SAP ERP INTEGRATION OF BUSINESS PROCESSES

WEEK 1 DAY 1 (APRIL 23)

2 BASIC END-TO-END PROCESSES:
PTP: PROCESS OF PROCURE TO PAY GET TO PHYSICAL STUFF / PROCESSES TO GET TO (BUY RAW MATERIALS,
F/G, ETC). UNIT 5
o Purchase requisition (optional to have)
o Purchase order (PO) requirement
Both done at the purchasing area

O2C: ORDER TO CASH WHERE YOU CAN INTERACT WITH CUSTOMER, AND CONVERT WHAT YOU HAVE
(PHYSICAL STUFF) INTO MONEY. UNIT 8
o Creation of Sales order: Customer and material master data needed

EXAM: COMPUTER 80 M/C 3 HOURS

Integration of Business Processes
GENERAL STRUCTURE OF SAP ERP - From Business prospective: Example (software needs)
1. Organizational level (structures) Basic knowledge
2. Master Data (Example > Microwave: Put stuff use time not changing in the system once
you have a structure) Making sure everybody in the company is taking the same thing.
3. Transactions Business Processes: How to do, etc.
4. Reporting > keeping track in SAP: Information system

Example: Buying a sofa
1. Getting the place structure to remember where the sofa is
2. Getting the sofa using the sofa, not buying one every day
3. How to use the sofa instructions
4. Reporting the use

How different modules work together to complete a business process
Unit 1: SAP NetWeaver > definition of SAP AND NetWeaver
o Unit 1 & 2 Check
Enhancement Packages: support packages










UNIT 1: SAP ERP AND SAP NETWEAVER

SAP ERP software late 90s CHECK PAGE 5

SAP ERP DOES: Manage their resources (e.g. software), planning, integrating people, information and processes
o Accounting, HR, and logistics are the heart of every bus. enterprise
o Allows the integration, streamline, and transparency of business processes in an organization all
computerized (companies can choose business functions needed; this simplifies upgrades and reduces
costs of ownership)
o Increases efficiency and profitability by allowing the company to gain better control of their
administrative and operations environment
o Drives down costs of integration and development by shortening time to benefit and leveraging IT
investments
o ABAP SAP own programming language
o Non-SAP members are able to use this software flexibility and standardization

SAP ERP Incorporates
SAP ERP financials: utilizing companys funds efficiently and therefore increasing profitability
SAP ERP Human capital management: covers HR from recruiting and training through payroll
SAP ERP Operations: provides extensive solution for automating and streamlining procurement and
logistics execution, product development, manufacturing, and sales and services
SAP ERP Corporate services: introduces services solution for end to end life cycles for travel
management, environment, health and safety and real estate management.

2 Major Categories:
1. Core SAP: Definitely need it (represent charts, FICO, Material management) Organizational functions
2. Extensions of core: Based on bus evolvement practices in bus world now called EHP
a. New processes, solutions, methodologies > integration of processes.
New solutions: SRM (Supplier relationship management). Example: CRM (Customer relationship
management)

SAP R/3 is the former name of the main enterprise resource planning: SAP ERP CORE
SAP ECC (SAP ERP Central Component) successor of SAP R/3 Main component of ERP solution
Developed using ABAP (SAP own programming language)
Service oriented architecture


SAP BUSINESS SUITE: offers additional solutions (listed down) that compliment, enhance and support processes
executed in SAP ERP.
ERP (Enterprise Resource Planning): Referred as the core of the business > Part of SAP BUS SUITE where bus
process, transactions are.
PLM (Product Lifecycle Management): Package > helps you specify specific bus needs with customers. Example:
Engineer Data
SCM (Supply Chain Management)
CRM (Customer Relationship Management)
SRM (Supplier Relationship Management)

- SAP NetWeaver: technical platform that empowers SAP BUS SUITE
WEB-BASED make it easier to build and SAP ECC (SAP ERP Central Component)
Business-driven technology
Helps reduce costs for SAP & IT landscapes (Information technology); it works with your existing IT infrastructure
to enable and manage changes in a flexible step-by-step approach
Allows you to add innovations to SAP ERP 6.0
Adds value while creating a foundation for future cross-enterprise processes
Serves as foundation for service-oriented architecture (SOA)
NetWeaver in simple words is an application and Integration platform in which Web Services play a major role
and which is open for Non-SAP applications and platform. It is used by organizations to improve productivity and
enhance efficiency by making all the resources that are available in an enterprise to work collectively. The SAP
customers to bring heterogeneous environments at one platform use SAP NetWeaver. In addition, it enables
customers to use the already existing systems without putting in much investment.

SAP NETWEAVER > ALLOWS FOLLOWING ACROSS BUSINESS AND TECHNOLOGY BOUNDARIES:
PEOPLE INTEGRATION: bringing people together to use system, making process flow efficiently E.G. a portal,
ESS (Employee sales service)
PROCESSES INTEGRATION: Ex: Invoice verification systems
INFORMATION INTEGRATON: Sharing information within different areas in the company
Utilizes open standards to enable integration with info. And applications



SAP NETWEAVER
INCLUDES A SET OF
TOOLS AND
COMPONENTS
Components Tools
SAP NetWeaver Application Server Adaptive Computing Controller
SAP NetWeaver Business Intelligence SAP NetWeaver Composition Environment
SAP NetWeaver Process Integration SAP NetWeaver Developer Studio
SAP NetWeaver Master Data Management SAP NetWeaver Visual Composer
SAP NetWeaver Mobile SAP Solution Manager
SAP NetWeaver Portal
SAP NetWeaver Infrastructure
SAP NetWeaver Identity Management

ADVANTAGES OF SAP NETWEAVER:
1. Openness and Extendibility (Microsoft.NET; IBM WebSphere)
2. Immediate Integration
3. Lower Total Cost of Ownership
4. Clear Roadmap


CHECK FIGURE 9: Technology capabilities & Service-enabled Applications (SUB-COMPONENTS OF NETWEAVER)
- Integration level employees, customers, partners: SAP NetWeaver capabilities in the User Productivity area:
(Portal & Collaboration, search, mobile, user interface technology)
o SAP NetWeaver is the central component in user productivity area
o A portal ensures a central point of access to information, applications, and services in the
company. All data is brought together in a single user interface; this facilitates authentication
and communication between different IT systems

- Integration level: Process integration (Repository based modeling and design, service bus based integration and
SOA Management)
o All work/procedures in a company are controlled by company processes
o People exchange data within these processes; info can be exchanged from applications, which
can be run on different requirements:
Modeling business processes
Customizing an application that supports a business process
Exchanging data between applications and systems in the context of a bus process
Automating bus processes
The components that SAP NetWeaver provides range from Solution Manager
(Customizing) to Process Integration (Data exchange btw applications/systems) to
process automation tools such as SAP Business Workflow, ccBPM, and the SAP
NetWeaver Business Process management tool.
Example: Showing a process for approving a travel application using the SAP Business
Workflow, and the posting of flights using the SAP Process Integration.

- Integration level: Information (Information management Business Intelligence and Content management)
o SAP BusinessObjects BI and SAP NetWeaver Business Warehouse supports you in collecting and
evaluating key figures. It allows you to define objectives and monitor their realization by
analyzing processes in your company can help you to make them more efficient

- Integration level: Master Data (Data Management Data management & Integration, Master Data
management)
o SAP NetWeaver Master Data Management (SAP MDM) allows you to create cross-company,
unified master data and distribute it across various dependent systems. It also checks new
master data to determine whether identical master data objects already exist, and identifies all
duplicates, which can be transferred to SAP BW (Business Warehouse) and used in analysis.

- Integration level: SAP NetWeaver Mobiles
o Solution that provides the basis for a range of solutions for mobile applications known as SAP
xApps composite applications for mobile business.
o Service employees can be informed of new orders via a mobile device and they can confirm data
at the customers instead of writing down data on sheets.
o Example: an enhancement of SAP HR Management allows you to enter mobile travel data and
working times

- Basis for integration: Application Foundation Application Platform (Life-cycle management, java
development, security and identity management and ABAP development)
o Technical basis of the SAP NetWeaver integration platform
o Supports J2EE and ABAP in a shared environment
o You can create Web Services in a development environment that supports all of the key
standards, such as Simple Object Access Protocol SOAP, web Services Description Language
(WSDL), AND Universal Description


- Enhancement Packages (EHP)
Active after activation
Only one EHP version is allowed
Simplifies the way customer manages and deploys new software functionality
Optional packages that enable companies to take advantages of ongoing innovations while keeping their core
software stable; aligned with support packages provides stability
Provides customers with new developments and enhancements of applications for existing installations
(Example: Business functions functions can be chosen according to requirements)
Installation has no impact on existing business processes as long as no business functions has been activated
Capabilities included in EHP focus on 4 areas:
o Simplification: new capabilities to simplify processes
o Generic enhancement: for financials, HR, human capital management, operations and corporate
services
o Enterprise service bundles Enterprise SOA: new services that illustrates the service oriented
architecture
o Industry-specific enhancement: new capabilities for particular industries
Things to know:
o Facts: Installations cannot be removed, only 1 EHP level per system/per industry (components have to
be updated with future EHP implementations), and industry solutions (activation of industry bus
function has to match EHP industry software component during installation)
o Technical delivery: Cumulative (each EHP comes along with previous and new EHP when downloading
the latest package), Delta shipments (delivers only changed objects to your system), EHP for SAP
NetWeaver Different versions (Select the right package version for your software)
o Project perspective: Modifications after installation must be adjusted, regression test must be done,
effort estimation (recommended to install the latest EHP)

SAP LOGON
USER: terp10-DOCE
CLIENT: 310
PASSWORD: #ELECTRONICA
SERVER: TE.UCC.UWM.EDU
SYSTEM ID: TE1
SYSTEM #: 00
IT PRACTICES & IT SCENARIOS > PAGE 17 > CHECK FIGURE 10
Looks at the overall SAP NetWeaver platform in ways that focus on key business goals rather than on isolated
technology components; business goals are:
The need to combine different integration technologies
The need to develop composite applications leveraging existing system investments
The desire to flexibly build new business processes
Data must be consistent
End to end process integration: Making process work consistently

Installed units: building blocks that are composed of clients, standalone engines, and usage types (usage types are built
from technical software components that form an installable and configurable unit).

