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End To End Transaction Flow

Procure to Pay Process SAP

Procure to Pay process is required when we need to purchase materials/services

from an external vendor for our company.
This process starts from a purchase requisition (PR) and finishes with payment to the
vendor.

The events that determine the start of this process are related to:
 Material requirement planning (MRP)
 Plant Maintenance like materials, tools, external resources, services plans to
procure all the resources needed
 Other procurement needs come from departments of a company.
First step to start the process is to create a Purchase Requisition (PR), a document that
allows people working in various departments of a company to specify the goods or
resources that have to be purchased.
The process ends when the payment to the vendor is booked. Here is a graphical
overview of the external procurement process in SAP:

SAP Procure to Pay Process

The Procurement Department can satisfy purchasing requirements of other
departments of a company by issuing:
 A Purchase Order: in this case an RFQ (Request for Quotation) process first is
needed.
 An Open Contract: in this case, in addition to the RFQ process, the purchasing
task is finalized by means of the Purchase Order referred to the Open
Contract.
The RFQ process is always carried out by the Procurement Department before issuing
a contract. Usually the ultimate aim of this phase is to select a supplier among several
of them, in relation to the goods or services to be purchased.

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A Goods Receipt allows the warehouse of the department who ordered purchases to
certify the received quantity of goods while a Service Entry allows them to certify the
acceptance of services. Both tasks are performed only in relation to a Purchase
Order/Contract Release Order.

Transactions in SAP Procure to Pay Process

Create Purchase Order for Indirect Purchasing:-
Purchase orders are created by using standard transaction ME21N (or ME21 – the old
instance of the transaction).
Step 1)
1. Enter transaction code ME21N.
2. Enter the vendor.
3. Enter material Text/Material Number that needs to be procured.
4. Enter the quantity and unit of measure (optional – system uses UoM from
purchase info record).
5. Press ENTER to confirm the data entered.

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Account Assignment:-
 Assign the General Ledger Account
 Assign Cost Center
Good Receipt for Indirect Purchasing
Mostly people use MIGO as it’s designed to have all the options for all of the
movement scenarios.
Step 1)
 Execute the MIGO transaction.
 Choose A1 – Goods receipt process.
 Choose R01 – Purchase order.
 Enter your purchase order number here.
 Click on execute button.

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Accounting entry view

 The next tab contains information about the destination for the goods.
 You can see the movement type used for receipt process,
 destination plant and storage location,
 as well as stock type upon receipt. We can see that this material is going to be
posted to quality inspection (this indicator is set in material master and has been
referenced in earlier topics), so it will not be available for use until confirmed to
be in satisfying quality.
 There’s also information about goods recipients and unloading points.
 If you need to change the storage location, or override the stock posting type, you
can do it here..

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Invoice verification is done via MIRO transaction.
Step 1)

1. Enter transaction code MIRO.

2. Choose invoice as a transaction type.
3. Enter the invoice date.
4. Enter the purchase order number.
5. Hit ENTER.

Accounting Entries
MIRO

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Creating material Master

 Transaction code: – MM01

 Menu_Path: – SPRO > Logistics – General > Material Master > Basic Settings >

Material Types > Define Attributes of Material Types

Step 1:- MM01 then Enter

step 2 Enter Following details

 Material
 Industry Sector
 Material Type

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 Then Enter
 Step 3 Select View
 Main View are: - Basic Data1, Purchasing and Accounting

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Step 4

Basic Data view

Fill Essential Data Such as material description, Basic unit of measurement and
Material Group This information is at client level if we save this information in the
basic data we can not change the this information after creation of material

 Material description: LCD TV 40″ – this can be maintained in various languages.

