SAP FI Overview

 SAP Finance organization structure and master data:

To understand any ERP and its functions, it’s very important to understand
its organizational structure. SAP Organizational structure includes high level
hierarchy for an organization.
Enterprise structure in SAP is an organizational diagram that shows how the
whole group is mapped in SAP. It consists of some organizational units of
different modules created for a specific business-related reasons and are
grouped together. Organizational units include legal company entities, sales
offices, profit centers, etc. It handles specific business functions.

FI Organization structure:

Client

Company

Company code

Chart of
Account

General Ledger

Accounts payable Accounts Receivable Asset Accounting

SAP defines the enterprise structure as “the definition of specific

organizational units that together represent your company’s business units
and divisions.” Enterprise structures are the bedrock of the SAP FI solution;
without them, you couldn’t integrate and configure your program.
FI Organization structure:

Client:
A client is defined as a self-contained commercial, organizational, and technical unit
within an SAP System. This means that all business data within a client is protected from
other clients. Each client has its own customer data, which can be considered as the
exclusive property of this client. When you go to log in to SAP, you choose the specific
client you want to log in to. Each one is assigned a unique three-digit number, which you
are required to know and type in at login time. This makes it easy to distinguish between
clients.

Company:
A company is defined by SAP as “an organizational unit in accounting that represents a
business organization according to the requirements of commercial law in a particular
country.” This is the highest level of organization for accounting. A company is an
organizational unit in Accounting which represents a business organization according to
the requirements of commercial law in a particular country. You store basic data for
each company in company definition.

Company Code:
Company Code is a smallest organizational unit used to represent the company for
external accounting. A company can include either one or more company codes.
The company business transactions for Financial Accounting are entered, saved and
evaluated at company code level. Company codes are usually assigned to legally
independent companies, but sometimes are assigned to legally dependent companies if
they are operating abroad with external reporting requirements.

Chart of Account:
A chart of accounts is a structure containing the G/L accounts used by one or more
company codes. You need to assign a chart of accounts to each company code. This chart
of accounts is then the operating chart of accounts and is used for the daily postings in the
company code. Chart of Accounts (COA) is defined at the client level and assigned to
each company code. It is a list of General Ledger account’s master data that fall under
different account groups of a company code. This grouping mechanism helps to develop
better financial reports.
 Types of Chart of Account:

There are three types of Chart of Accounts

1. Operating Chart of Account: There are used to post daily expenses and income in
company code. The accounts in Operating Chart of Accounts could be either expense
or revenue accounts, or the information is shared by Finance as well as Controlling
modules. It is an mandatory to assign COA to Company code.
2. Group Chart of Account: These are accounts used by the entire corporate group.
They help in generating reports at the corporate.
3. Country specific Chart of Account: This Chart Of Accounts help meet country-
specific legal requirements.

General Ledger:
General Ledger (G/L) accounts are used to provide a picture of external accounting and
accounts and to record all the business transactions in a SAP system. This software system is
fully integrated with all the other operational areas of a company and ensures that
the accounting data is always complete and accurate.

Accounts Payable:
SAP FI Accounts Payable is sub module in SAP and used to manage and record accounting data
for all the vendors. All invoices and deliveries are managed as per vendor requests. Payables are
managed as per the payment program and all the payments can be made using checks, transfer,
electronic transfers, etc.

Account Receivable:
Accounts Receivable is a sub module of SAP FI used to manage and record Accounting data for
all the customers. It handles customer invoices, approvals, payments and other allied activities.
Any postings made in Accounts Receivable are updated in General Ledger G/L as well.

Asset Accounting:
The Asset Accounting (FI-AA) component is used for managing and supervising fixed assets
with the SAP System. In Financial Accounting, it serves as a subsidiary ledger to the General
Ledger, providing detailed information on transactions involving fixed assets. The Asset
Accounting (FI-AA) component is used for managing and supervising fixed assets with
the SAP System. In Financial Accounting, it serves as a subsidiary ledger to the General Ledger,
providing detailed information on transactions involving fixed assets.
  Master data in SAP:

Master data is the core data that is used as a base for any transaction. If you are
producing, transferring stock, selling, purchasing, doing physical inventory,
whatever your activity may be, it requires certain master data to be maintained.
Master data can be used by different user of organization as per their requirement.
Various data is maintained in master data while creating master data and these
data is used by different user.

There are various Master data is maintained in SAP like General Ledger, Vendor
Master Data, Customer Master Data, Material master data, Bank master data etc...

Master data − Data that is created centrally, and is valid for all applications. ... For
example: Vendor is a type of master data that is used for creating purchase orders
or contracts.
Transactional data − Data that is associated with processing of business
transaction is transactional data.