LESSON UNIT 1 SUMMARY:
1. INTEGRATION OF BUSINESS PROCESSES
2. ERP
3. NETWEAVER
4. IT (INFORMATION TECHNOLOGY)

UNIT 2: ERP BASICS > PAGE 29
Focus on ERP (CORE OF BUSINESS SUITE)
o HOW ERP CAN VIRTUAL A BUSINESS PROCESS?
- Organizational Structure:
Client > Controlling area > C.C. (Company Code), Organizational Unit (Module Specific - HR) > Position > Sales
Organization > Division (Line of Business products) > Plant > Storage Locations > Shipping Points
o Companies based must decisions depending on the location
Client: Highest level unit of all organizational elements
o Setting up who the customer is
o General Data > shared within company > can be used by all company codes
Controlling Area: Combination/group of company codes that shared common characteristics; e.g.: based on
product.
o Its an organizational unit from the Accounting component in the R/3 System, used to represent a closed
system for cost accounting purposes.
o Internal > can be set up
o Not a legal entity
CC: Highest legal registered entity > Internal > Financial Accounting
o Not decided by the company (created according to tax law commercial law, and other financial
accounting criteria; usually created based on geographic considerations)
o One per country
Plant: physical location > setting up material management
o Central organizational unit in production planning
o Can be for manufacturing/distributing products, and providing services

- Master Data:

Material mater: Wal-Mart > Packaging is different > so material master is different
Personal Record: Call Centre
Customer Master Data
- Transactions
Must information for the Sales Order is copied from Customer Master Data and Material Master
- Reporting
Information can be accessed in reports available en SAP or can be pulled into the BW and reported there
BW: Business information warehouse
OLTP (Online transaction processing) - Operational: Online transactions Business transactions/process
(sales orders) use daily basis
OLAP (Online analytical processing): All about reporting Business analysis

- BI (Business Intelligence): Tools, planning, stimulation capabilities and warehousing
functionalities that allows strategic analysis and supports decision making and within the
company.

LESSON UNIT 2 SUMMARY:

1. ORGANIZATIONAL STRUCTURE UNITS
a. CLIENT
b. CONTROLLING AREA
c. COMPANY CODE
d. ORGANIZATIONAL UNIT
i. POSITION
ii. PLANT - RELATED TO MATERIAL MASTER
iii. STORAGE LOCATION
iv. SHIPPING LOCATION
2. MASTER DATA
a. MATERIAL
b. CUSTOMER
c. PERSONAL RECORD
3. TRANSACTIONS
a. CUSTOMER AND MATERIAL
i. PTP
ii. O2C
4. REPORTING
a. OLTP
b. OLAP
5. BI
UNIT 3: FINANCIAL ACCOUNTING > PAGE 43

FICO (FINANCING CONTROLLING)
1. FINANCIAL ACCOUNTING (FI): EXTERNAL REPORTING > shareholders, gov. agency CRA RAX
o Recording of monetary and value flows
o For legal purposes/compliances
o Part of income statement, B/S
o Focuses on General Ledger

2. GENERAL LEDGER ACCOUNTING
a. General ledger and sub-ledger (combination of accounts)
High level; and detailed level
THE VENDOR MASTER RECORD USED IN G/L
Summarizes the nature of the cost
Managed at a CC level
There is exactly one leading ledger in each client
Others ledgers can also exist (within the G/L)
Meant for legal reporting (different for each country)
Compiled the P/L statements (also called income statements represents a company financial
status at one point of time) and the B/S (Assets of a company are listed in the B/S divided into
Assets & Liabilities)
You can create different reports using depending on requirements: countrys rules
When transactions are posted in FI, automatically appears on the B/S

b. General ledger Chart of accounts
Chart of accounts: contains the recording of all definitions/accounting business transactions on to
the G/L accounts in an ordered form CHECK > PAGE 74 HANDS-ON-ASSIGNMENT
o Definitions consist of the account number, account name, and the type of G/L
o One chart of account can be assigned to many company codes
o For each company code, you have to specify one chart of accounts for the G/L
o Every G/L is structured according to a chart of account (Revenue is recorded
when invoiced; expense is recognized when services are procured outside the
company and provided internally)
c. General Ledger Account master Record
G/L Account Master Record:
2 segments: 1) the chart of account has high level control features the like description of
the account, whether the account is a balance sheet account or a P/L account, 2) the
company code segment, details how the company code that uses that specific account
manages the account.
Account Groups for G/L accounts:
Classifies G/L accounts into user-defined segments
4 field statuses of a field can be suppress, required, display and optional
d. Reconciliation Accounts
Reconciliation accounts and sub-ledgers:
Integrates all the sub-ledgers accounts with the general ledgers
Only contains collective postings; the posting data is represented in a more
differentiated way called sub-ledgers
Can only be posted through a sub-ledger account

e. Financial Statements Versions
Financial Statement Version:
Keeps the general ledgers so information can be used when needed to create a B/S or a
income statement - as far as account s map to which line items on the report
Various financial statements have to be created to meet reporting requirements; you
define which accounts are to appear in which line items of the financial statement
Can be created for profit centers as standards
f. Profit Centers
Profit Center
Organizational unit (E.g. Plant) integral part of General Ledger
A line of business part of financial accounting, geographical location
Considered as master data in G/L
g. General Ledger Account postings and queries
G/L Account Posting:
When creating a post for G/L account documents, it contains:
o Header data, templates, line items (details) and information area
The posting key:
o Determine 3 results:
Account type for posting
Posting the document as credit or debit
Field status of the additional data
Account Information:
The balance display and line item display are provided to display the account data


3. LESSON: 3 ORGANIZATIONAL UNITS IN FI
1. CC (independent accounting unit): legally the smallest SAP entity unit has to report B/S by itself
2. Segment: new organizational unit available for SAP ERP 2004
In the G/L Accounting, segments can be used as dimension for reporting purposes
According to US-GAPP, a segment is a part of the company that incurs costs, generates revenue
and has its own financial data
Segmented reporting aims to:
Provide an insight into different business activities of a diversified company
Provide info about the general environment
Purposes:
Provide better overview of a companys economic performance
Improve a forecasting of the potential sales reserves of a company
Better anticipate risks and opportunities of a company
IAS (International Accounting Standards)
Distinguishes btw business and geographical segments
o Business segment: Represents a capacity of a company, involving the
manufacturing of products or provision of services
o Geographical segment: provides info about risks and revenues that differ from
other geographical segments in terms of economic or political factors.
2. Third organizational unit is the controlling area; which identifies a self-contained organizational
structure for which costs and revenues can be managed and allocated.
i. One or more company codes can be assigned to a controlling area; only possible if cc
and controlling area are all the same operating chart of accounts and fiscal calendar
year

4. FSCM (FINANCIAL SUPPLY CHAIN MANAGEMENT):
- Helps enterprises to optimize cash flows; manages cash in process
- Manages four major processes: CHECK FIGURE 25 > PAGE 50
1) Electronic bill presentment and payment (SAP Biller Direct): allows billers to send and customers to
receive invoices electronically, making invoice more efficient
o Customers can access to info in internet
o Reduces media fragmentation
o Vendor can interact with customer; example: processing insufficient payments or providing
customer service
2) SAP Credit management: monitoring the total liabilities of customers, using appropriate credit lines
o Advantage of centralized and company-wide management of credit lines
o Eliminates risks of customers exceeding the credit limit granted
3) SAP Dispute management: system support for processing payment deductions
o Enables Cross-departmental resolution of dispute cases
4) SAP Collections management: allows you to structure, classify, and minimize the receivables owed to
your organization
Following processes are linked to the previous ones
5) SAP Cash and liquidity management
6) SAP In-house Cash
7) SAP Treasury and Risk Management

FINANCIAL ACCOUNTING MODULES:
b. Covers two major Business processes
i. Money coming in order to cash (O2C)
ii. Money coming out procure to pay (PTP)
1. Example: Loan at the bank
2. Example 2: Buying and paying
a. AR > O2C > Customer
b. AP > PTP > Supplier
c. Asset Accounting (AA) related to management of assets
d. Banking (BL) Supports booking of cash flows
e. Treasury TR- (focuses on functions such as payment)
f. Financial supply chain
g. Management