 Base unit of measure (often referred to as Base UOM): PCS – this is the unit of
measure in which material stock is managed. For a TV set, it’s natural to be a
piece. You can also use meter, kilogram, or any other unit you have defined and
is suitable for material.
 Division: 10 – Division for the material, you could create divisions 10, 20, 30, 40
for finished goods, trading goods, services, and other materials, so you can
categorize them in this way. We have selected division 10 for our material since
it is finished goods.
 General Item category group: NORM – Standard item. Used throughout the
system, this indicator has an effect on sales and stock transfer processing as it is
used in item category determination.
 Weight unit: Kg – unit in which product weight is entered.
 Gross weight: gross weight of 1 unit of product in weight unit.
 Net weight: – net weight of 1 unit of product in weight unit

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Step 6

Purchasing view:-

 Purchasing group: you can define various purchasing groups like raw material
purchasing, trading goods purchasing, service purchasing etc. This value will be
the default value for all the items entered in purchasing documents.
 Order unit: default unit used for ordering this material. We have used pallet as
default so if we enter a quantity of 10 it means we are requesting 10 pallets of
the material (120 pieces in this case). You can see the Purchasing values section
in this view. The only field you have to populate is the Purchasing value key which
is maintained in customizing consisting of all the values you can see in this section
(underdelivery tolerance, overdelivery tolerance). When you define the key in
customizing, the values from the key are transferred to all the fields in this
section.

Step 7

Accounting view

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 Valuation class: depending on your system settings, but valuation class is in most
times influenced by material type, so you will have a valuation class for finished
goods, and another for trading goods. In our case valuation class, 7920 is SAP
default class for finished goods. For HALB, this class is 7900 by default, and for
ROH we can use 3000.
 Moving price: you can populate this field if price control is set to V.
 Standard price: you can populate this field if price control is set to S. Your
controlling team can use transactions for generating these prices based on the
information contained in production orders, purchase orders, so that these prices
don’t have to be entered manually for each material. We can also maintain a
Valuation Category field, which determines whether stocks of the material are
valuated together or separately.

Business Partner (SAP BP)

The component SAP Business Partner enables you to create and manage
business partners centrally. This is of prime interest if a business partner plays
different roles for a company, such as sold-to party and ship-to party.

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SAP Business Partner is designed to utilize technical benefits such as data
integrity and freedom from data redundancy, and to place greater emphasis on
aspects relating to customer maintenance and acquisition of new customers

Enter BP

Then Enter

Select Organization

Below screen will be opened

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Fill the Address

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Fill the address and Language

Click on Save Icon

BP number will be generated

Change the screen by clicking on Switch between a Display and Change

Click on Down Arrow on Display in BP Role

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Select FLVN00 FI Supplier

Below screen will be opened

Select Company Code

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Fill Company Code

Enter

Then Fill Reconciliation Account

Then Enter and Click on Save Icon

Then Fill

FLVN01 Supplier and Enter

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Click on Purchasing

Enter

Fill Purchasing organization

Enter and Click on Save Icon

BP will be created

OBYC SETTINGS

SPRO→ Sap Ref IMG → Materials Management → Valua on and account assignment →
Account Determination → Account Determina on without wizard→ Group together
Valuation Areas
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Define Valuation Class

SPRO→ Sap Ref IMG → Materials Management → Valua on and account assignment →
Account Determination → Account Determina on without wizard→ Define Valua on Class
TCODE : OMSK

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Configure Automatic posting

SPRO→ Sap Ref IMG → Materials Management → Valua on and account assignment →
Account Determination → Account Determina on without wizard→ Configure Automa c
Posting
TCODE : OBYC

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TCODE : MD61

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TCODE : MD04

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Difference between stock requirement list and MRP list

•MD04- Stock Requirement list is Dynamic it shows the current stock requirement
whatever changes after MRP run it shows all the requirements.

