SAP-TO BE Process

New Allenberrry Works

FICO NAW
Finance and Controlling

Version 1.0
28.09.2006

STATEMENT OF CONFIDENTIALITY /
DISCLAIMER
This document is the property of Caritor, Inc. No
part of this document shall be reproduced, stored
in a retrieval system, or transmitted by any means,
electronic, mechanical, photocopying, recording,
or otherwise without prior written permission from
Caritor, Inc.

Table of Contents

Table of Contents
Material Accounting................................................................................................................................3
1

AS IS Process..........................................................................................................................................4

Core to Be Process.................................................................................................................................7
Changes to Existing Organization........................................................................................................................18
Description of Improvements and Key Metrics.....................................................................................................18
Notes on Further Improvements...........................................................................................................................18
Functional Deficit and Method to Remove that.....................................................................................................19
Interface Requirement..........................................................................................................................................19
System Configuration Considerations..................................................................................................................19
File Conversion Considerations............................................................................................................................19
Any reports required related to current business process....................................................................................19
Any document/output would be printed for this business process........................................................................19
Authorization Considerations................................................................................................................................19
End User Training Requirements..........................................................................................................................20

A. SAP Standard Reports...................................................................................................................21

B. Custom Developments...................................................................................................................22

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SAP-TO BE Process
Material Accounting
TO-BE Document
For SAP R/3 Implementation at New Allenberry Works.
Date: 28.09 2006
Sr. No of TO BE document

10

Ref. Sr. No. Of AS-IS document

Name of Business Process:

Material Accounting

Module: Finance

Sub module: General Ledger, Customers,

Vendors

Version no of document:

Date: 28.09.2006

Version Management This Document is subject to change control. Every change of the document has
to Undergo change control procedure and has to be registered in the following table
Version

Caritor

Change

Prepared By

Confidential

Date

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SAP-TO BE Process

1 AS IS Process
At present the areas materials management is not integrated with general ledger accounting.
GR clearing account maintenance
In respect of Goods Receipt, stores department will update stock records in the Materials
Module. In Year end Goods received without invoices are shown as liabilities under provision
for pending MRIR. Invoices received without material are not shown in the balance sheet.
Invoice verification:
Stores do manual verification of invoices with purchase order and the invoices duly verified
along with data are given to accounts for making the entries in respective books.
Vendor document parking
After receiving the invoices and material MRIR is prepared by stores and the excise dept
takes modvat credit. CENVAT credit is taken separately and no accounting entry in passed while taking
CENVAT credit
After that purchase invoice is checked with MRIR & Purchase Order and Bill Pass Slip is
prepared.
The taxes that are calculated on vendor transactions are:

TDS

Excise duty

Cess on Excise duty

VAT

Service tax

Cess on service tax

Vendor credit memo

Sometimes credit memo are raised by stores on vendors. Credit notes are prepared in
Accounts and posted.

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SAP-TO BE Process
At the time of goods receipt the following accounting entry is passed for the full amount
(including ED):
Purchase

A/c

CENVAT receivable A/c

Dr.
Dr.

To MRIR A/c
At the time of Invoice verification the following accounting entry is passed:
MRIR

A/C Dr

Vendor A/C Cr.

In respect of services accounting entry is passed only in Finance.
While sending goods to sub-contractor for job work, two procedures are followed- one is with
payment of duty and other one is without payment of duty, through delivery challan. In
respect of goods sent through delivery challan, no accounting entry is passed and goods
sent on payment of duty the following accounting entry are passed:
Dr Job worker
To Goods sent on Job work
To CENVAT Payable
While receiving back the goods, in respect of goods sent without payment of duty, no
accounting entry is passed and goods send on payment of duty the following accounting
entry is passed:
Goods Sent on Job Work A/c

Dr.

Job Worker A/c (Excise Portion) A/c

Dr.

To Job Worker A/c

In the existing system physical verification of inventory is carried out at the end of the year
and differences, if any, is adjusted against the raw material consumption account.