5. CO: INTERNAL REPORTING > Management accounting
c. Meant for internal management information regarding cost and revenues
d. Audience: managers, shareholders
e. Can analyze costs and revenues at high level across boundaries. Example: analyzing costs
and revenues for all production departments worldwide.
f. Uses the costs and revenues from FI
g. Provides controlling objects which allows an organization to internally track both, costs and
revenues
Example: T-Accounts
1) Paying tuition $4000
a. Tuition Account (Expense): Credit $4000
b. Cash Account: Credit $4000
2) Tutoring $400
a. A/R: Debit $400
b. Revenue: Credit $400 (Revenue works as same as expense account)
3) Receiving payment for tutoring
a. A/R: Credit $400
b. Cash: Debit $400

LESSON: ACCOUNTS PAYABLE > PAGE 83
1) VENDOR MASTER RECORD AND ACCOUNTS PAYABLE POSTINGS BUSINESS PROCESS FOR A/P:
a. The Vendor Master Record
o Purchasing organization specific settings
o Specific general info at the plant level
o Business process: Global purchasing org. They have to enter data specific to purchasing in the vendor
master record before the suppliers master record can be used.
o Contains data that controls how transaction data is posted and processed (Info about vendor: name,
address)
o Any company code defined in the client will have access to this information
Once you have Vendor master Record set up, you can create and post a vendor invoice transaction business transaction
b. Invoice

1. DOCUMENT SPLITTING POSTING
o Has to be activated to ensure uniform splitting of the segment characteristics. Systematic segmentation
means that zero balance position is reached for each document with regard to the entity
o Used because corporate groups are required to create B/S at segment level but no segment entries
exist in two lines items, which means that they would not be complete. Furthermore, the balance is not
0 for the segments meaning B/S is not balanced

2. VENDOR PAYMENT
a. Elements of the payment process
o Manually or through the use of the automatic payment program
EDI Electronic Data Interchange (Info in sent to bank inmediately online)
DME Digital Media Interchange (bring a file to the bank)
b. Overview of the automatic payment program
Maintain parameters
Start proposal run
Edit proposal
Start payment run
Start printout
THE VENDOR MASTER RECORD > CREATE INVOICE > PAYMENT
3. INTEGRATION WITH PURCHASE TO PAY BUSINESS PROCESS
a. Purchase to Pay Business Process Overview (P2P) PAGE 90
1) Order requirement (Optional)
2) Order
3) Goods receipt MM (Material Management Document)
4) Bill check invoice verification
5) Payment processing
Sometimes you are buying things that are not for you; there is a step prior order requirement which is purchase
requisition.
b. Purchase-to-Pay process Account View (P2P) PAGE 9 FIGURE 47

1) GR/IR Allocation Goods receipt to warehouse; everything you post in here are temporal posting; use to
accommodate gap (because you dont pay immediately) btw business process post as temporary
offset
a. Always post twice in accounts
b. Increase GR/IR (Credit) and assets (Debit)
2) Vendors Incoming bills
a. Once you receive the bill Increase A/P (Credit), also assets (Credit)
3) Payment program Bank accounts
a. Increase * Credit Bank allocation
b. Debit A/P reduce
4) Account statement
a. Credit Bank expense account increase
b. Debit Bank Allocation reduce

Notes:
- First 3 steps in the P2P Business process has nothing to do with finance compared with the SAP
Overview
- PO is a legal document in SAP
- Accounting gets involved in the Payment program
- GR/IR used as an clearing account for assets
- GI/IR and Bank Allocation are middlemen clearing accounts - works as liability accounts
- Financial documents are only created when goods and the invoice are received
LESSON: ACCOUNTS RECEIVABLE > PAGE 103
ACCOUNTS RECEIVABLE MASTER DATA BUSINESS PROCESS FOR A/R:
1. THE CUSTOMER MASTER DATA
a. Customer Master Record:
- Sales Area specific settings
b. Credit Data:
- Customer evaluation management
- Checking credits , internal score Account Receivable (Payment history, credit limit, etc)
- What kinda risk class the customer is
c. Credit Management Process
- Internal and external customer information at 2 sources: customer master record (internal info)
or external information (from other companies/sources)

2. ORDER TO CASH BUSINESS PROCESS INTEGRATION WITH FINANCIAL ACCOUNTING
a. Order to Cash from the accounting point of view
1) Sales order: Contains all relevant information for processing the customer order within the
framework of the transaction No financial implication
2) Delivery: Goods to be delivered are posted as goods issue; which is created in MM, and an
accounting document is created in FI so the goods issue is posted to the correct G/L
Reduce * Credit Product (Asset account)
Stock comparison expense account increase * debit
You recognize cost/expense
3) Billing: Created in SD, invoice is sent to the customer (REVENUE IS RECOGNIZED). At the same
time a document is created in FI so that the receivable and the revenue can be posted to the
correct account
When the billing document is created in SD, an accounting document debits customer
and credits revenue automatically
- Financial implications for billing documents:
Recognizing revenue
Recognizing A/R
4) Payment by customer
Credits * increases revenue
Debits Customer reduce

b. Sales Order Process from the accounting view - B/S
1) DELIVERY MM
- Reduce * credit material
- Stock change F/G Increase * credit
2) BILLING Customers
- A/R Increases * debit
- Income increases * credit
3) PAYMENT FI/AR
o Debit * increases Bank account
o Credit * reduce A/R

c. Sales of Services: Process from an Accounting perspective
Billing creates income
Payment settles receivables, leading to a credit memo on your bank account

3. CUSTOMER PAYMENTS
a. Incoming payments in Accounts receivable
- If there are payment differences , must be dealt with manually:
o Partial payments: the item being short-paid doesnt clear
o Residual items: the open invoice is cleared and a new open item (residual item) in the amount of
the payment difference is created

LESSON: FIXED ASSETS ACCOUNTING (AA) > PAGE 119
1. ASSETS MASTER RECORD
a. Assets in FI Organizational Unit:
i. Each asset belongs to a company code and business area.
ii. Assets what you own (Acquisitions, retirement, depreciation)
iii. You can assign the assets to various CO objects Controlling objects (cost centers, internal
order, activity type) and logistic organizational units
iv. Ways to get assets: buy, transfer or make

b. Assets Class main criteria for defining the asset
i. Assets should by assigned to classes in the asset class you determine control parameters and
values for depreciation and other master data
ii. Assets do not appear in the same line item of the B/S Separated by class
iii. The application component PM (Plant Maintenance) is used for the management of assets
iv. Special assets:
a. 4000: Assets under construction
b. 5000: low-value assets

2. ASSETS TRANSACTIONS
a. Assets Transactions (Acquisitions, retirements) in asset accounting
- In FI-AA you can post the following ways:
a. Without a vendor or a P.O.; the offsetting entry is made to a G/L clearing account
a. Example: in the PTP (Material GR/IR; clearing account for assets)
b. To a vendor, but without reference to a purchase order
c. Via materials management using the MM functions (purchase order, goods receipt and
invoice receipt)
b. Transaction type
- Addition to the asset posting keys (Asset posting: acquisition, asset retirement, allocation, depreciation,
and appreciation):
a. 70 Debit
b. 75 Credit
i. Assets posting keys must be included when posting to an asset account.
ii. The transaction type is necessary for asset accounting, since it specifies exactly where the asset
posting is listed in the asset history sheet.
- The transaction type is the distinguishing characteristic of the various asset posting, which include:
a. Buying and selling
b. Credit memos
c. Acquisitions from internal production
d. Adjustment postings
e. Retirements without revenue
f. Depreciation and appreciation

c. Asset Explorer Tool
- It offers a clear overview of the activity for an asset (You can see transactions that have been posted to
the asset plus planned and posted depreciation per depreciation area, per period, for each fiscal year)

3. DEPRECIATION
a. Depreciation Areas
- To keep more than one valuation basis, depreciation areas are kept in the SAP system. Separate
transaction figures are kept in each area:
i. Per asset and depreciation area & for individual value components such as balances,
depreciation, depreciation, and remaining book value
- Various data is stored in the asset master record for depreciation areas, which control the calculation of
normal and special depreciation for the special depreciation areas
i. Example: Book depreciation

b. Control Data in depreciation areas
i. In the asset master record, different data for valuation areas are stored. These data control de
calculation of normal and special depreciations for the respective areas

c. Depreciation Run
ii. Only after the depreciation postings run has been completed is the depreciation actually posted
in asset accounting and in the G/L. The depreciation is posted to the corresponding depreciation
accounts in the G/L and to the assigned CO cost.
iii. Same assets, different views

LESSON UNIT 3 SUMMARY:
1. FICO (FINANCING AND CONTROLLING)
a. FI FINANCIAL ACCOUNTING
i. 3 Organizational Units
1) CC Must have
2) Segment Optional
3) Controlling Area
ii. General Ledger Accounting CHECK > PAGE 74 HANDS-ON-ASSIGNMENT
iii. FSCM
b. CO MANAGEMENT ACCOUNTING
c. ACCOUNTS PAYABLE
i. USES Vendor Master Record
ii. Creation of invoice
iii. Posting
iv. Payment
1) Overview of the automatic payment program
v. P2P business process
vi. SAP Account review
d. ACCOUNTS RECEIVABLE
i. USES Customer Master Record
ii. Credit Data CHECK > PAGE 111 HANDS-ON-ASSIGNMENT
iii. Credit management process
iv. O2C process from an accounting point of view SAP
v. S.O from an accounting point of view
vi. Sale of services from an accounting perspective
vii. Customer payments
1) Incoming payments
e. FIXED ASSETS ACCOUNTING