Account Customer
Receivable Master Data

GL Master Account Vendor

Data Payable master Data

Asset Asset
Accounting Master Data

(Master data can be used for multiple sub modules also in same way sub module master

data can used by others.)

How to create GL Master data?

GL Master data created with T-code FS00.

In SAP a set of all general ledger accounts are used by a company or a group of companies is called a
chart of accounts. These are the accounts that will be used for the preparation of financial statements
and reporting.

In above screen we can create GL account. First we need to enter GL account

which we want to create, and then enter Company code under which you want to
create GL account. Selection of account group from which it belongs to.
Enter short text and long text for GL and then select Field status group in
create/Bank/interest tab.

(In the similar way there is different T code to create different master data like
FK01 for vendor creation.)

 General ledger Accounting:

General Ledger (G/L) accounts are used to provide a picture of
external accounting and accounts and to record all the business transactions in a SAP system.
This software system is fully integrated with all the other operational areas of a company and
ensures that the accounting data is always complete and accurate.

General ledger account used by business transaction to record all day to day transaction.

These transactions recorded throughout a certain period and then used later on to create financial
statement.

There are two types of General ledger:

1. Profit and loss General ledger

2. Balance sheet General ledger

We can create normal and reconciliation General ledger here (FS00).

While creating General Ledger in FS00, we need to enter various data in different tabs.

First we need to mention General ledger account which we need to create and company code under
which we need to create General Ledger.

Type/Description Tab.

1st we need to mention account group from which general ledger account is belongs.

2nd we need to select profit or loss account GL or Balance sheet GL

Control data Tab.

1st Check Currency

2nd Recon account type (If you are creating recon account)

3rd Open item management (If you want to used for clearing account then click)

Create/Bank/Interest Tab.
Enter Field status group.

Important Pre-request to create General Ledger.

Chart of Account (OB13):

The chart of accounts is a listing of all accounts used in the general ledger of an organization.
The chart is used by the accounting software to aggregate information into an entity's financial
statements. The chart is usually sorted in order by account number, to ease the task of locating
specific accounts.

Chart of account means list of General Ledger accounts master records that are used by
organization.

To have better control in SAP, General ledger accounts are grouped under a company’s chart of
account to develop different financial statement for reporting purpose.

In SAP we need to create up to 10 digits General Ledger and those we need to mention in
Chart of Account. Language also needs to mention in Chart of account.

A chart of accounts (COA) is a financial organizational tool that provides a complete listing of
every account in the general ledger of a company, broken down into subcategories.

It is used to organize finances and give interested parties, such as investors and shareholders, a
clearer insight into a company’s financial health.

To make it easier for readers to locate specific accounts, each chart of accounts typically
contains a name, brief description, and an identification code.

There are 3 types of Chart of Account:

1. Operating Chart of Account:

It contains General ledger account that we use for posting in Company code during daily
activities. It is mandatory to assign operating chart of account to company code.

2. Group Chart of Account:

It contains General ledger accounts that are used by entire corporate group. It is not
mandatory to assign Group chart of account to company code.
3. Country specific chart of Account:
It contains General ledger accounts that needed to meet country’s legal requirement.
It is not mandatory to assign Country’s specific chart of account to company code.

Account Group (OBD4):

Chart of account contains different types of accounts. In order to manage
and control a large number of General ledger accounts better in SAP. They
arranged in account group.
For E.g. Fixed asset, Current asset, Income, Expenses etc.
It basically controls the field which is pop-up during master data creation in
SAP.
It controls the numbering and restricts the creation of general ledger code
within the specified number range.
For E.g.

Account group From Number To Number

Fixed asset 100000 150000
Income 300000 350000
  Accounts payable business process
SAP FI Accounts Payable is used to manage and record accounting data for all the
vendors.

All invoices and deliveries are managed as per vendor requests. Payables are

managed as per the payment program and all the payments can be made using
checks, transfer, electronic transfers, etc.

The full cycle of accounts payable process includes invoice data capture, coding
invoices with correct account and cost center, approving invoices, matching
invoices to purchase orders, and posting for payments. The accounts payable
process is only one part of what is known as P2P (procure-to-pay).

When a company purchases goods on credit which needs to be paid back in a

short period of time, it is known as Accounts Payable. It is treated as a liability and
comes under the head 'current liabilities'. Accounts Payable is a short-term
debt payment which needs to be paid to avoid default.
PO Invoice Processing (MIRO):

A PO (Purchase Order) invoice is the invoice raised by the vendor based on

the purchase order created by the buyer. Generally for processing an invoice, the
accounts payable will match the PO invoice raised by the vendors against
the purchase order to ensure all details.

