The Comprehensive Procure to Pay Process in SAP

Procure To Pay Process In Sap

The Procure to Pay process in SAP is a crucial aspect of managing procurement and financial operations within an organization. It involves the entire cycle from requesting goods or services, selecting suppliers, creating purchase orders, receiving and verifying invoices, to making payments. This article provides an overview of the Procure to Pay process in SAP and explores its key steps and functionalities.

Invoice Receipt in SAP – MIRO

Input the date of the invoice, reference details, and purchase order (PO) number. Proceed by selecting enter to proceed with the process.

To view the accounting entries prior to saving, you can click on the simulate option and review the accounting entries.

If all appears satisfactory, proceed by selecting the post option.

To access Accounting Documents, simply go to the Menu and select “Invoice Document” followed by “Display.

To access the accounting document, simply click on Follow-on Documents and then double click on it.

1.4 Validate Material/Stock Report – MB5B

Provide the necessary information for Material, Plant, and company code and proceed with the execution.

Goods Issue for Consumption in SAP – MB1A

2. Process for Capital Expenditure Purchase Orders in SAP

In this procedure, I will demonstrate the steps to generate an Asset purchase order. To begin with, I have previously established an asset in the SAP system using transaction code-AS01. However, it is also feasible to create an asset while creating the purchase order itself.

2.1 Creation of Purchase Order (ME21N)

When creating a Capex PO in SAP, it is important to select the account assignment category as “A” and choose the document type for Capex PO.

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At the line item level there you need to select the Account assignment – ‘A’ (Asset related) enter short text, quantity, delivery terms, plant, and storage location.

If you have already created the Asset using AS01, please select it from the account assignment tab. Otherwise, you can create a new Asset here by choosing the Asset creation option. After making your selection, remember to save it.

Note: If you want, you can create the Asset on the same screen. But here I am not creating, because I have created the Asset using (T-Code-AS01)

The PO Document mentioned below has been created by the system.

2.2 Receipt of Goods in SAP (MIGO)

Click on enter, enter the quantity in the delivery note and click on the ‘Item ok’ check box and save.

The system has generated the material Document. The System doesn’t generate the FI/Accounting document during this process. It will generate only an MM document. You can see the below screens for more information.

On the same page, click on Display under Goods Receipt.

2.3 Invoice Posting (MIRO)

To view the document in simulation mode, simply click on the “simulate” button. If everything appears to be correct, proceed by posting it.

Navigate to the Menu and select “Invoice document” followed by “Display”. This will allow you to view the IV document.

The system has been generated the below documents.

To view the accounting entry, simply click twice on the relevant document.

Procurement to Payment Process in SAP

We have now gained knowledge about the various situations in the P2P process and received comprehensive information regarding the Standard PO and Capex PO procedures. This process is not limited to just the ECC system, but also applies to the S4HANA system. In the case of S4HANA, we will utilize specific Fiori Apps instead of relying on transaction codes. I trust that this blog post will be beneficial to someone, and I intend to cover additional scenarios in future posts.

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The SAP P2P Process: An Overview

After compliance has been ensured, purchase orders are generated within SAP to formalize the agreement between the buyer and supplier. These purchase orders contain detailed information about quantities needed, agreed-upon prices, delivery dates, terms of payment, etc., providing clarity for both parties involved.

Steps in the procure-to-pay process

Identification of Need: The first step in the procure to pay process is identifying the need for specific goods and services. This involves determining what items or services are required to fulfill a particular business objective or project. It also includes setting out a budget that is available for the proposed purchase. This helps ensure that the procurement activities align with financial constraints and organizational goals.

Sourcing Goods: Once the need has been identified, the next step is sourcing goods from potential suppliers. This involves researching and evaluating different vendors based on factors such as price, quality, delivery timeframes, and reliability. The goal is to find suppliers who can provide the required goods or services at competitive prices while meeting all necessary specifications.

Requisition: After selecting suitable suppliers, a requisition is created detailing the specific items needed along with any additional requirements or specifications. This document serves as an official request for purchasing those items from approved vendors.

Issuing Purchase Orders: Upon approval of the requisition, purchase orders (POs) are generated and sent to selected suppliers. A PO outlines details such as item descriptions, quantities, agreed-upon prices, delivery dates, terms of payment, and any other relevant information related to the transaction.

Receiving Supplier Invoices: Following successful order fulfillment by suppliers; invoices are issued by them indicating payment due for delivered goods/services rendered. These invoices should match corresponding purchase orders accurately regarding quantity received and agreed-upon pricing terms.

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Accounts Payable: Accounts payable teams review supplier invoices against supporting documentation like POs/receipt confirmations before processing payments within defined payment terms/conditions outlined in agreements between both parties involved (buyer/supplier).

Reporting: Throughout the procure to pay process, various reports are generated to track and monitor procurement activities. These reports provide insights into spending patterns, supplier performance, inventory levels, and other key metrics that help organizations make informed decisions regarding future purchasing strategies.

The meaning of P2P processing

Purchase-to-pay is a complete purchase system for businesses from the purchase of goods to vendor payment. Purchase-to-pay is also called P2P, procure-to-pay, eProcurement, or req-to-cheque. The purchase-to-pay process is automated, saves costs, and reduces risk.

The life cycle of P2P

The Procure to Pay (P2P) process in SAP involves several steps that ensure the smooth and efficient procurement of goods or services. The first step is to identify the need and create a purchase requisition. This involves determining what items are required, their quantity, and any specific details such as delivery dates or preferred suppliers.

Once the purchase requisition is created, it needs to be processed into a purchase order. This involves selecting a supplier, negotiating terms and conditions, and generating an official document that outlines the agreed-upon details of the purchase. The purchase order serves as a legally binding contract between the buyer and supplier.

Next comes matching and receiving invoices. In this step, invoices received from suppliers are compared against both the original purchase order and receipt of goods/services documentation. If everything matches up correctly, including quantities, prices, taxes etc., then payment can proceed.

The approved invoice is then ready for payment processing which includes obtaining necessary approvals from relevant stakeholders within an organization before making payments to suppliers/vendors through various modes like checks or electronic transfers.