Pricing Procedures in Accounts Payable

[Sourav1999]

Introduction

The Blog “Pricing Procedures in Accounts Payable” is the learning outcomes from SAP INSIDE TRACK KOLKATA 2024. I have attended and participated as a volunteer in SAP INSIDE TRACK KOLKATA 2024, (27TH APRIL) and this SIT helped me to understand the different dimensions of Pricing procedures used in accounts payable. The speaker sessions of this event have discussed how the concept of Pricing Procedure has been developed in SAP and what are the core components used in defining pricing procedures in accounts payable. I have learned how pricing procedures will work in real-time business scenarios and the cruciality of configuring Pricing procedures in SAP.

Concept:

In Finance term, Pricing is the methodology to determine incurred cost components to process the finished goods and services from raw materials. In SAP, Pricing enables determination of actual value of goods and services to be produced or sold by considering all cost components.

In Accounts Payable, different cost components Base price of raw materials, freight, surcharges discounts and taxes are associated with finished goods and services production. Under Pricing Procedure, Consultant can define each and every cost component associated with Production of goods and services using SAP’s standard conditions or creating custom condition as per business requirements.

Pricing Procedures is the dynamic features of SAP MM Components that allows to consider all cost components with unique condition type and determine the net price of the goods and services.

Scope:

As discussed in earlier, Pricing is crucial methodology to determine cost associated with manufacturing or production or purchase and sales of goods and services. Hence, Pricing procedures has been used in different modules in SAP like Material Management, Sales and Distribution, Real Estate and Flexibility Management, Treasury and Risk Management and Controlling. In accounts payable (purchasing), Pricing Procedures is responsible for cost associated from procuring the raw materials to process the finished product.

Overview:

Components of Pricing Procedures

There are different key components associated with Pricing Procedures from Accounts Payable Prospectives.

Condition Type

As discussed in earlier Pricing Procedures considers different cost elements involved in procurement and production of goods and services. In SAP, every cost element has defined as unique condition type like discounts, freight, and surcharges. A unique condition type featuring below components.

Condition class: Condition class has been used as grouping functionality that allow system to control each condition type separately. For an example, Discount or Surcharge condition class allows system to group condition type having characteristics of discounting factors.

Calculation type: This is one of the crucial components of Condition type that define basis of calculation like quantity, percentage, or formula.

Condition category: Condition category allows to classify different condition type based on the nature of cost components like Base Price, Input Tax or Output Tax.

Rounding rule: The scope of rounding rule applies while small price difference has taken place in the transaction. By defining this parameter, Condition type has rounded off the value of small price difference in a form of rounding up, rounding down or commercial.

Accrual Key: It is a feature of condition type that allows to navigate a statistical condition type to determine separate accounts.

Group Condition: This feature allows to use a single condition type by multiple times in a single document.

Maintaining Condition table

This feature allows to create a Condition type by combining different fields or variables like tax code, country code, Company code, plant and other variable and same are used in Pricing procedures whenever the condition type being used in the transaction. For an example, a condition type for Tax classification might be used different key combination like Tax Code, Country Code, Plant, Business Place or Vendor.

Access sequences

Access sequences is one of the crucial controlling parameters used in pricing procedures. The key concepts of access sequences is determining the most appropriate and relevant condition record from the combination of Condition table. A single access sequence does contain multiple condition table based on business requirements. For an example, if a single access sequence has 3 different condition table, system will search all 3-condition table based on the sequence defined in access sequence.

Condition Record

In condition record, different pricing elements like Prices, discounts and surcharges has been stored with regards to Condition type for a specific timeline.

The variable maintained in the condition record has been derived via access sequence and condition type.

For an example, Condition record for Taxes has been maintained and if the same condition type getting called during the transaction, then said condition record will be applied during automatic price determination.

Calculation schema, Schema group and schema determination

Calculation schema is a logical structure that integrated with number of pricing condition used in purchasing document. This is also define a sequence or order by which different pricing condition called in a purchasing document.  This configuration activity allows system to calculate subtotal, discount or taxes with the help of other parameters like calculation type, base price.

In pricing procedure, there are two Schema group, Schema group Vendor and Schema Group Purchase organization is being used and assigned with Vendor Schema Group is assigned to the purchasing data fields of vendor master record and on the other notes, Schema Group Purchase organization is assigned to Purchase organization in configuration.  

By grouping different vendor and purchasing organization into a Schema group, system allow same schema calculation for every vendor or purchasing organization belongs to the same Schema group.

Schema determination is a customizing activity where Calculation schema (Procedure) is assigned to Schema Vendor group and Schema Purchasing Organization. Whenever any vendor or Purchase organization is being used in any transaction (suppose said vendor or Purchasing Organization assigned to Schema group), schema group combination is being fetched and based on the combination automatic pricing executed on purchasing documents.

Summary:

Key takeaways

• Pricing is key factor that determine net value of goods and services at the time of procurement and as well as sales.
• Pricing Procedures is the key features of SAP used to determine net value of goods and services by considering different cost element during procurement, production, consumption and sales
• Different cost components like base price, discounts, surcharges and taxes has termed as Condition type in pricing procedure.
• Condition table is the key combination of different fields to trigger pricing procedure for a specific condition type.
• Access sequence defines most appropriate and relevant condition record from the combination of Condition table.
• Condition record has been derived via access sequence and condition type.
• There are two schema group, Schema group vendor and Schema group Purchasing Organization and based on schema determination schema group is getting triggered at the time of automatic pricing determination.

@DataTherapist MM (Materials Management) SAP S/4HANA Finance FIN General Ledger  FIN Controlling SAP Tax Classification and Reporting FIN Posting and Taxes SAP Tax Compliance MM Purchasing MAN Material Requirements Planning 

@SohamBhKoL