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SAP-TO BE Process

Integration with Sales and Distribution

Customer document
No approval is required for posting customer invoices and no approval is required from
accounts dept for making any delivery to customer.
Out going invoices
As regards document type and document number range NAW uses common invoices for all
types of sale be it domestic or export sale. Invoice number is generated automatically. Five
digit numeric series is used for all types of sales.
NAW posts the transaction in foreign currency after converting it in INR applying the
exchange rate applicable on the date of transaction.
Document reversal
Document reversal should update the balances of the relevant accounts by rectification
entry. There may be a need of canceling the document and making a new document.
The following accounting entries are passed related to:
Sales:
Customer

A/c

To Sales

A/c

To Excise Payable

A/C

To Sales Tax Payable

Dr.

A/c

Sales tax payment:

Sales Tax Payable
To Bank

Caritor

A/c

Dr.

A/C

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SAP-TO BE Process

2 Core to Be Process
Valuation Classes: (This field is filled by duly authorized person of finance department in material master)

Valuation Class is the field, which is used to link the materials to the GL accounts. For
each Valuation class a GL account will be assigned in automatic account determination
OBYC settings.
Valuation classes will be created according to NAW requirements like Raw material
domestic, raw material imported etc
Purchase Order

Domestic vendor bills can be classified as supply bills and service bills. Purchase orders
will be raised for all the supply and service requirements. Various components like basic
price, duties, freight and clearing charges will be attached as a condition in the
purchase order. These conditions will be included in the purchase order based on the
requirement. All the conditions included in the purchase order will have value and
vendor attached to it. At the time of preparation of Goods receipt note, provision will be
created for all the conditions in the purchase order. Other than basic price all other
conditions will be delivery conditions with a price attached to each.
Goods Receipt

Wherever the acceptance of material is subject to inspection and quality

check the stores will do Goods Receipt with movement type 101 and no
accounting documents will be generated at that time. Inspection lot will be
created for all items for which inspection has been activated & stock will be
posted to Quality inspection stock. The quality check will be carried by QC
department (processes are described in the blue print of Quality
Management module). After the material has been accepted, the stock from
Quality will move to unrestricted stock and accounting documents will be
generated.
The values for the entry will be quantity received multiplied by the conditions
rates as per purchase order. In the case of Service purchase orders service
entry sheet will be prepared.

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SAP-TO BE Process
Material document created at the time of Goods Receipt in transaction code
MIGO will pass the following accounting entry:
For unassigned POs (Stock items):
Inventory Raw Material etc A/c
To

Dr.

GR/IR Clearing- Materials A/c

Multiplying the Purchase order conditions with the quantity received will give
the values for the above entries.
For account assigned POs (Non-Stock items):
Raw Material Consumption A/c
To

Dr.

GR/IR Clearing - Materials A/c

Service Receipt

In respect of service orders, concerned department will pass the service

entry sheet through the Transaction code ML81N and the following
accounting entry would be passed:
Relevant Expenses A/c
To

Dr.

GR/IR Clearing Services A/c

Sub-Contract Order

When the Goods are received against a subcontracting order, Movement

types 101 and 543 are used and following accounting entries will be passed:
Consumption
To

A/c

Dr.

RM Inventory A/c
&

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SAP-TO BE Process
Finished Goods Inventory
To

A/c

Dr.

A/c

Dr.

COGM A/c
&

Sub-contract Charges
To

GR/IR Clearing A/c

If the goods are not returned with in 180 days then the sub-contracting
vendor will be debited with the value of the excise payable.
Goods Returned to Vendor:

Return of goods to vendor is done by movement type 122 and the following
accounting entry is passed:
GR/IR Clearing

A/c

Dr.

To Vendor A/c

The return material from cost centre or the scrap receipt will be taken back
into stores by posting movement type 202 manually.
Goods Issues to production order

In respect of goods issued to production order using the movement type 261
the following accounting entry is passed:
Raw Material consumption

A/c

Dr.

To Raw Material Inventory A/c

Confirmation of Stock
Dr. Inventory Finance goods (At standard cost)
Cr. Cost of goods manufactured

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SAP-TO BE Process
Settlement of Production order-Variances
Dr/Cr Production variances
Cr/Dr Cost of goods manufactured
Goods Issues against sale order:
Cost of Goods Sold A/C Dr
To Inventory Finished goods Cr.
Invoice Verification:

At the time of passing the bills through SAP standard transaction MIRO the
system will pass the following entry
DR GRIR Provision
a/c
DR Cenvat Clearing a/c
DR. VAT set off
a/c
CR Vendor
a/c

xxxx
xxxx
xxxx

Invoice is a Bill/Document from an invoicing party containing the

payments to be made based on business transactions performed in
Purchasing (Production, Non-production items & services) and
Inventory Management.
Invoice processing begins with entering invoice with invoice amount
into the system for goods receipt, purchase order, delivery note or
service entry sheet. Invoices received from Vendors is to be entered
in the system and the data will be verified with respect to Purchase
orders and Goods Receipt
For Invoice Verification to happen GR should have been done against
a PO by the stores person if the PO is of GR based IV.

