Across many SAP S4 projects, phased deployment is a common implementation strategy. If an organization has cross-company transactions, this strategy creates a few gaps around Inter-company transactions and margin tracking. The complexities increase if the GL system has gone live before the inventory management system. In this Blog, I will discuss, how one can design a solution in SAP that can help during this Interim phase (till the receiver’s logistics system gets deployed in the SAP software).
In S4 HANA and ECC SAP systems, Inter-company (between two company codes) or intra-company (within one company code across plants or divisions) processes can be best handled using the parallel valuation functionalities. The solution proposed in this blog assumes that the SAP system already has the material ledger parallel valuation solution implemented with at least legal and group valuation currency types setup. This blog won’t show the details around the configurations or enhancements for parallel valuation techniques.
The parallel valuation approach simplifies the accounting requirement between two company codes or two plants/divisions around the areas of Inter-company margin tracking and elimination. This solution uses two or more sets of postings i.e., legal and group valuation within the same accounting document, and tracks the Intercompany margin during the logistics transactions. This solution best works when both the selling company code or shipping plant and the receiving company code or plant are deployed in SAP. But there are many a situation when only the selling company code or plant goes live SAP (which I call here as a deployed company code) but the receiver is still in the legacy application (non-deployed company code). If this type of deployment strategy is adopted, then the Inter-company margin tracking in case of cross-company sales becomes problematic. Still, a parallel valuation approach can provide the necessary postings to help eliminate Interim inventory-related margins.
Deployed to non-deployed Inter-company Scenario:
This scenario involves the selling/shipping side going live first in the SAP system. The receiving company code would still be in a legacy application from a logistics perspective., in this scenario, we are going to discuss if the receiver’s financial system has already gone live in SAP and just the logistics system is outside SAP. Figure 1 summarizes this scenario from various systems perspective. First, the inter-company scenario will be described which would mean the selling and receiving plants are under two different legal entity structures and are two company codes in SAP.
Figure 1: Deployment Scenario Details
Usually, a sales order-driven sales or inventory transfer process is implemented under the selling/shipping company code. This sale is similar to an external customer sale, but keeping a separate sales order type can improve the process. At least two sales order item categories would need to be defined for the Interim process, one for the inter-company and the other for Intra-company. The two separate item categories can help with deriving two separate movement types. Also, one of the item categories won’t require a customer billing document (the “intra” company one). The “inter” company sales item category will have a normal billing document with the parallel valuation group cost condition type KW00 or any other similar condition to capture the group cost as the sales revenue for the customer billing in the group valuation view.
The following points capture the high-level sales order set-up:
A separate sales order type
Two Item categories
Inter-company – driving certain accounting postings for “Inter-company”, a customer billing posting to Inter-company sales and Inter-company accounts receivable
KW00 condition type assigned to the customer billing pricing procedure preferably using the customer account assignment key
Customer should be Inter-company type having a “trading partner”
Also, set-up is a custom output type to post to “Inter-company Accounts payable or vendor invoice
Intra-company – driving necessary postings for “Intra”, and not billing eligible
The customer master or business partner would be an Inter-company type with the trading partner playing a key role in the inter-company sales order scenario. The trading partner gets assigned to the control data tab under the business partner master setup.
Let’s see this scenario with an example, let’s say company code A with plant A is selling the product to company code B with plant B. The cost for this product in plant A is $100/EA and company code A is selling to Company code B with a 10% markup. The following figures show the normal SAP parallel valuation accounting.
Figure 2 and 3 shows the accounting postings for regular post goods issue documents. This shipping plant is the original manufacturer of the product; thus, the legal and group view will show the same balances.
Figure 2: Debit Side posting in company code A (plant A)
Figure 3: Credit Side posting in company code A (plant A)
The next step would be the customer billing document. This step is similar to any customer billing except this customer is of inter-company type and would have a trading partner assigned to its master data. The 10% Inter-company markup has been added to the base cost of $100.00. This pricing is a simple example of cost-plus transfer prices for this sale. Figures 4, 5, and 6 show the accounting postings for the Billing document. These postings have used the standard parallel valuation system accounting approach and posted the Inter-company margin to a separate GL account (Figure 6) in the group valuation view. Under the group view, the sales revenue is at cost.
Figure 4: Debit Side posting in company code A (plant A)
Figure 5: Credit Side posting in company code A (plant A)
Figure 6: Credit Side posting in company code A (plant A)
The next step of the process is to generate an offset entry for this Inter-company accounts receivable posting. That would be the Inter-company accounts payable entry in the receiving company code ledger. This blog describes a scenario, where the receiver company code general ledger has been migrated to SAP but the logistics process is still outside of SAP. To meet this business requirement, the previous customer invoice will trigger an inter-company accounts payable vendor invoice. Technically this will be possible using the concept of “output type” (Figures 7 & 8). A new output type will be configured using the “special function” transmission medium and will use a custom program. This custom program will be an ABAP report program to read the output type-based customer invoice (that triggers this output type) and create a new Inter-company vendor invoice. This new accounting document will be posted via BAPI_ACC_DOCUMENT_POST (see Figure 9). This new vendor accounting document will be created based on the Inter-company customer invoices and amounts can be flipped to adjust for the vendor invoice requirement. The accounting for this document is shown in Figures 10 through 13.
Figure 7: A custom output type assigned to the Inter-company Interim Billing Doc
The intercompany vendor accounts payable invoice assumes that the legacy system carries inventory “with no markup”, hence a separate profit in the inventory account has been used in the BAPI to separate out the inter-company markup in the legal view.
Figure 10: Debit Side posting in company code B (plant B)
Figure 11: Debit Side posting in company code B (plant B)
Figure 12: Debit Side posting in company code B (plant B)
Figure 13: Credit Side posting in company code B (plant B)
Deployed to non-deployed Intra-company Scenario:
Another variation of the deployed to non-deployed material sale or transfer is between two plants within the same legal entities or SAP company code. One of the befitting solutions for this scenario would be to use the sale order that has been described above with a separate item category specifically designed for Intra-company material transfer. This item category will not generate a customer billing document and only accounting posting ensuing from this process has been described in Figures 14 and 15. My proposal for the debit side account is an inventory-clearing GL account that can be cleared when the receiving plant receives the material and sends back to SAP the Inventory receipt accounting entries.
Figure 14: Debit Side posting in company code A (plant A)
Figure 15: Credit Side posting in company code A (plant A)
This blog captured a phased approach deployment scenario and how the sale side can be designed to meet both the inter and/or intra company accounting requirements.