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Purchase to Pay Process

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In order for an invoice to be correctly posted and paid against a purchase order. It's useful to understand the underlying documents in the whole purchase or procure to pay flow. It makes sense to ensure that purchases are approved before they were watered and recording the receipt of goods or services against the purchase order means that you already have some information available in the system when the invoice arrives. This section explains the purchase to pay process and how the information from the purchase order and the goods receipt is used to improve the efficiency of posting and paying the invoice. We will start by explaining the purchase to pay process flow and the concept of three-way matching. And then talk about the different types of procurement and purchase order types that you might come across. We'll explain how the different documents and information transferred to finance and what you need to know to match the invoices correctly with them related documents. If the price, the quantity is the same or lower than the price on the purchase order or the quantity on the goods receipt, then the invoice can be selected automatically for payment. Once it becomes due for payment. His checking process is called three way matching different purchase order types, behave in slightly different ways. And depending on the settings in the purchase order, there may be evaluated a non-validated goods receipt, or no goods receipts at all. In which case the matching is between the invoice and the purchase order. Only we will look at each document in the process, flow in turn and explore the different types. The next steps will vary depending on the organization and whether the whole flow is in SAP or another system, such as a Reba, some organizations will start with the purchase requisition for some, all purchases and others may start with a purchase order usually, but not always. The receipt is then posted, followed by the invoice. If everything is okay, the invoice can be paid. The information contained in the original purchase requisition or purchase order will be passed along the flow. And some of it used by each step. A purchase requisition is an internal request to buy something, either from a catalog or in general purchase requisition. May also be automatically created by the system. For example, in order to replenish stocks in a production process, alternatively, it may be created as part of the employee self service process where an end-user knows approximately what he wants to buy, but may not necessarily know the best place to buy from or what the correct price should be. Once the purchase requisition has been checked and any necessary details added. The purchase requisition is then converted into a purchase order to be sent to the supplier. Some organizations may create a purchase order directly without a purchase requisition. The some, or all purchases purchase requisitions in orders may be created in the S for HANA system or be sent from an external system, depending on the size of the order. The approval flow may vary. There may be no approval for low value purchase orders. Or a single approved for up to certain amount. Whereas for logical, does, there may be a number of approvers. One of which may be the procurement department structure of the PEO fury is a bit different to that of a PO in the gooey. Well, they're essentially they contain the same foods and information. So I'm just going to use the GUI screen initially is it's easier to get an overview of the whole purchase order. On one screen, the PO is made up of three sections on the left. In the GUI transaction. You can see three buttons, which you can use to open or close each section, so that there's more room to view. The other sections. The header section has a number of tabs containing information that applies to the whole document. For example, the company code. It also contains payment terms from the supplier master data purchase, order, currency, address, status, and so on in fury. Instead of seeing the sections all on one screen, you drill down into each one separately. And for the line items, you have further drill downs for the different details. For example, account assignment, the next section contains the details of the items that have been purchased. Description, quantity, price, unit of measure, et cetera. In this case, stock has been purchased. So the two columns after the line item number, the account assignment category, and an item category, the blank, and all the accounting information will come from the material or product code mentioned in section two at the top of the final section, there's a dropdown to choose a specific line item. And then the tabs along the bottom indicate further detail for that specific item. Only if a non-stock item is being purchased. The account assignment category allows you to choose between an asset cost center, internal order project, et cetera, and an additional tab called accounts assignment will appear in the bottom section for you to enter the specific asset number cost center, internal WBS element, et cetera. Plus any related information such as the GL account, this information will then be copied to the screen at a later stage. When you enter the invoice. If we look at the same stock purchase order in fury, you will see that to get more information about the individual line items. You have to drill down into the line item, using the tiny arrow on the right hand side of the items. The most useful sections for accounts payable when checking something, but probably the account assignment tab and the process control and process flow tabs, which we will see in the next slides to get to the account assignment detail. You use the arrow to the right of the line item on the first screen of the purchase order to drill into the line item. And then you go to the account assignment tab section, and then drill down once more using the right terror. This slide shows a non-stop purchasing litter where the cost center account assignment was chosen in the purchase order. Well, there's no material or product code. The material group must be chosen depending on the setup. The GL account may be chosen manually or defaulted in from the material group. In this case, the cost center also has to be entered. You can get to the process control tab from the first screen, the purchase order here, you can see whether a goods receipt is expected or