Understanding the P2P Cycle in SAP MM

What Is P2P Cycle In Sap Mm

The P2P cycle in SAP MM, also known as the Procure-to-Pay cycle, is a crucial process that organizations follow to procure goods or services from external vendors. It involves various steps such as creating purchase requisitions, requesting quotations, vendor selection and evaluation, purchase order creation, goods receipt and inspection, invoice verification, and finally payment processing. Understanding the P2P cycle is essential for effectively managing procurement activities within an organization using SAP MM module.

1.3 Invoice Receipt – MIRO

Please input the date of the invoice, reference number, and purchase order (PO) number before clicking on the enter button.

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

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

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

Select the option “Follow-on Documents” and then proceed to open the accounting document by double-clicking on it.

P2P Cycle in SAP MM: Understanding the MB5B Material/Stock Report Verification

Input the information for Material, Plant, and company code and initiate the process.

1.5 Goods Issue for Consumption – MB1A

2. Capex (Capital Expenditure) Purchase Order Process can be described as the procedure followed in SAP MM for acquiring capital assets. This process involves creating and approving purchase orders specifically for capital expenditures, which are expenses incurred to acquire or improve long-term assets such as buildings, equipment, or machinery. The capex purchase order process ensures that all necessary approvals and documentation are obtained before proceeding with the procurement of these assets.

In this procedure, I will demonstrate the steps to generate an Asset purchase order. Prior to initiating the purchase order creation, I have already established an asset in the SAP system using transaction code-AS01. It is also feasible to create an asset while creating the purchase order itself.

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P2P Cycle in SAP MM: Purchase Order Creation (ME21N)

When creating a Capex PO in SAP MM, it is important to choose account assignment category-A and select the appropriate document type – Capex PO.

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 from this section. There is an option to create an Asset available there. Remember to save your changes afterwards.

Please be aware that you have the option to create the Asset on the same screen if desired. However, I will not be creating it here as I have already done so using (T-Code-AS01).

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

P2P Cycle in SAP MM: Goods Receipt (MIGO)

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

The material document has been created by the system. However, it does not generate any FI/Accounting documents in this particular process. Only an MM document is generated. For further details, please refer to the screens below.

On the same page, choose the option “Display” under Goods Receipt.

Invoice Posting in SAP MM

To view the document in simulation mode, simply click on the simulate option. If everything appears satisfactory, proceed to post 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.

P2P Cycle in SAP MM: Payment to Vendor (F-53/F110)

We have gained knowledge about the various situations in the P2P cycle and received comprehensive information regarding the Standard PO and Capex PO procedures. This process is not limited to just the ECC system, but can also be implemented in the S4HANA system. In this case, 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 plan to cover additional scenarios in future posts.

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Understanding the P2P process

The procure to pay (P2P) cycle in SAP MM refers to the end-to-end process of acquiring goods and services, from requisitioning them to paying for and accounting for them. This cycle is named after the sequential order of procurement and financial activities involved in obtaining a product or service.

The P2P cycle begins with the initial step of requisitioning, where a user identifies the need for a particular item or service. The user creates a purchase requisition, specifying details such as quantity, delivery date, and any specific requirements. Once approved by relevant authorities, this requisition serves as the basis for further procurement activities.

Next comes the purchasing phase, where procurement professionals search for suitable suppliers who can fulfill the requested items or services. They evaluate different vendors based on factors like price competitiveness, quality standards, delivery capabilities, and past performance. After selecting an appropriate supplier through negotiations or bidding processes, they create purchase orders (POs) that outline all necessary information regarding quantities required and agreed-upon terms.

Upon receiving POs from buyers, suppliers prepare goods according to specifications mentioned in those documents. They then deliver these goods along with relevant supporting documentation such as packing slips or invoices. Upon receipt of goods/services at their location(s), buyers perform inspections to ensure compliance with specified requirements before accepting them into inventory.

Explaining the SAP P2P cycle in an interview

The procurement process in SAP MM, known as the P2P (Procure-to-Pay) cycle, encompasses several steps. These include:

1. Purchase Requisition: The process begins with the creation of a purchase requisition, which is a formal request for goods or services.

2. Request for Quotation (RFQ): After the purchase requisition is approved, an RFQ is sent to potential vendors to gather quotations and compare prices.

3. Vendor Selection: Based on the received quotations, a vendor is selected considering factors such as price, quality, delivery time, etc.

4. Purchase Order (PO) Creation: Once the vendor is chosen, a purchase order is created specifying details like quantity, price terms, delivery date and location.

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5. Goods Receipt (GR): Upon receiving the ordered items or services from the vendor, a goods receipt document is generated to confirm their receipt and initiate further processing.

6. Invoice Verification: The invoice received from the vendor undergoes verification against PO details and GR information to ensure accuracy before payment processing.

7. Payment Processing: Finally, after successful verification of invoices and necessary approvals are obtained within SAP MM system; payment can be made to settle outstanding dues with vendors.

Understanding the SAP O2C cycle

The Order to Cash (O2C) process in SAP S/4HANA is a complete cycle that involves various steps from receiving a customer order to getting paid for the goods or services provided. It is an essential business process that ensures smooth and efficient operations.

Here are the key steps involved in the O2C process:

1. Order Entry: The first step is to receive and record customer orders accurately. This includes capturing all necessary details such as product quantity, delivery date, pricing, and any special requirements.

2. Order Processing: Once an order is received, it needs to be processed within the system. This involves checking inventory availability, determining pricing based on agreements or contracts with customers, and creating delivery documents.

4. Billing: Once goods have been delivered successfully, invoices are created based on agreed-upon prices and terms with customers. These invoices include details of products/services provided along with payment instructions.

5. Payment Collection: Finally, payments from customers are collected against their outstanding invoices through various means such as bank transfers or online payment gateways.

By following this O2C cycle in SAP MM (Materials Management), businesses can streamline their sales processes while ensuring accurate tracking of orders and timely collection of payments.

Example of a P2P Transaction

With P2P payments, you no longer need to rely on traditional methods like writing checks or carrying cash. Instead, you can use your smartphone or computer to quickly send money to friends, family members, or even businesses. This is particularly useful when splitting bills at restaurants or sharing expenses for group activities.