Before processing PO invoice we need to check Purchase order which is

mentioned on Invoice, Delivery note number and invoice number. Once
everything is confirmed then you can process the PO invoice. Also user need to
check quantity received and price.

T-code MIRO
Non PO Invoice (FB60):

A Non-PO or Non Purchase Order is typically used when something is needed

urgently, and the person, who intends to purchase the good or service, cannot
afford to waste any time in seeking approvals from multiple parties before placing
the order.

Non-PO purchases are the result of spend outside a regulated procurement

process. This type of invoice is often called an expense invoice. Non-PO payments
can also be the result of contracted products or services. 

PO purchasing is a business best practice. But POs don’t make sense for smaller
purchases, regular expenses, or legally contracted services.
Automatic Payment (F110):

Payment run process is an accounts payables process that is used to handle

payments to vendors. To access the automatic payment program screen, you
need to enter transaction code F110.

We can process multiple vendors’ open invoice for payment in single payment run
in F110.

Important points while running payment.

F110 Process flow:
Input run id & run date and maintain parameters:

Below parameters need to be maintained

 Posting date for the payment document (payment document will get
posted with this posting date)
 Select invoice document entered up to date (cutoff date up to which
documents entered will be considered in payment run)
 Company codes (list of company codes whose invoices are to be included in
payment run)
 Payment method (invoices with selected payment methods will be picked
in payment run)
 Expected date of next payment run
 Vendors whose invoices are to be included in payment run

 Select additional log if you want system to generate log when proposal run
and payment run is executed. Log helps in analyzing and fixing the issue in
case of any error.

  Maintain variant against program which are responsible for generation

payment medium file and payment advice.

Proposal run
 Proposal run is executed to check if there is any error. If there is any error
then proposal log is analyzed to find out the root cause of the issue. Delete
the proposal run→ fix the issue→ execute the proposal run again→ check
of error. In case of error, analyze the proposal log, delete proposal run, fix
error and again execute the proposal run.   
 Payment run
 Once proposal run is free from any error, payment run is executed.
 Payment document gets posted with posting date mentioned in parameter.
Status of vendor invoices which are paid changes from open to cleared.
 A mail is triggered to vendor’s mail id which has soft copy of payment
advice attached.
 Output payment medium file is generated and stored in a specific location
on company’s server. This file is picked up by automated batch job program
and sent to bank’s server for vendor payment. Once bank receives the
payment file, bank pays to vendor as per data in payment file.

Manual payment method (F-53):

We can make payment to vendor by F-53 also.
In F-53 we need to select vendor one by one and need to make payment
individually. We can make partial payment by F-53.

 Accounts Receivable business process

 Accounts receivable management incorporates is all about ensuring
that customers pay their invoices. Good receivables
management helps prevent overdue payment or non-payment. It is
therefore a quick and effective way to strengthen the company's
financial or liquidity position.

A sale is realized as and when the invoice is generated but usually, a

time period is provided to the customers for the payment of the
amount due. This practice of conducting business on credit terms
gives rise to Accounts Receivable (AR) in the financial statements.
This credit facility is laid down to ensure a smooth flow of the
working capital into the businesses. There are complexities involved
with the accounts receivable i.e. its management, the process of
recording in financial statements, credit period etc.  

While setting up Accounts Receivable, you need to understand your

company and customers are structured, how payments are processed,
and what your reporting needs are. The setup will include defining
customers, terms, finance charges, process levels, and default codes.
These will assist you in processing payments, maintaining customer
balances, and reporting.
Accounts Receivable is a sub module of SAP FI used to manage and
record Accounting data for all the customers. It handles customer
invoices, approvals, payments and other allied activities.

Account Receivable Process Flow:

Posting Customer Invoice FB70:

FB70 Transaction code is used to process customer invoice. When customer

purchases Goods and services, we need to use customer invoice in FB70.

Important element while processing customer invoice.

 Check company code

 Enter Customer
 Enter posting data and Invoice date
 Reference number
 Amount (In header Data)
 Amount and Tax (if applicable)
 In GL line item, Enter GL account belongs to Sales
 Amount in Document

After entering all details, user need to check all customer number, amount,
date and GL account before saving document.
Reversal of Invoice (FB08):
If due to some changes in customer document or by mistake user if user
enter wrong details while processing customer invoice then need to reverse
the entered document.
T code for Reversal of invoice is FB08.
For reversal, you need document number which is appear when you saved
customer invoice in FB70.
You need to enter company code and fiscal year.
Reversal reason is 01 or 02. (If you reverse in current period then reversal
reason is 01 and if you reverse in closed period then reversal reason are 02)
Incoming payment from customer (F-28):

Once as per customer request we delivered goods or services to customer then

we are eligible to received amount from customer.