not, whether it will update the general ledger and whether the invoice will be posted against the goods receipt or directly against the purchase order. We'll see this in more detail shortly. To get to the process flow. You select one only to commit to time and then select the process flow tab for that item. The process flow shows what has been received and invoiced for that specific item. I not the whole purchase order process flows. Interesting because it shows the expected items. For example, it shows whether an invoice good to receive your expected of the delivery is complete. And the final invoice has been received. We will look at this process controlling more detail when we talk about the goods receipt, because it's important in explaining how the goods receipt and the invoice posted. She sort of does may look and behave slightly differently, depending on what's been purchased. For example, fixed assets, stop non-stock and services are transferred to finance in slightly different ways. This slide shows a purchase order for fixed assets. The main difference on the top screen is that the account assignment a process has been used. And this means that an asset number must be entered asset number dictates which asset count in the general ledger will be posted to, if you have more than one ledger, the internal posting would be to a special clearing account, but at the same time, additional documents will be posted to the asset counts for each ledger. Yes, it number shows in the lower left of the screen in the asset management section of the account assignment screen. This slide shows a stock purchase order, and you can see that the material column has been filled with the description from interior master record. The material master record would dictate the posting to stuck accounts in the balance sheet. This slide shows a non-stop purchase order where the account assignment K has been used, meaning that the cost center is required instead of immaterial and material group is used, depending on the purchasing analysis required organizations, may configure material groups in detail and link GL accounts. Well, they may just use generic ones. And then to the GL account manually each time, this slide shows an example of a limit or blanket purchase order where instead of purchase order items being entered, the limit item section is used to entry limit amounts. This can be used for example, for regular utilities, telephone or surface charge. But the exact amount may not be known in advance, but it's rarely queried. It can also be used for a number of small items, such as stationary to avoid having to create a separate purchase. So we'll do that for each small, right? You could also create separate line items for each month to ensure that the spend is spread across the year, rather than may daughter in one month. In SAP S four HANA the goods receipt is a posting that confirms the receipt, the quantity of the item ordered in a purchase order. It may reference a physical delivery note that came with the goods or an internal reference from the warehouse, depending on the organization. This slide shows evaluated goods, receipt for stock, which will debit the stock account and credit a clearing account known as the GRI, our account.When the invoice arrives, assuming the quantity is the same as the goods receipt posting the amount on the GRI, our account will be cleared even if the value of the invoice is different to the goods receipt. As long as the quantities are the same, the GRI, our account will be cleared and adjustment posted for the difference. Two documents are produced for evaluated goods receipt. One is a material document and contains information about product storage, location, and quantity. And the author is the finance document with the values and the GL account. The slide shows an example of a goods receipt material document. Now, if the purchase order has the non valuated goods receipt box selected, then although material document can be produced. No financial document will be produced. If the goods receipt is posted before the invoice, it will usually take the value from the purchase order. Whereas if the invoice is posted first, the goods receipt will take the invoice value. Assuming the two are different note that if the purchase order relates to stock valued at standard price, then the goods receipt will still take the purchase order price. But the stock itself will be updated at a standard price and any differences between standard price and purchase order price will go to price bearings account. The term logistics invoice verification simply means verifying the invoice against the logistics processes. In other words, the purchase order and the goods receipt. Similar to the goods receipt, both material document is produced for the logistics process, as well as the finance document for the general ledger posting. In this slide, we see an example of an invoice being entered against a purchase order. The only thing I've manually typed in so far is the purchase order number and the amount of invoice the system has taken the rest of the information such as the supplier number, product tax general ledger information.From the purchase order it's proposed in amount of, for each line item based on the quantity and the goods receipt and the value in the purchase order. If we click on the view button for an item, we can see the full history. For example, in line item one, although 10 items were ordered only for a goods receipt, an important point to note that sometimes confused this new users, is that what is shown is just a proposal. In other words, just what the system thinks should be invoice based on the purchase order and goods receipt in order to save time, manually entering all the details. If that's not what is on the invoice, you should change the quantities and amounts accordingly and changing the quantities and amounts on this screen only affects the invoice and does not affect the original purchase order and goods receipt. In reality, the invoice could be for different amounts of quantity or both. Perhaps the supplier made a mistake on the invoice and invoice to sit at the wrong price or for the wrong quantity or the person creating the purchase order or goods receipt made a mistake. In any case, we usually have to enter the amount that is on the invoice, regardless of whether it's technically correct or not. And then request a credit note or other correction. The fields for quantity and amount can therefore be changed accordingly the behavior of a purchase order