•MD05- MRP list is Static it shows the requirement up to when you run material
planning.
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Create Purchase Order for Direct Purchasing

The Purchasing department will negotiate the required materials/services with the
external vendors, and they will finalize the vendor. The purchase order will be raised by
the Purchasing Department to the vendor with the agreed price, materials/services,
quantity, delivery terms, and payment terms. This kind of information we can find in the
Purchase order. If there is any release process (Approval Process) for a Purchase order,
we need to get the approvals first before issuing PO to the vendor. We have different
types of PO Processes like Standard(Stock) PO, Service PO, Capex PO (Capital
expenditure Purchase order), Opex PO (Operational expenditure purchase order),
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Consumption PO, Scheduled agreement, and Stock Transport (STO)Purchase orders.
There’s no accounting document at the time of PO creation.

Good Receipt for Direct Purchasing

The warehouse department receives the goods from the vendor as per delivery terms.
Warehouse department enters Goods Receipt against the Purchase Order in the SAP
system. They simply verify the stock and enter the delivered quantity while posting the
Goods Receipt. In this process, the system will generate two documents – Material
document in MM and accounting document in FI.

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ACCOUNTING ENTRIES

Invoicing - MIRO

ACCOUNTING ENTRIES [MIRO]

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Order to Cash Process Overview

In the above Flow diagram overview the process explained is order to cash business
process in SAP where each box indicates a particular document or action in SAP ERP
system. There are four main stages of SAP order to cash process:
 pre-sales activities
 order processing
 shipping
 billing

Pre-sales activities take place before an actual sale deal has taken place.
Inquiry is a non-binding formal inquiry from a customer about products and
services that a company offers (can be saved as a document in SAP).

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Quotation is a document containing the offer of a company to a customer and
mentioning products, prices, and other details
Contract is a formal agreement between a company and a customer to provide
products or services during a specific period of time on certain conditions
Scheduling Agreement – a formal agreement between a company and a
customer to provide products or services containing delivery quantities and
dates. These agreements are common in the component supplier industry.
Order to Cash Process
Sales Order is a document that captures a request for goods and/or services
from a particular customer. It includes a variety of information such as:

 Information about goods and/or services

 Pricing information
 Delivery information
 Shipment information
 Billing information

Shipping Activities in SAP Order to Cash Process

When SAP sales order has been confirmed, the next stage is related to shipping goods
or delivering services to the customer. This process is called outbound delivery and it
helps to perform various activities related to shipment.
Outbound delivery is a document that enables shipping of goods to a particular
customer. It includes information about a number of activities
 Picking and Packing
 Shipping
 Posting goods issue

All these activities are mandatory. For example, some companies don't perform the
packing process in SAP ERP but perform it outside of SAP. In these cases, they will not
perform packing in outbound deliveries.

Posting goods issue process is integration between SD MM and FI Modules and

generates automatic postings on G/L Accounts:
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[debit] Cost of Goods Sold (COGS) account

[credit] Inventory account

After creating a billing document the customer will pay the bill. A payment from the
customer will generate a debit posting on the cash account and a credit posting on the
customer account.

Transactions in SAP Order to Cash (O-2-C)

Menu Path: –SPRO (tcode) –> SAP Ref Guide –> Enterprise Structure –> Definition –>
Sales and distribution –> Define copy, delete, check sales organization

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Assign sales Organization to company code OVX3

SAP Menu Path:- IMG → Enterprise Structure → Assignment →Sales and Distribution
→ Assign sales organiza on to company code.

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Sales Organization SK00 has been assigned to the co. code SK01

Creating Distribution Channel:

To configure the distribution channel follow the menu path
Spro → IMG → Enterprise Structure → Defini on →Sales and Distribu on → Define,
copy, delete, check distribution channel.

The Distribution Channel (SK) is Created:

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Assigning Distribution channel to the Sales organization:

To assign the distribution channel to sales organization follow the menu path
SAP Menu Path:- Spro → IMG → Enterprise Structure → Assignment →Sales and
Distribution → Assign distribu on channel to sales organiza on.

Distribution channel SK is assigned to Sales organization SK00

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SAP Menu Path:- IMG → Enterprise Structure → Defini on →Sales and Distribu on →
Define, copy, delete sales organization.

Define sales organization

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