All incoming payment from customer need to received with proper details (which
include invoice number, received amount etc.)

Important element while posting incoming payment:

Enter the Document Date.

Enter the Company Code.
Enter the Payment Currency.
Enter the Cash/Bank Account the Payment is to be posted.
Enter the Payment Amount.
Enter the Customer Id of the customer making the Payment.
Dunning:
Dunning is the process of sending dunning notices to customers with overdue
payment items, requesting payment of the outstanding amount by a specified
date. To help you track open invoices and monitor the payment behavior of your
customers, SAP Business One includes the dunning wizard.
When customer miss the payment of outstanding invoices within specified due
date then dunning notice is send to customer via SAP.
We can consider outstanding customer invoice, credit memo, installment, partial
payment etc in dunning.

It is the process of Correspondence with the Customer/Vendor about pending

bills ( in sap as we call it open items). In SAP we can schedule the Dunning Process
and maintain different Dunning Levels for Dunning run. The Dunning process
involves the following steps:

 Entering Parameters in the dunning program. The parameters of old

dunning run can be copied and dates can be adjusted.

 The Dunning run selects the accounts, examines them for overdue items,
checks if they have to be dunned, and assigns dunning levels to them. All
dunning data is stored in a dunning proposal.

 The Dunning Proposal can be edited, deleted and recreated as often as

necessary until the dunning clerk is satisfied with the result.

 If desired ,this step can be skipped and the dunning run can be followed
directly by the printout of dunning notices.

 In One Click, Dunning notices are printed and dunning data is updated in
the master records and associated documents.
Dunning (F150):
Enter Run date and identification for dunning

Enter Below details as mentioned.

After entering all details click on schedule.

Click on dunning notice in spool request.

 Asset accounting business process

SAP Asset Accounting is also called as sub ledger accounting; it is one of the
important sub-module of SAP financial accounting (SAP FICO) module. Asset
Accounting in SAP (FI-AA) is used for managing and supervising the fixed assets of
an organization. The main purpose of asset accounting is to extract the exact
values of the fixed assets owned by the company on a particular date.

Fixed assets are assets are used for running a business enterprise, where the fixed
assets are used for more than one year.

The cost of using asset and the wear and tear in the asset is called as
depreciation, where the depreciation is accounted at the end of accounting
period.

The total value of assets is charged to profit & loss accounts over life cycle of
asset.

Initially you need to configure company code in financial accounting, then you

need to assign chart of depreciation to company code.
The values of assets from the date of purchase and to its final termination will be
updated in SAP system.

Asset Class is main criteria in Asset accounting. Every asset must have only one
asset class for e.g. Machinery, Plant, Building, Vehicle, Computer etc.

Every asset class have number range, Whenever asset is create under particular
asset class then number is assign to particular asset which is mentioned for asset
class.

Asset class also contains screen layout, which control the field when user does the
transaction like asset creation, asset purchase etc.

Asset creation (AS01)

First select the asset class and enter company code for which required asset is
created and number of asset.

Once you entered all details then below screen will appear.
 Enter number of years of
asset

Enter cost center

Asset Purchase:

F-90 is used for those transactions where you buy an asset directly from a vendor.
If you are constructing or building the asset on your own then this transaction
f-90 cannot be used as you are no way dealing with any vendor. Before using f-90
transaction you must be ready with your general ledger accounts, asset master,
vendor master, posting period configuration, number range creation and
assignment and document type for posting etc.
Once you click on Enter button below screen will appear and you need to enter
details like amount and vehicle etc.
Then click on Simulate

And then SAVE.

Post Depreciation (AFAB):

The monetary value of an asset decreases over time due to use, wear and tear or
obsolescence. Opposite of depreciation is appreciation which is increase in the
value of an asset over a period of time. Each single asset transaction leads to a
change in planned depreciation, but not to a posting to the relevant general
ledger accounts. Only when you execute a depreciation run does the system carry
out all depreciations planned up to the specified date.

Before final execution of depreciation always un-tick Test Run.

Depreciation is run in background run.

Asset Explorer (AW01N)
The Asset Explorer shows planned as well as already posted asset balance sheet
values and depreciation of a fixed asset in various formats and levels of
summarization. The Asset Explorer is used for displaying and analyzing fixed asset
values.

Asset retirement (F-92)