and hence, the related goods receipt and invoice depends on a number of factors. If the value of two goods receipt option is selected in the purchase order, then the goods receipt will contain the posting to expenses or stock. But the offset posted to a control of how called the G R I our account, when the invoice is posted, the vendor account will be credited and assuming the amount matches balance, we're clear the gr I, our account, once any taxes have been taken into consideration, this slide is similar to the previous one, but you'll notice that the first three lines all refer to separate goods, receipts for the same item on the purchase order. The checkbox for goods, receipt based invoice verification has been selected in the purchase order or defaulted in from the supplier master data, which means that each invoice must be matched with the goods receipt line. And if no goods receipt has been posted, you cannot post the invoice or invoices received electronically and posted automatically. Invoices may fail in the interface. If they arrive before the goods receipt. So what can I say? Patients may switch off the good space. Didn't voice verification to avoid dealing with too many interface or idle carers. In this example where we've received one invoice, maybe at the end of the month, covering all the goods receipts during the month. It may not have been important. The Jr based invoice verification was selected. However, where you have a large purchase order of many goods receipts for each item. It will probably be easier to have the box ticked. In addition, when entering the invoice, instead of entering the purchase order number, it might be easy to enter the delivery note or bill of lading number. If now. Using the accounts payable process flow transaction, but this and the next couple of slides to show the difference between a goods receipt based posting and a non goods receipt based posting in this slide. And the next you can see that the invoice posting is directly linked to goods, receipt, posting. This slide is very simple. One with one delivery for each purchase order. Right? Again, the invoice is linked directly to the goods receipt. Although here you have several deliveries for each purchase order item purchase order 20 has two goods receipts. But for invoices, the first three, linked to the first delivery, then the fourth invoice linked to the second delivery. Although the finance documents for the first two invoices also cover item 10 of the purchase order and have not been included in the side and this side, which does not have the goods receipt based invoice verification box ticked in the purchase order. You can still post goods, receipts, and invoices, but they're all matched or linked directly to the purchase order line instead of the goods receipt. So for example, you can see that line item 10 has two invoices and two goods receipts, but the invoices are not linked to the goods receipts, just to line 10 of the purchase order. It may be that it doesn't make much difference to you and your system is configured over one way or the other. But if you have the choice and invoices are not imported at chronically, but posted manually, it might help to change the settings. You can also change the settings at supplier level. So some suppliers have a lot of deliveries and invoice is posted against a purchase order. You could have the goods receipt based invoice verification box selected for those suppliers. And if some suppliers only have one invoice per PO, regardless of the number of deliveries, you could leave the box blank. Note that with good spaced invoice verification, you cannot post the invoice. If the goods receipt is not there. So again, be careful if the invoices are posted electronically, especially if the invoices are imported faster than the goods, receipts can be posted. Just because the invoice is posted against the purchase order and not directly against the goods receipt, it doesn't prevent the three-way matching being carried out. And if the correct goods, receipts are not posted, invoice will still be blocked for payment. The slide shows the purchase order where the invoice has been posted, but there's no good receipt at all. Because the purchase order did not have the goods receipt based invoice verification selected. It was possible to post the invoices against the purchase order, but because the goods have not been receipted, the invoice is still blocked. The goods receipt can also be valuated or non-validated. For example, some countries do not allow our values to be posted to the fixed asset unless the invoice has been received, but they still want a record of the receipt of the fixed asset to be posted to the system. Posting a non-evaluative goods receipt simply means that the general ledger is not updated at the time of entering the goods receipt. The goods receipt occurs so that there's a record that the items have been received. But the general ledger is then only updated when the invoice is posted. In the slide, you can see that there's no accounting document in the flow of the material document. And the, in the PO process control shows the non-validated goods. Receipt box has been selected. If there's no goods receipt, or if the goods you see is non valuated, then any posting to the general ledger will only occur when the invoice is posted. You can also use blanket or framework purchase orders where you regularly purchase an unspecified amount of low value material, which does not have a product code, for example, stationary or utilities, or you can use a framework or do for regular maintenance plan. If you want to order things at different prices, you can set the item category to D for limit, and then you can purchase a mix of different items. As long as they're for the same GL account and cost center, the framework code, it uses a special purchase order type and hasn't validity period. No goods. Receipt is required. As long as the date is inside the validity period, just post each invoices. It arrives against the purchase order until the limit is reached. As you can see you Mount is not proposed each time. You have to enter it manually in the line too, but you can see the overall limit. The slide shows the purchase order history for blanket purchase order. Yeah, I used was the supplier invoice list and I drew down on the purchase order line to see the full history. In this slide, you can see the same example, but from the full accounts payable process flow. In this case, the second invoice had a query and is currently manually