UNIT 3 STRUCTURE
1) Organizational Unit
a. FI CC, Segment, Controlling Area
b. A/P Client, CC, Purchasing Organization
c. A/R Client, CC, Sales Area
d. CO Operating Concern, Controlling Area, CC
2) Master Records
a. G/L Account Master Record
b. Vendor Master Record Client, CC, Purchasing Org.
c. Customer Master Record Client, CC, Sales area
3) Processes
a. Payment Run
b. P2P
c. O2C
d. Depreciation Run Different views
4) Reporting
a. Asset Explorer
b. OLTP
c. OLAP
d. BI


UNIT 4: MANAGEMENT ACCOUNTING > PAGE 151

1. COMPARISON OF FINANCIAL AND MANAGEMENT ACCOUNTING
MANAGEMENT FINANCIAL
Internal Accounting External Accounting
Cost Accounting Financial Statements
Diverse Valuation Legal Requirements
Flexibility Standards

- Management Accounting contains all the functions necessary for effective cost and revenue controlling.
- Financial Accounting provides reports (B/S, P/L Statements) used for external reporting purposes in the CO

2. MANAGEMENT ACCOUNTING/CONTROLLING
a. Management Accounting Architecture:
- Profitability Analysis (CO-PA)
- Profit Center Accounting
- Overhead Cost Controlling (CO-OM)
- Product Cost Controlling (CO-PC)
- Cost Elements accounting
Costs from CO-OM and CO-PC can flow into CO-PA, where together with revenue data, can be used to calculate
operating results, making it possible to establish how profitable the various are
Costs are either production or overhead cost
Other SAP components such as Human Capital management, and logistics (MM, SD, and PP) are also
integrated with CO

b. Flow of values within management accounting
- Costs incurred in one part of the enterprise and pass on to a different part of the enterprise
a. Example: allocating overhead costs from administrative cost centers to
production cost centers
- Within the overhead cost controlling area, costs can be posted to cost centers, internal orders
and processes from the SAP ERP applications (external costs), then the cost centers can
allocate costs to other costs centers, to orders, Activity-based Costing (ABC)
- Flow of costs exits btw CO-PC and CO-OM
- Cost objects (production orders) can received direct cost posting from FI
- Profitability analysis can receive cost assessments from cost centers and ABC Costing
processes, settlement of cost from internal orders and production variances settle from cost
objects
c. Integration with other SAP ERP Applications
- Data created in other SAP ERP applications can have a direct influence on CO
1. Example: if a non-stock item is purchase, it is posted in the G/L. This is also post in the
cost center as a cost, for example for which the item was purchase. Those costs can be
pass on to production cost center
- Financial accounting is the primary source of information for CO
- Most expense posting (journal postings, vendor invoices or depreciation posting form the
Asset Management) in the G/L result in a cost posting in the CO
- Sales order management is the primary source for revenue posting from billing documents to
revenue postings in Profitability Analysis (CO-PA), and Profit center accounting (PCA)
- Human capital management can generate cost postings in CO; it offers the allocation of labor
costs
- In MM, a good issue transaction can create a cost posting in CO to whichever cost object is
specified
- The manufacturing area of logistics works closely with CO. Bills of material and routings,
creating in manufacturing, can be used in CO-PC

3. ORGANIZATIONAL UNITS
a. Organizational levels in Management Accounting
1) Operating concern
- Represents the structure of external market segments for the enterprise
- You can assign several controlling areas to a operating concern
- Profitability Analysis is used in the operating concern
2) Controlling area:
- Basic organizational unit in CO
- Used for Cost accounting you can allocate costs only within a controlling area (this costs do
not affect objects in other controlling areas)
- You can assign more than 1 company code to a controlling area as long as CCs and
controlling area have the same operating chart of accounts and the same fiscal year variant
3) Company code
- Independent accounting unit
- P&L statements are prepared at the company code level to meet legal reporting requirements
- Business areas (BA) can be used to group strategic business units for P&L and financial
statements
4) Plant
- Production unit a plant is assigned to a CC
- Central organization in MM and PP
5) Purchasing Organization
- Used in MM - Purchasing
6) Sales Organization
- Used in Sales order management

b. Multiple Assignment
- By assigning more than one CC to a controlling area, you can perform cost accounting for all
company codes; you can allocate values in CO than can affect more than one CC
- In cross company code cost accounting, the controlling area and the CC can have different
currencies by default, in a cross company cost accounting displays the CC currency as the
object currency (cannot be changed)
- You can use 3 currencies in CO:
1. Controlling area currency
2. Company code or object currency
3. Transaction currency

4. COST CENTER ACCOUNTING
COST/REVENUE ELEMENTS
a. G/L accounts and Cost elements:
- Chart of account is created in FI; all expenses are allocated in one class (class 4) and revenues
in class 8
- Expense accounts to which costs are posted for cost accounting purposes must also be
created as cost elements in CO this ensures that all info from this account gets to the CO at
the same time
- Cost elements make sure data flows in accounts and transactions you can run the reports
- Secondary cost elements are defined only in CO and are used for internal allocations.
Secondary cost dont have any correspondence in FI

b. Standard hierarchy represents all cost centers per controlling area
- The cost center is an organizational unit in a controlling area representing location where
costs occur. You can make organizational divisions on the basis of functional, settlement-
related, activity related, spatial and/or responsibility related standpoints
- Cost centers are used to differentiate assignment of OH costs to organizational activities
based on utilization of the relevant areas (cost determination function) and to differentiate
controlling of costs arising in a organization
- The costs center accounting component (CO-OM-CCA) tracks where costs occur in your
organization
- Cost centers can be defined in different ways:
1. For each low-level organizational unit that has responsibility for managing cost
2. As costs are incurred, they are assigned or posted to the appropriate cost center
3. Cost could include payrolls, rend and utility costs, or any other costs relevant to a given
cost center
- The posting and assignment pr costs to cost centers not only makes managerial accounting
possible; but it is a vital step for utilization to the other controlling areas
c. Cost Center data
- Basic data: contains fields for name and description of cost center, name of responsible
person or cost center manager, department and profit center
- Cost center hierarchy: displays the standard hierarchy node to which the cost center is
assigned
- Profit center: identifies the purpose of the cost center (production, sales, etc)
- Company code and business area: represents the close ties btw CO and FI
d. Activity types
- Classifies the activities to be performed within a company by one or several cost centers
- Serves as tracing factors for cost allocation
- Quantify business activities mostly tangibles
- In a internal allocation: the quantity of the activity (# of consulting hours) is enter into the SAP
ERP system; the system calculates the cost based on the activity price and generates debit to
the receiver and credit to the sender for both quantity and cost
- Internal activity is allocated using secondary cost elements stored in master data
e. Cost Center/Activity type
- To allow internal activities allocations, you have to specify which costs centers provide which
activity types at what price in SAP by planning the activity output/prices for a cost center
- For direct allocations, you enter the quantity of the activity to be allocated manually
f. Statistical key figures (SKF) Only for secondary cost element
- A measurable quantity that can be assigned to cost centers, activity types, OH orders, business
processes and profit centers
- Used as an allocation base (Tracing factor) in OH cost allocations
- You can define statistical key figures in two categories:
1. Type 1: fixed value - is carried out over from the period in which it is posted to all
subsequent periods of the same fiscal year remains constants over time
2. Type 2: totals value - is not transferred to the following period but must be entered for
each individual period tends to change over time
- Can be linked to logistics information system (LIS)
g. Cost center planning process
- Can be done automatically or by the help of formula planning
- Planned value can be also transferred from HR and FI-AA
- Aim to calculate planning costs to define deviations later and to prepare the allocation to
costs bearers based on absorption costing, you try to allocate all costs in the OH area to the
cost bearers using different procedures
- Activity type planning is an important step in cost center planning
- Also shapes price determination for activities of the cost center
h. Posting Logic
- When a FI document is created that posts to an expense or revenue account using a cost
element, a CO document is also created
- CO document has unique number and contains following information:
1. CO object that was posted
2. Cost element used
3. Posted amount
i. True and statistical objects in CO
- Postings and revenues in CO can result in true and statistical postings
1. True objects: can act as sending or receiving objects during cost allocation
a. Example: Cost centers, real internal orders, real projects, networks, make-to
order production orders, cost objects and profitability segments
2. Statistical objects: cannot allocate cost to other objects
a. Example: statistical orders, statistical projects and profit centers
j. Posting from FI to a cost center
- When a journal entry is created in FI that includes an expense line item, that expense can be
posted in the CO as a cost if:
1. A primary cost element has been created in CO that corresponds to the expense
account used in the FI journal entry
2. A valid cost center is referenced in the FI line item
- As a result 2 documents are created with unique numbers, FI & CO:
1. FI: document that posts to an expense/revenue account having a corresponding cost
element and valid controlling object
a. FI Document debits P&L account and credits B/S
2. CO: contain following details: controlling object posted, cost element used and amount
a. Debits controlling object, NO credits
k. Posting from MM to a cost center
- Goods issue transactions posted in MM component can be assigned to a cost center called
material consumption
l. Direct activity allocation
- Allocating activities by creating an activity type - only for primary cost element
- Information needed: sender cost center, receiver, activity type and quantity
- Cost center used is derived from the master data
m. Periodic allocation techniques
- Assessment: designed for the allocation of primary and secondary cost from a sender cost to
receiver controlling objects; which are allocated at period-end closing according to rules uses
statistical key figures to determine the allocation of the receiver
- Similar periodic allocations are: Periodic allocation reposting, assessment, distribution,
indirect activity allocation and template allocation
n. Real time integration CO FI
- The FI document has the following features:
1. Posting are made in real time
2. It doesnt required clearing accounts
3. Users can access the FI document generated in real-time from the CO document