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SAP-TO BE Process
Invoices can be posted for Purchase orders for direct consumption
with multiple account assignment.
Invoices can be posted with reference to Purchase orders and
Payment can be made to alternate payee
Any debit to the vendor with out implication on quantiy or tax will be
done through a debit memo transaction in Financial Accounting. Debit
note can be printed and sent to the vendor.
All the bills and services, which are not covered by a purchase order,
are to be routed through financial accounting transaction. Financial
Accounting vendors will be created for this purpose.
The invoice can be posted and blocked for payment, subject to later
invoice release/billing processing or be released for payment.
Invoices can be blocked with reference to various Tolerances like
Quantity Variance, Price Variance, Date variance etc.
Delivery Costs- There are two types of delivery costs Planned delivery costs
Unplanned delivery costs
Planned Delivery Costs
Planned delivery costs are agreed upon with the vendor, a carrier, or a
customs office before the purchase order is created. You enter them in the
purchase order.
Planned delivery costs are agreed upon with the vendor, a carrier, or a customs office
before the purchase order is created. You enter them in the purchase order.
Planned delivery costs can be differentiated as follows:
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SAP-TO BE Process
1.

Origin of Costs

Freight charges

Customs charges

2.

Calculation of Costs

Fixed amount, irrespective of delivered quantity

Quantity-dependent amount

Percentage of value of the goods

Unplanned Delivery Costs

Posting of invoices can be done for additional delivery costs with respect to
Purchase orders. Based on the bill received, there is provision to take the extra
amount to a GL account or Material account or to an unplanned delivery cost.
Unplanned delivery costs are the costs which were not agreed on in the purchase
order and are not entered until the invoice is received. You can enter them in the
invoice document alongside the costs incurred.
Posting of unplanned delivery Costs:
There are two ways to post them
1. Unplanned delivery costs are distributed among the items when the document is
posted

The system distributes the unplanned delivery costs automatically in the ratio of the value invoiced so far to the values in
the current invoice.

When the invoice is posted, the system automatically adds the share of delivery costs to the item amounts.

If delivery costs to be allocated differently, enter them as a price variance or as a subsequent debit. This could lead to the
system blocking the invoice for payment.

2. Unplanned delivery costs are posted to a separate G/L account

The system posts unplanned delivery costs to a separate G/L account. Therefore, the
unplanned delivery costs do not debit stock accounts or account assignment objects.

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SAP-TO BE Process
Physical Inventory Verification:
Inventory differences at the time of physical inventory verification are posted through the movement
types 701 (for Physical inventory gain) and 702 (for Physical inventory loss).The following accounting
entries are passed
Inventory Gain:
Inventory A/c

Dr.

To Physical Inventory gain A/c

Inventory Loss:
Physical Inventory Loss A/c

Dr.

To Inventory A/C
Other MM/SD/PP/QM/PM Processes:
The other MM/SD/PP/QM/PM business processes like revaluation of stock , scrapping, Issues of goods on sample,
Captive consumption etc that posts accounting documents automatically will be discussed in depth in respective
module business blueprints.

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SAP-TO BE Process
Process Flow Charts

Purchase of Excisable Raw Material

Commercial
Department based on
Budget requirement

PURCHASE
REQUISITION

RELEASE OF PR
QUOTATION
ANALYSIS

Commercia
l Division

Stores
Department

PHYSICAL
PROCEDURES FOR
PURCHASE PROPOSAL
APPROVAL
PURCHASE ORDER
PREPARATION & RELEASE

POSTING OF EXCISE
INVOICE

GOODS RECEIPT &

CAPTURING OF
EXCISE INVOICE

Finance &
Accounts

LOGISTICS
INVOICE
VERIFICATION

FINANCIAL
IMPACT

PAYMENT TO
VENDOR

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SAP-TO BE Process
In case of purchase of non excisable goods and services procurement there wont be excise invoice
verification step.

