finance users know SD? Especially, when it is such a huge application. A good compromise is to recognize the integration points .
Two things are essential for the integration:
- Assignments of the SAP organizational structures
- Automatic Account Determination Rules
SD and MM organizational structures are assigned to financial stuctures. The Sales Organization is assigned to Company code. This controls, which Company will get the revenues and trade receivables. Delivering plant is also assigned to Company code. This controls the cost of goods sold posting.
The presentation below describes a simplified sales process (sales order -> delivery -> billing ). The integration points to finance and controlling are analyzed along the process.
The example is from SAP IDES Model Company ( IDES ECC607). This example can be repeated in SAP IDES. IDES is a static environment, where the user often runs into problems that are not easy to solve without previous knowledge of SAP. This is why I have described the errors that I encountered and how I solved them.
Sales Order Process from Accounting Perspective
1. Sales Order
Appendix: How to create stock coverage for the exercise?
Sales Order Process from Accounting Perspective
FI-MM integration – Procure to Pay Process
The Procure-to-Pay process contains the steps from purchasing goods from a supplier, to paying the supplier.
This presentation describes the integration between Procurement and Accounting. The aim is to gain understanding of the process and to locate the integration points. This presentation is a simplified version of real life. The picture gets more complicated when freights, purchasing accounts or price differences are involved.
Goods can be procured to stock or cost objects, e.g cost centers. In MM the process is quite the same, but in accounting there is a difference. A purchase to stock is posted to a balance sheet account, while a purchase to a cost center is treated as cost and posted to profit and loss accounts.
MRP, APO, Sales Order (Trading), Maintenance Order, Production Order all trigger Purchase Requisitions (PR). Of course manual creation is also common. If Commitment Management is active in CO, the Budget check occurs at creation of Purchase Requisition or Order. First posting to FI occurs at Goods Receipt. The account assignment type of the Purchase Order determines the CO object. It can be a profit center, cost center, order, project or asset. The Invoice creates an open vendor item in FI.
Below examples of a simple PO processes, where goods are purchased to storage and cost center. If you have access to SAP’s model company IDES, you can repeat the examples there.
1. Create a Purchase order
2. Post the Goods receipt
3. Post the Invoice
4. Display the Invoice and Accounting Documents
5. Procurement to Cost Center
6. Account Determination
7. Purchase Order History
Financials in Procure to Pay Process