5. INTERNAL ORDER
a. Internal Orders
- It is a flexible CO tool that can be used for tracking costs, and in some cases revenues within a
controlling area
- Data for internal order can be got obtained from MM, FI and CO
- 4 types:
1. Overhead costs: used to monitor OH costs incurred in the production for a particular
purpose. Example: conducting a trade fair or tracking costs for maintenance work
2. Investment orders: used to monitor costs in the production of a fixed asset, such as
building
3. Accrual orders: used to offset postings of accrued costs in cost centers
4. Orders with revenues: used to replace the cost accounting parts of SD customer orders
if SD is not being used, or to monitor revenues not affecting the organizations core bus.
b. Planning/ calculating internal orders
- Three different cost planning levels for internal orders are:
1. Overall planning: is the simplest level for planning order costs. You can plan overall
values and annual values irrespective of the cost elements
2. Primary/secondary cost and revenue planning: can be used if you have detailed
information about an internal order.
3. Unit costing: can be used to carry out more detailed planning in cost elements

- Posting to an internal order
a. A Bucket that allows a better view of costs that could not be itemized in detail in
a cost center
b. Can be real or statistical (information postings only)
c. From FI to make an order: invoices, G/L account postings and revenues
d. From CO: stat. key figures, funds commitments, activity allocations, reposting
e. From MM: goods movements, pur. Requisitions, P.O
- Commitments
a. Identifies costs which will be incurred in the future for materials and services
requested
b. Commitments for future costs are created in the purchasing function of the
material management component
i. A commitment is recorded automatically when you assign an OH order
to a purchase requisition or P.O line item
c. You reduce the commitment by posting a goods receipt against a purchase
order
d. You must activate commitment management in CO for each controlling area
c. Order settlement
- Internal orders are usually used as an interim collector of costs and an aid to the planning,
monitoring, and reporting processes. When the task is complete the costs have to be passed
on to their final destination (cost center, fixed asset, profitability segment, G/L account,
assets, sales order with collectors) this is called settlement; meaning it has to be settled to a
permanent object

6. PRODUCT COST ACCOUNTING
a. Product cost accounting (CO-PC)
- Concerned with all aspects of planning the cost of producing products or services, as well as
tracking and analyzing the actual costs
- Has following components:
1. Product cost accounting: used to estimate the costs to produce goods
2. Cost object controlling: collects costs incurred during production using costs objects
such as production orders
3. Actual costing/material ledger: provides actual costs for each material at the end of the
period
b. Product Cost Accounting: Overview
- Used to estimate the costs of producing goods or providing services
- If a quantity structure (bill of material and routing) is available in manufacturing planning then
the system will create a cost estimate based on this data
- In cost object controlling the costs incurred during production
c. Product cost planning: Overview
- When you create a cost estimate with a quantity structure, you must enter the costing variant,
the material the plant, and the lot size. The dates proposed from the costing variant specify
the following:
1. The period of validity of the cost estimate (costing date from/to)
2. The selection date for the bill of material and routing (quantity dates)
3. The pricing data for the material components and activities (valuation date)
- The costing results can be saved and analyze as:
1. Cost element itemization groups the individual costing items into cost elements, the
cost elements group the cost in order of appearance
2. The cost component split groups elements into costs components
d. Price update
- Marking and releasing a standard cost estimate updates the standards prices for the material
in the material record. This results in the inventory being revaluated.
- The following prerequisites must be met before standard cost estimate can be marked or
released:
1. Standard cost estimate must be free of errors
2. The marking and release must be allowed. The company code and period in which the
standard cost estimate can be marked with a set costing variant are entered in the
authorization for a marking. The authorization should be set up once per period by the
employee responsible
e. Integration: Standard price and Std cost estimate
- Price control plays a crucial role in material valuation. When price control is set to S, the
inventory and good movements are valuated at standard price.
- If the standard price was updated by a standard cost estimate, it can be used in Cost
object controlling; the system use the itemitization of costs estimate to determine the
target costs for manufacturing orders.
- Profitability analysis, you can use the standard cost estimates to compare the revenues
of the billed quantity both the cost component split of the product.
- A standard price is also required in the material ledger to determine the actual price
7. PROFIT ANALYSIS IN CO
a. Profit center
1. An organizational unit within the company (plant)
2. Line of business
3. Geographical location
- The goal of profit center Accounting is to measure the profitability of areas of responsibility
with the organization
- Management-oriented organizational unit used for internal controlling purposes.
- EC-PCA (Profit center accounting) lets you set to profit center according to product or
functions.
- PCA allows you to calculate internal measurements of profitability
- Account assignment logic in CO:
1. When Controlling is active each posting to a revenue or expense account that has been
set up as a cost element in CO requires an account assignment object.
2. The master records of controlling objects contain a profit center field
b. Data flows to profit center accounting
- The following data is transferred to PCA:
1. All postings for revenue and cost elements
2. Expense and revenue accounts that are posted to using logistics transactions
3. B/S account and other expense and revenue accounts optional
c. PCA
- Enables you to draw conclusions on the internal aspects of profitability

8. PROFITABILITY ANALYSIS (CO-PA)
- It is an application in CO used to analyze the profitability of segments in your external market
- Includes a multidimensional reporting tool for creating reports that analyze data for any
market segment and any profitability measure
- Two versions are available for profitability reporting: costing-based and account-based
- Aim: provide the board of directors, SD, marketing, with market-oriented decision support
- Costing-based:
1. has reports that display values by values field (flexibly defined key figures)
2. can be expanded with other anticipated values
3. Produces revenues and cost of sales simultaneously when the billing document is
calculated
- Account-based:
1. has reports that display values by cost and revenue elements
2. reconciles directly with FI at account level
3. shares data tables with other CO applications, such as Cost center accounting
4. Post revenues when billing document is created
- Data flows in CO-PA:
a. data from sales order management is one of the key sources of info for CO-PA
b. Options to allocate the OH costs that werent allocated to Product cost
controlling to CO-PA in order to display all OH costs in CO-PA:
i. Allocation of internal activities
ii. Assessment
iii. Order settlement
iv. Project settlement



Allocation methods:
- Activity type more accurate Quantify bus activities
- SKF primary cost element
- Assessment secondary cost element
2 types of costs: OH, and PC
Every transaction entry in the G/l passes on to the primary costs same account number
Secondary cost element uses to calculate revenues and expenses through estimation of prices comparison to the
standard price, difference goes to the difference account (revenues/expenses)
OH: Structure: Cost center; tool: Internal orders temporary account