blocked for payment, but the other two are free for payment. In the past. I've seen organizations invert the quantity and the amount in the purchase order. To make it easier for the goods receipt to be entered accurately by the person who's received. The surface surface might be, let's say around 3000 USD. If the purchase order is raised for a quantity of one and an amount of a thousand, then you can't really do goods receipt for 997 point 21 because you wouldn't be able to tend to the correct fraction of one. However, if you have a quantity of a thousand in a price of one, And you can enter a quantity of 997 point 21. For example, although it works okay, it's not ideal and it might be confusing for the supplier. If you're confirming a service using a service entry sheet, instead of goods, receipt provides more flexibility. Although surface entry sheet produces a good receipt posting to finance. Anyway, one advantage of using the service entry sheet. Is that it's more flexible where exact quantities are difficult to know in advance. For example, where the repair times, something is not known at the time of the purchase order on like a goods receipt, service entry sheet can be accepted or approved. So for example, contractors could enter their own time via time sheet, directly into service entry sheet to be approved by the business. This slide shows an example of a very simple service entry sheet. Then the insert shows the process flow. As you can see both the service entry sheet and a good receipt has been produced. The slide shows the display process flow for accounts payable app. Showing all the related documents for your transaction in this case, I've entered the purchase order, but I could have entered, for example, a goods receipt or journal entry number. Instead, all items are green. It's. Everything was okay in paid, but if there was a discrepancy in the invoice was blocked parts of the flow showing rate. You may not have access to some of the reports. Is there more purchasing, but I thought it worthwhile to include so that you know, that the information is available on the system. Even if you have to request it from another department. Yeah. In this demos, the display process flow accounts payable app F two six, nine one. I thought I'd demonstrate it properly here is you'll see a lot of slides referring to it throughout the tutorial. If you know the purchase order number, you simply select the purchase order option from the drop down and enter the purchase order number and then press go. You can see the flows, the chart, whereas the table by clicking on the tabular view item. The table lists all the documents related to the selected purchase order in the table format, you have a settings button and you can add columns and export the whole purchase order details to Microsoft Excel. If I go back to the purchase order flow view, you can see the optic that I selected. In other words, the purchase order is highlighted in blue. If I select a different object, for example, the invoice receipt, I can restart the flow from the invoice in state. It still shows the purchase order and goods receipt, but only those that referred to that specific invoice number. If I use the back arrow, I can go back to the goods receipt, and if I use it again, I can go back to the original full purchase order flow. Clicking on an object gives further detail and also the option to select related applications, clicking on optimized connections, sometimes rearranges the objects better, but in my opinion, not always. Although this app is useful for quickly spotting a perch. You sorta know that it's also a maintenance action where you can copy and create purchase orders as well. So you may be better off with the next step, which is monitor, purchase order items. Again, this app is very much a purchasing report, but it may be useful to help find or check a purchase order number where there's a typo or something is unclear in the reporting section. We'll go into more detail on how to run this type of report, but you can see in table or chart form or both is in the slide. By clicking on the right hand arrow, you can drill down into the purchase order line item and see the document process flow for the line item. Or you can click on the blue purchase order number and select the manage purchase orders to arrive at the same place, clicking on the blue purchase order number. And then in the pop-up kicking again on the blue purchase order number takes you to another purchase order app, which is more of a fact sheet. The slide shows the fact sheet arrived at, from drilling down from the monitor purchase orders. Well going look similar to the managed purchase order app. If you scroll down or use the tabs at the top to jump to different areas, there's a lot of useful information. For example, it lists any purchase, requisitions, contracts, goods, receipts, and invoices, and you can easily see if any of the goods, receipts have been reversed. You can also drill down into clue items, such as the goods receipt number or the supplier invoice number for more details. In a similar way, you can use this app to search for purchase orders, but in this case, there's more information by account assignment, category, GL account cost center, and so on. This Atlas material documents for all goods movements, but you can filter so that you only see goods, receipts. You can add columns for document type non-validated goods, receipts, supplier purchase, order number and so on by clicking on the arrow on the right of the line, you can drill down into the goods receipt for further detail, and to see the link to the accounting document. This slide shows the detail of a goods receipt breach by selecting the right hand arrow on a line in the previous slide. Now for a couple of tips and tricks. If you're in the finance document and want to drill down into the story core documents, the easiest way to do is to go to the related documents tab shown in the slide, and then expand the document types. You can then drill down into those documents, using the blue document number. When you're running reports, you can preset some of the purchasing options as well in the me area of the Fiori launchpad under settings, and then default values. See the tips and tricks demo and section one. This will fill these fields automatically, but not necessarily everywhere. For example, it won't pre-fill fields when you're creating purchase order, but it can pre-fill fields in the selection criteria and the filter bar, some of the reports where it's relevant.