Job Work:
SERVICE REQUISITION

Production
Departmen

RELEASE OF SR

t
Commercia

PHYSICAL PROCEDURES FOR

l Division

SERVICE PROPOSAL APPROVAL

ONLY STOCK LOCATION ,,TR
POSTING OCCURS NO

Stores
Department

GOODS ISSUE OF RAW

ACCOUNTING IMPACT

MATERIALS TO JOB WORKER

FINIESHED GOODS RETURNED BY

JOBWORKER
FINANCIAL
LOGISTICS INVOICE

Finance &

IMPACT

VERIFICATION

Accounts
PAYMENT TO VENDOR

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SAP-TO BE Process

Execution of Production Order Make to stock type

Past Sales Trend

PREPARATION OF PLANNED

Production

ORDER

Department
CONVERSION OF PLANNED ORDER
INTO PRODUCTION ORDER FOR
MAKE TO ORDER

Stores

ISSUE OF RAW MATERIALS

Department

AGAINST THE PRODUCTION ORDER

CONFIRMATION OF PRODUCTION
ORDER

Production
Department

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FINANCIAL IMPACT

SETTLEMENT OF PRODUCTION
O
ORDER

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SAP-TO BE Process

Sale of Excisable Finished Goods

Marketing
Department

Stores
Department

SALE ORDER
PREPARATION

DELIVERY ORDER
PREPARATION
EXCISE INVOICE
PREPARATION
GOODS ISSUE TO

Billing

CUSTOMER

Section

COMMERCIAL INVOICE
PREPARATION

Finance &
Accounts

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RECEIPT FROM CUSTOMER

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FINANCIAL IMPACT

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SAP-TO BE Process

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SAP-TO BE Process
Further Notes
Changes to Existing Organization

The Finance people will fill in the details of only the Accounting-I, Accounting- II, Costing-I, Costing
-II views of the Material Master.

All materials will be created centrally so that no duplication of data is there in the system

Materials are accounted to inventory GL account rather than to purchase account.

Provision for Goods receipt note will be created automatically by the system based
on the purchase order rates.

For Invoice Verification to happen GR should have been done against a PO by the
stores person if the PO is of GR based IV

Description of Improvements and Key Metrics

FI and SD/MM being integrated, an invoice entry in the latter modules automatically posts from the sub
ledger to the respective reconciliation GL account. So the process is simultaneous. It does not involve any
additional process of reconciliation.

Unique material codification for all modules

Single material master with all details from relevant modules

Online Inventory valuation and material values in MM matches with finance GL at any point of time

Notes on Further Improvements

NA

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SAP-TO BE Process
Functional Deficit and Method to Remove that
NA

Interface Requirement
NA

System Configuration Considerations

NA

File Conversion Considerations

NA

Any reports required related to current business process

Pending GRs for which IV has not been done and pending GR to be done for which IR
is done: --Available

Any document/output would be printed for this business process

NA

Authorization Considerations
Detailed Authorization matrix will be defined for all users in the common file for all
modules.
The high level Authorization requirements are as below.
Business Roles

Number of Users

Business Manager
Operations Manager
Transaction Owners

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SAP-TO BE Process

End User Training Requirements

Business User Segments

Number of Users

Type of Transaction

Business Manager

Display, Reports

Operations Manager

Change, Display, Reports

Transaction Owners

Create, Display, Reports

Geographical Location

Sign-off (Approval) for this document:

Name of Team members:

Organization / Bus. Unit

FI/CO Consultant-Vinod Atmakuri

Caritor Inc

Business Process Owners-C.M.Duggar

New Allenberry Works

Key User-Balbir Khanna

New Allenberry Works

Key User- Vishal Sharma

New Allenberry Works

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Signature

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SAP-TO BE Process
A. SAP Standard Reports
<E.g.:

SAP Standard Reports

Sl No:
01

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Report Description
List of Purchases

Selection Criteria
S_ALR_87012093

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Output
Screen View/Print

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SAP-TO BE Process
B. Custom Developments
<E.g.:
Print Requirements
Sl No:

Report Description

Selection Criteria

Output

1.0
2.0

Development Requirements
Sl No:

Report Description

Selection Criteria

Output

1.0

Report Requirements
Sl No:

Report Description

Selection Criteria

Output

1.
2.
3.

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SAP-TO BE Process

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