UNIT 5: PURCHASE TO PAY BUSINES PROCESS > PAGE 246

5 LEVELS OF ORGANIZATIONAL LEVELS IN THE PURCHASE TO PAY BUSINESS PROCESS
a. Organizational Levels in the Procurement Process (Legal)
- Analyze the structural and process organizations in your enterprise and the reconcile them
with the SAP structure. Once you have decided on an organizational structure, considerable
effort would be required to change it again
1) Client: unit within tan SAP system that is self-contains both in legal and organizational terms and
in terms of data, with separate ,master records and an independent set of tables
- Can represent a corporate group
- Highest hierarchy in the SAP system
- Data entered to this unit level apply to all organizational units ensures uniform data status
- Access authorization is assigned on a client specific basis (a user master record must be
created for every user for the client)
- Defined in SAP by a 3 digit numeric key
COPA
PCA (Plant, estimate, do it) - all kinda
docs can be generated here
OH (Primary element cost)
Cost Element
Component
FI - G/L
PC (Secondary
cost element)
2) C.C.: smallest organizational unit of external accounting for which a complete, self-contained
bookkeeping system can be replicated.
- Represents an independent unit producing its own balance sheet; a company within a
corporate group (client)
- Defined by a 4 character alphanumeric key unique in the client
3) Plant: organizational unit within logistics that subsidies an enterprise form the viewpoints of
production, procurement, and materials planning
- Defined by a 4 character alphanumeric key unique to it in the client
A plant may represent different entities:
o Production facility, central issuing storage location, regional sales offices, corporate
headquarters, maintenance location
4) Storage location: organizational unit that facilitates the differentiation of stocks of materials
within a plant. Inventory management on a quantity basis is carried out in the plan at storage
location level.
- Defined by a 4 character alphanumeric key unique to it in the plant
5) Purchasing organization/Purchasing group:
1. Purchase Organization: organizational unit within logistics that subdivides the
enterprise according to the purchasing requirements.
a. Specific information related to purchasing organization
b. Can be cross company code centralized C.C
c. Can also control de vendors
d. Procures materials or services
e. Negotiates conditions of purchase with vendors, and assumes responsibility for
these transactions
2. Purchasing group: key for a buyer or a group of buyers who is/are responsible for
certain purchasing activities. Purchasing group is internally responsible for the
procurement of a material or a class of materials and externally supplies the contact
person for vendors
a. Not aligned to other units in the company
- You can incorporate purchasing into the company structure by assigning the purchasing
organization to a C.C. ant to plants (Purchasing can be centralized or decentralized)
b. Organizational levels in inventory management
- 1 C.C can have multiple plants
- A client can have several C.C
- 1 plant can have multiple storage locations
- A specific storage location can belong to 1 plant
- 1 plant can only have 1 company code
- Since the key of a plant is unique to a client by specifying the plant key, you specify the C.C
- Several purchasing organizations to 1 C.C.
- A specific purchasing organization can only belong to 1 C.C.
- There is a m:n (many to many) relationship between purchasing organizations and plants ;
meaning you can assign many plants to one purchasing organization, and one plant to several
purchasing organizations
1) Plant-Specific Purchasing organization
- A purchasing organization is responsible for procuring materials for just one plant ; this
purchasing organization is assigned to one C.C and to just one plant
2) Cross-plan purchasing organization
- Purchasing organization procuring materials for several plants belonging to a C.C
3) Cross-company-code purchasing organization
Not assigning the purchasing organization to a company code. Then when you create a purchase
order, the system will ask you to enter the company code for which you want to procure the
material
THREE DIFFERENT DATA CATEGORIES:
MATERIAL MASTER RECORDS
a. central source of material-specific data. It is used in all areas of logistics
- Data in the vendor records controls how transaction data is posted and processed for a
vendor. It also contains all the data you require to do business with your vendors.
- The master record is used not only in MM but also in FI
b. Material Master:
1) Data required for following activities:
1. Purchasing data for ordering purposes
2. Inventory management data for posting goods movements and physical inventory
management
3. Accounting data for material valuation
4. Materials planning data for material requirements planning
2) Data examples: basic data, MRP, Stocks at plant, accounting, storage, warehouse management,
purchasing, sales, work scheduling, quality management, forecasting, classification
3) Every department creates its own view of a material master because each one of them stores
different information about the material
1. Data available for whole enterprise: Material no., material short text, material group,
base and alternative units of measure
2. Data that is valid within one plant: purchasing data, MRP data, forecasting data, work
scheduling
3. Data that is valid for one storage location: storage bin description, picking area, etc
c. Material master: organization levels
- Material master can be organized in certain way to reflect the structure of an organization
making flexibility and integration avoiding redundancies:
1. Data at client level: General material data that is available for the whole company is
stored at client level
2. Data at plant level: data that is available for plants and storage locations are stored at
plant level
3. Data at storage location level: data valid for particular storages is available at storage
location level
- These 3 organizational level are relevant for the external procurement process; plant, client,
and storage location play a role when you enter data for purchasing, inventory management
and accounting
d. Data screens in Material master record maintenance
- Different levels of information:
1. Initial level: material
2. Main work level: purchasing, sales, accounting, MRP, forecasting, work scheduling
3. Additional data level: texts, units of measure, additional EANs, document data and
consumption
- Material master records can be subdivided into the following types:
1. Main Data: screens for the individual user departments, such as basic data, material
planning
2. Additional data: you find additional data information, such as alternative units of
measure, material short descriptions and consumption values

VENDOR MASTER RECORD
- Contains information about a companys vendors, such as name and address, currency used
for transactions with the vendor, terms of payment, names of important contacts
(salespersons)
- For accounting purposes, the vendor is also a creditor of the company. The vendor master
record contains accounting data such as the reconciliation account form the G/L
- Vendor master record is maintained by accounting and purchasing
- Data is subdivided into different categories:
1. General data: address, communication, control data, bank information, contact persons
2. Company code data: account information, payment transactions, correspondence,
withholding tax
3. Purchasing organization data: purchasing data and partner roles
a. Vendor master data
- Subdivided into categories:
1. General data: valid for a single client. It includes the vendor address and bank details
2. Acc data: maintained at a company level. It includes the number of the reconciliation
and the payment methods for automatic payment transactions
3. Purchasing data: maintained for each purchasing organization. It includes the purchase
order currency, incoterms, and various control data pertaining to the vendor.
- Data in the vendor master can be maintained centralized or decentralized
b. Vendor master record: organizational levels
- Before you can order anything from a vendor, you must have previously maintained the
purchasing data. To enter invoices you need to create the accounting data beforehand
- General data, purchasing organization data and accounting data can be maintained centrally
or separately possible
PURCHASING INFO RECORDS
a. Purchasing info records: provides the option of storing information about a vendor and a material as
the master data at purchasing organization level and plant level. It is an important source of information
for the buyer. You can define the following information in info records:
1) Current and future prices and conditions (freight and discounts)
2) Delivery data (planned delivery time, and overdelivery and underdelivery tolerances)
3) Vendor data and vendor specific data about material
4) Number of the last purchase order
5) Texts
Following type texts are stored in the purchasing info record:
- Internal info record memo: this is an internal comment that is transferred to the purchase
order item. This text is not printed
- Purchase order text in the purchasing info record: this text is used to describe the purchase
order item. Its transferred to the purchase order item and printed
The data for the purchasing info record needs to be divided into generally applicable (valid for a
single client) data, purchasing-organization specific data, and purchasing organization-specific and
plant-specific data
b. Conditions:
- Are agreements with vendors about prices, surcharges and discounts. Conditions can be
maintained when entering quotations, info records, outline agreements (contracts, scheduling
agreements) and purchase orders
- Following conditions are used in purchasing:
1. Conditions in a contract apply to all contract orders created with reference to this
contract
2. Conditions in purchasing info record apply to all purchase order items that contain the
material and vendor in the purchasing info record
3. With general conditions, you can also display price agreements that dont only apply
to individual quotations, etc.

LESSON: PURCHASE REQUISITIONS AND PURCHASE ORDERS > PAGE 277

1) PURCHASE TO PAY BUSINESS PROCESS
Purchase to pay business process
1. Determination of requirements
2. Determination of source of supply
3. Vendor selection
b. Purchase order
1. Purchase order handling
2. Purchase order monitoring
3. Goods receipt
4. Invoice receipt
5. Invoice verification
6. Payment processing

2) PURCHASE REQUISITIONS
Purchase requisitions
- Purchase requisitions are internal documents for asking your purchasing department to
procure a particular quantity of a material or service for a particular date.
- It can be created directly (created manually in the department that made the request.
Whoever creates the purchase requisition determines which material or service is ordered,
and the quantity and the date) or indirectly (P.R. from another SAP component is created
automatically; through materials planning as follows: in MR, with maintenance orders, with
production orders and with networks)
- Can also come from SAP SCM or SAP SRM.
- When you create P.R. for materials that have a material master record, the system transfers
data in the material master record to the P.R.
- You can convert P.R. into RFQs, P.O or outline agreements
Processing purchase requisitions
- Using the creation indicator in the statistic data of the purchase requisition item so to see
which procedure was used to create the purchase requisition. When creating the purchase
requisition the requester can enter a source of supply for the relevant item or specify a
desired vendor
- In the end the purchasing department is responsible for determining the source of supply and
for converting the P.R. into a purchase order or RFQ
Consumable material
- Consumable materials are materials or services that are procured directly for an account
assignment object. Examples: office supplies: assigned to a cost center; computer systems:
assigned to an asset; machines.
- In the case of consumable material with a master record: there is no value-based inventory
management, and consumption is automatically updated in the Material master record
- In SAP: Consumable material material that is subject to procurement and whose value is
settled using the cost element accounts or the assets account
- A material master is not necessary when a material is procured for consumption (BUT IT DOES
FOR MATERIAL PROCURED TO BE STOCKED STOCK VALUE IS POSTED TO A STOCK ACCOUNT
DURING GOODS RECEIPT STOCK VALUE AND QUATITY ARE UPDATED IN MASTER RECORD).
Short description, material group and PO unit in the document must be entered manually in
the doc because there is no master record; if there is a master record, the material type
controls whether inventory management for a material is to take place on a value basis.
a. The following material types exist by default for consumable materials:
i. Non-valuated material (Material UNBW): Subject on quantity basis, low-
value material that have stock, and needs to be monitored (E.g.
operating manuals)
ii. Non-stock material (NLAG) (Material type NLAG): Not possible in
inventory management. Allows you to store the info required to create
purchasing documents (text and units of measure)
- Material can be procured for stock and consumption. You also may purchase trading goods for
a customer (sales order), therefore you can enter an account assignment for the item of a
purchasing document or a P.R if it is intended for direct consumption.
- In certain cases, account assignment is mandatory. For example:
1. If your order material that is not subject to value-based and post its values directly to
consumption (pure consumable material)
2. If you order an article that doesnt have material master record
3. If you order a service
I you want to procure material as consumable, an account assignment category must be performed
- The following are different examples of consumables materials:
1. Consumable material without material master record
2. Consumable material with material master record that is not subject to inventory
management (on quantity or value basis)
3. Consumable material with material master record that is subject to inventory
management on quantity only
Account assignment objects
a. In the procurement process, the procured of material for stock and consumption is shown with regard
to account assignment
b. Consumption accounts (cost center, assets, project, production order, sales order, profit centers)
c. Account assignment category determines the account assignment object category that is to be charged,
which account assignment must be provided and which accounts are debited when goods receipt and
invoice is posted. Examples:
1) Account assignment for object cost center: you must enter G/L account number of the
consumption account and the cost center for which the material is to be procured.
2) Account assignment object asset category A: you must enter account assignment number. The
system automatically determines the G/L account to be charged from the asset number
cannot be entered manually

Procurement for consumption (1) CHECK PAGE 284 FIGURE 122
Stock material and consumable material: comparison
Stock material Consumable material
Necessary to enter material number Not necessary material number
No account assignment category Account assignment category mandatory
GR mandatory GR optional
Quantity, value and consumption updated in
Master record
Posting to consumption account
Adjusted of moving average price No value updated, quantity and consumption
update in material master record possible

1) PURCHASE ORDERS
Formal request to a vendor to supply you with goods/services under conditions stated in the PO
You specify in the PO if material is purchased for consumption or stock
Purchase order
- Save time by creating PO in reference to previous POs, P.R, QT, OR CONTRACTS
- If no referenced; you need to enter ordering address, terms of payment and freight
(incoterms) from the vendor master record. If material master exist; material group and short
text are transferred automatically to the PO
- You can send the PO to a vendor or you carry out a stock transport order in another plant
belonging in your company or group
Purchase order format: Header: information that refers to the entire purchase order; item part: data describing
the materials/services ordered
Purchase order transactions ME21N, ME22N, ME23N
a. ME21N: Single screen transaction, divided into 4 screens:
1) Header: contains data relevant for the order
2) Item overview: items with most important data; such as quantity, delivery date, price and plant
3) Item detail: additional data
4) Document overview : displays different purchasing documents
5) ADDITION: Help function
Purchase order Transaction - Navigation
a. Info required: Vendor master: material group, vendor, plant, storage location
1) MESSAGES Issue a message
b. You can issue all purchasing documents as messages. Every time you create a PO, PR, contract,
scheduling agreement etc. the system creates a message from the document affected. This message is
posted in the message queue (contains all messages that havent been transferred to the vendor)
c. To issue the message: issue immediately (message is issued directly from the queue as soon as you
save the document), or issue later (you schedule a background job to process the message queue in
determine intervals, or you start the issue from the purchasing menu manually; rush orders)
d. You can specify which header texts and item-based texts the systems issue

LESSON: GOODS RECEIPT AND TRANSFER POSTINGS LOGISTICS > PAGE 303

1) GOODS RECEIPT PROCESSING
- When goods are delivered against a purchase order you should enter a G/R entry
- Other things to check: if the right material and quantity has been delivered, if perishable
goods are within their minimum shelf life
Goods receipt:
a. Every time you post the receipt of goods the system will create a material document; which contains
information on the material delivered and relevant quantity. The system also records the plant storage
location in which the material is put away.
b. If goods receipt if valuated, an accounting document is generated in addition with info about
accounting effects on the material movement
c. You can enter multiple goods receipt items against a purchase order advisable when goods come in
batches or are going to be distributed to several storage locations
Valuated goods receipt:
a. For goods receipt you decide which stock type and quantity is posted. The stock type is relevant for
determining the stock available in Materials planning and is used for withdraws in inventory
management
b. You can post goods receipt for warehouse into 3 stock types:
1) Unrestricted-use stock (no usage restrictions - available from MRP perspective, and withdraws
are possible for consumption)
2) Quality inspection stock (available from MRP perspective, no withdraws are possible for
consumption)
3) Blocked stock (no available from MRP perspective, withdraws are possible for consumption)
c. Always use movement type 101 to post goods receipt for a PO to valuated stock (stock type for PO:
delivery tab. Stock type for production: goods receipt tab)
Movement types: examples:
a. When entering a goo movement you must enter the movement type. Example:
1) Goods receipt into warehouse: movement type 101
2) returning delivery to vendor: movement type 122
b. Example of goods movement: transfer postings or goods issues, goods receipt
c. Movement type determines the layout of the screen for document entry or updating quantity fields
Transfer postings:
- If you want to withdraw goods from the quality stock or the blocked stock you have to do a
transfer posting; which is changing the label
- Movement type controls between which stock types and transfer postings occur
- A document is created in the system to show the transfer posting and if transfer posting is
valuated, an accounting document is also created
- stock to stock transfer posting physical transfer posting between two storages locations;
not relevant for valuation
- material to material transfer postings movement type 309 is linked with a stock value
change and is relevant for valuation
Documents for goods movements
a. Material, quantity, movement type, and organizational level cannot be changed as soon as goods
movement is posted
b. The document principle applies for IT-based inventory management. Material document and accounting
documents (if valuated) are generated to prove that the movement has been made
c. Goods movements are valuated when they affected your companys accounting department. Example:
goods receipt posting for a raw material will increase your assets; so a material document is created and
an accounting doc also. However, if goods are being transferred within plants, no accounting doc
necessary
Material and accounting documents:
a. Material (consists in a header includes the posting day and name of creator with at least one item)
and accounting documents (records the effects of the movement on the accounts; document header
contains: document date, currency, posting date, reference; item level: G/L account number, and
quantity) are created; both are independent documents
b. Material document can be identified by material document year and material account number
c. Accounting document can be identify by company code which is taken from the plan in which the
movement of goods takes place and year
Effects of goods receipt
a. Material (quantity), and accounting (values) documents being created, other areas are affected:
1) Purchasing: purchase order history updated
2) Quality management (if active)- transfer requirement is created along with the goods being
placed into warehouse
3) Output may be generated, example: goods receipt slip or pallet

LESSON: INVOICE VERIFICATION AND VENDOR PAYMENT > PAGE 324

- Invoice processing
- Invoice verification with reference to PO
- Documents in invoice verification
- Posting an invoice
- Elements of the payment transaction
LESSON: REPORTING > PAGE 340

4) REPORTING AND ANALYSIS FUNCTIONS IN PURCHASING
Reporting and analysis functions in purchasing
Analysis in inventory management
Reporting and analysis functions in invoice verification
1) SAP LIST VIEWER AND ALV GRID CONTROL
SAP list viewer and ALV grid control
Functions of the SAP list viewer/ALV grid control
Layout (display variant)
1) BASIC STRUCTURE AND CONCEPT OF THE LIS
SAP logistics information system (LIS)
Reporting in the LIS
Information structures
Reporting in standard analysis

UNIT 5: PURCHASE TO PAY BUSINES PROCESS > PAGE 246

UNIT 13: HUMAN CAPITAL MANAGEMENT > PAGE 839
ESS (EMPLOYEE SALES SERVICE) PEOPLE INTEGRATION
MOST IMPORTANT MASTER DATA IN HR: EMPLOYEE RECORDS
MOST IMPORTANT FUNCTION IN HR: PAYROLL DONE IN PERSONNEL STRUCTURE
RECRUITING, MANAGING EMPLOYEE, MANAGE ORGANIZATIONAL STRUCTURE
1) HCM STRUCTURES
Organizational, enterprise and personnel structure infotype 0001 (Organizational assignment)
a. Allocation of employees to the structure in the company is a very important step in HCM - first step in
entering personnel data
b. 3 Mayor areas of information:
1) Enterprise sales structure: attach person to other organizational units module structure
2) Personnel structure: Create HR structure to manage people
3) Organizational structure: deeper than HR one position, lots of employees (jobs). Example: 1
employee secretary for two departments
c. Information on the organizational assignment of employees is of great importance for authorization
checks, for the entry of additional data, and for the time management and payroll accounting
Enterprise structure : personnel administration is determined by the elements:
a. Client: is an independent legal and organizational unit of the system (group example)
b. CC: is an independent company with its own accounting unit, a company that draws up its own B/S
c. Personnel area: is an organizational unit in the Personnel administration. It represents a subdivision of
the CC HR AREA
d. Personnel subarea: are subdivisions of personnel areas. The organization of the most important
subareas of personnel administration take place at this level
Definitions
a. A client can either be valid for a company code at the smallest level or for the entire corporate group.
a. Consider before setting up a client:
i. There is usually no exchange of data between clients
ii. If an employee changes clients, you have to create the personnel
number again
b. The CC is defined in Accounting B/S and P/L statements are created in this level; highest level of a
company structure
c. The personnel area is used in Personnel administration and is unique within a client must be assigned
to a CC
d. Personnel subarea unique to personnel administration: employees assigned to a particular CC, or
personnel area. It is a further division of the personnel area. Principal organizational aspects of HR are
control in this level; namely: the pay scale, wage type structures and planning work schedules
Personnel structure
a. Trying to organize your employees in groups. Organized in two levels:
1) Highest level: employee group
2) An employee subgroup
Both are subject to authorization checks, remuneration levels or different work schedules, for
example
DIVISIONS OF PERSONNEL STRUCTURE:
Personnel structure: employee group
o General division of employees. It defines the relationship between an employee and a
company in that the employee males a certain contribution to the company in terms of
work.
o Main employee groups: active employees, pensioners and early retirees
o Functions of employees groups:
Default values can be generated for payroll area and basic pay for example
according to employee group
It is used as a selection criteria for reporting
It is one unit of the authorization check
Personnel structure: employee subgroup
o Differentiated further within the employee group.
Personnel structure: payroll areas:
- Payroll area: is an organizational unit used for running payroll for a specific group of people
- The employee subgroup is a fine division of employee groups according to the position of
employees.
- Wage earns, salaried employees, and non-pay scale employees are subgroups within the
active group
- Control features of personnel structure are defined at the subgroup level.
- Features:
1. The employee subgroup grouping for the personnel calculation rile allows you to define
different payroll procedures or different employee subgroups.
2. The employee subgroup grouping for primary wage types controls the validity of wage
types on a employee subgroup level.
3. When entering data, you can define default values using employee subgroup payroll
area
Organizational structure (HR) :
a. An organizational plan provides a model of the structural and personnel environment at your company
b. Organizational plan: organizational units + positions
c. You map hierarchies within your organizational plan:
1) The organizational structure of your enterprise : created by maintaining and creating
organizational units and relating to them
2) The individual positions and the reporting stricture (chain command): reporting structure
depicts the line structure that exist in your enterprise. Created by creating and maintaining
positions and relating to them
Organizational structures jobs
a. Jobs are general classifications of responsibilities that are performed by employees
b. Jobs are used in the applications components: shift planning, personnel cost planning and personnel
development
Organizational structure: positions
a. Positions are the individual employee assignments
1) Positions are enterprise specific
2) A number of positions are based on the same job
3) As a rule, each position represents one employee. However, it is possible for a position to be
occupied by many employees
b. Positions can be 100% filled, partially filled or vacant
Organizational structure: persons
a. Persons are objects that hold positions within the organizational structure. Additional information doe
persons is maintained in the personnel administration
b. INFOTYPES for persons area maintained in the to a organizational plan through their position
assignment. Example:
1) Infotype 0001: Organizational assignment
2) Infotype 0002: personal information
3) Infotype 0007: planned working time
4) Infotype 0008: Basic play
5) Infotype 0000: actions
c. Employee group/subgroup infotype 1013

Objects types: organizational units
a. Organizational unit + relationships
b. Organizational units describe the various business units that exist in your enterprise. Multiple
organizational units and their interrelationship form the organizational structure
1) Can be classify generally: by function, or region; and specifically: by project group
2) Organizational units can be linked to cost centers from accounting
Object types: cost centers
a. Cost centers can be assigned to organizational units and positions. The relationship between
organizations and cost centers is hierarchically inherited align the structure
b. Cost centers are maintain in controlling and can be linked to either organizational structures or positions
Personnel administration and planning
a. If personnel administration and personnel planning are integrated, you can enter the position in the
actions infotypes (0000) .
b. Default values can be supplied for the personnel area, personnel subarea, business area, employee
group and employee subgroup fields over the organizational unit or the position

2) EMPLOYEE RECORDS
- Infotypes: logical grouping of data fields about an employee way to organize information
i. Need to be set up after you hire an employee
ii. Individual information, such as last name, name and date of birth, is defined in the data fields
data fields are grouped into data groups or information units according to their content. In HR,
there info units are called information types or infotypes
- Maintaining infotypes
i. Human capital management stores an employees data in infotype records. Each one of this has
a validity can be validity interval or a key date
ii. Three ways of processing infotype records: single screen maintenance (1 infotype 1 personnel
number), personnel actions (keeping more than one infotypes for 1 employee- example: hiring a
new person - display all of the relevant infotypes for you to maintain, one after the other.) or
fast entries (1 personnel number sequences of infotypes)
- Initial entre screen for infotype maintenance
i. Infotypes are most used are group together by subject ,matter and assigned to static menus.
- Personnel file
i. It lists all of the infotypes or which records have been created for a personnel number
employee. The infotypes are displayed in ascending numerical order.
ii. The position entered and its existing relationship to a job, organizational unit, and cost center
are imported from existing records they also cannot be rewritten
3) HCM PROCESSES
- SAP ERP Human capital management
i. Elements of SAP ERP HCM: organizational management objects, applicant data SAP-E-
recruiting, personnel management, personnel development, training and event management,
appraisals, payroll, personnel cost planning employee self-service and manager self-service
- From vacancy to hiring
i. When you hire an applicant, you can transfer the applicant data recorded in recruitment to
personnel administration as employee data
ii. Line managers can use the managers desktop to map their decisions on applicants and to
trigger further administration in the HR department, efficiently and cost-effective
iii. External applicants can use a Web application employment opportunities, and the ESS solution,
Job advertisement, to attach electronic application documents to online applications
- Applying via the internet
i. Employment opportunities assist companies in recruiting applicants by allowing users to:
1. Display their companys job vacancies
2. Apply for positions in their company
- Personnel development
i. Personnel development requirements result from a comparison of the job requirements and the
employees existing qualifications. The info required for the comparison is stored in profiles.
- Qualifications/requirements
i. Requirements: list of skills, abilities and experience required to be suitable for a job, position
task, or work center related to positions
ii. Qualifications: list of skills, abilities and experiences that make an employee suitable for a
position related to employees
- Training proposal for training deficits
i. If personnel development is integrated with training and event management, you can use the
generate training proposals function
ii. SAP Knowledge warehouse: displays info material from the knowledge warehouse (training
materials, documentation, videos, etc)
iii. Cost accounting: internal activity allocation of attendance fees and instructor costs, cost transfer
postings for business event costs
- Processed in training and event management
1) Preparation of business event: Business event environment, create business event groups, and
create business event types
2) Business event catalog: create business event dates with and without resources, and plan
business event dates based on requirements
3) Day to day activities: book, prebook, replace, rebook, cancel business events and
correspondence
4) Recurring tasks: firmly book/cancel, lock/unlock, follow up business events, carry out appraisals,
repost costs, allocate activities and issue invoices
Training and event management is a tool for extending and updating your employees knowledge
- Appraisals
i. Integration with SAP ERP HCM personnel development enables requirements profiles from
positions or qualifications catalog directly to your employees individual objective-setting
agreements
ii. Record > valuate > use time data
- Time management
i. Info about employees availability and their work is an important element in human resources
ii. There are various options available for recording time data such as hours worked, vacation, off-
site work, or substitutions:
1. Online by the time administrator
2. Using front-end time recording systems
3. Using the cross-application time sheet (CATS)
4. Using ESS
- What is CATS? Cross-application time sheet (CATS)
- Another form of ESS
- Offers advantages such as: cross-application standards screens for entering working times, ease of use for
all users, default values and data entry templates, integrated approval process, support for corrections
etc.
i. CATS business process
1. Actual working time by themselves time sheets for employees ; have to be approved
by managers and then you release it
2. Consist on the following steps:
a. Entry of time data in the time sheet, release of time data, approval of time data,
and transfer of time data to the target application
- Personnel cost planning and simulation
i. Supports business processes that reach beyond the boundaries of departments and
applications. SAP user can use to data to:
1. Creating a training budget for training and event management
2. Transferring data to controlling
3. Extracting the cost projections for further analysis in the SAP NetWeaver BW
- Payroll
i. An employees remuneration is calculated in 2 steps:
1. Grouping the remuneration elements gross payroll (comprises all payments and
deductions that were determined for that employee during one payroll year)
2. Legal and voluntary deductions country-specific net payroll
- Travel management environnent CHECK PAGE 886 FIGURE 403
- Employee self-service
i. Employees can use this to: search the Whos who, view the calendar, submit travel expenses,
enter work times, check workflow work times, enroll for benefits
ii. Following info is available in ESS: personal data (payroll, time management, travel expenses,
qualifications), public information (whos who, calendar, education, training offers, open
internal vacancies)
iii. Benefits of ESS: well informed employee decisions, reduced administrative costs and shorter
cycle times, accurate employee records, time and resources for strategic HR initiatives
- Manager self-service
i. It is an intuitive, easy-to use portal based application that supports manager in their daily work.
ii. It covers: employee reviews, employees change requests, monitoring, recruiting, compensation
planning and quota planning
iii. Can be used by controlling and HCM
4) REPORTING AND ANALYSIS HCM
Can be done through: ad hoc query, standard reports, HIS, Managers desktop, and BW
- Reporting overview:
i. Ad Hoc Query enables you to create reports. It is integrated to SAP Query, although it is called
InfoSet Query in other SAP ERP Components, it remains Ad Hoc within the Human resources
component
ii. You can access standard reports from the SAP easy access menu general report selection
iii. Human resources information system (HIS): makes it easy for you to request and start all HR
reports within structural graphics
iv. Managers Desktop: tool for managers in which they can analyze and change data - reporting
v. Business warehouse (BW): independent system in which analyses can be performed
- Information system reports
i. Report are created using Ad Hoc Query or the SAP Query can be saved and added to the
standard reports (can be changed in customizing)
ii. Can be run under the employee tab
- Managers desktop
i. Consists of 5 themes categories: employee (Function list: reports, personnel development)
organization, costs and budget (cost center accounting, required positions, compensation
management), recruitment, special areas and workflow inbox.
ii. Adaptable theme and function catalog
iii. User-specific selection of the theme category and functions
iv. Enterprise-specific initial screen possible
v. Customizing wizard
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