Procure-to-Pay Business Process in SAP Business ByDesign

Table of Contents
1 1.1 1.2 2 2.1 2.2 2.3 2.4 Introduction ......................................................................................................................... 3 Tenant ......................................................................................................................................3 Reference System.....................................................................................................................3 Introduction to Business Process Management .................................................................. 4 Overall Objectives ....................................................................................................................4 Roles and Segregation of Duties ..............................................................................................4 Specific Information .................................................................................................................5 Master and Organizational Data ..............................................................................................5

Master Data for the Business Scenario ...........................................................................................7 Approval Limits ................................................................................................................................7 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 Business Scenario: Procurement (Procure-to-Pay).............................................................. 7 Objectives .................................................................................................................................8 Overview of Business Tasks ......................................................................................................9 Login .........................................................................................................................................9 Create Sales Order..................................................................................................................10 Planning and Release Purchase Proposal...............................................................................11 Process Purchase Request and Order ....................................................................................13 Approve Purchase Order ........................................................................................................15 Post Goods Receipt ................................................................................................................16 Check the General Ledger Entries (optional) .........................................................................17

3.10 Post Supplier Invoice ..............................................................................................................18 3.11 Approve Supplier Invoice .......................................................................................................19 3.12 Select Items and Make Payment ............................................................................................20 3.13 Additional Optional Tasks ......................................................................................................22

1 Introduction
This assignment was originally developed by Nitin Kale` from University of Southern California and has gone through multiple iterations and alterations. Thank you to Nitin for pioneering the effort. In addition, the full assignment includes procure-to-pay and sales-to-cash along with some analytical exercises. Due to time constraints here at the conference, we will complete only the procure-to-pay assignment. This assignment will introduce you to business transactions recorded in a fully-integrated system called an ERP (enterprise resource planning) system.

1.1 Tenant
On-demand customers want to focus on their business, not on running software. They expect no upfront investment in hardware, predictable costs, and immediate access paired with rapid deployment. The SAP Business ByDesign on-demand (SaaS) solution is initially setup by SAP shortly after the customer requests it. The system is fully managed by SAP with high availability and highest data security. For SAP Business ByDesign at least a 1 MBit/s internet connection is recommended. SAP Business ByDesign is a web-based application and therefore only needs a standard web browser. The Tenant Provisioning service encompasses the following elements: Tenant Set Up: SAP sets up the tenant ready for implementation and enables a smooth Go Live of SAP Business ByDesign in full operative mode. Tenant Operation: SAP manages the availability of the network-centered application and monitors all the components of SAP Business ByDesign to see if they are up and running. It also checks the traffic load on essential components in order to forecast delays and to invoke additional processes to handle the overload. Storage Operation: SAP takes care of the administration of all storage-related tasks with regard to SAP Business ByDesign operations. Application Management: For tenant operations, SAP takes care of monitoring and maintenance of the SAP Business ByDesign application. This includes versioning, security, backups and system health checks.

1.2 Reference System

A reference system is a system that is preconfigured and loaded with realistic users and sample data. The users and sample data are based on the model company Almika Inc. By following the stepby-step instructions in this hand-out, you will assume the identity of Almika users and use the builtin sample data to carry out each of the business process tasks.

2 Introduction to Business Process Management

The full set of exercises includes the procure-to-pay and the order-to-cash business transactions. In section 2, we will focus on the procure-to-pay process.

2.1 Overall Objectives

1. You will assume various roles and work within a medium-sized enterprise using an ondemand information system (SAP Business ByDesign) o To understand and execute various business processes and their variants o Perform different roles within the company and understand the responsibility and authorization for each role o To perform business tasks necessary to achieve the business process outcomes o Experience the end-to-end integration of SAP Business ByDesign o Learn to trouble shoot process issues within an ERP system 2. Describe the advantages of an on-demand solution for a small/medium sized enterprise

2.2 Roles and Segregation of Duties

Normally, a company is run by people with different skill sets who perform different functions within the organization. Often these individuals are grouped according to their functions or roles within the company. For instance, there may be a sales department, an accounting department, production, and so on. A persons function may be further refined within his functional area. For example, the sales department might have sales managers, sales reps, telemarketers, and so on. Typically an individual is allowed access to information, company assets, and given certain authority based on his or her role and denied access to other information, assets, and authorizations which he or she does not need to perform the tasks within the assigned role. This access limitation within the company is called segregation of duties (SOD). SOD along with other internal controls can help the company reduce the risk of fraud and errors. Lets look at an example: Almika Company makes and sells solar heating systems. The sales reps are allowed to negotiate prices with their customers. The sales rep enters the order for the heating system into Almikas integrated ERP system, Business ByDesign. The warehouse delivers the heater to the customer and the engineer installs the system. The billing clerk bills for the heating system once it is installed at the customers site and the accounts receivable clerk collects the money from the customer. If the sales rep did all of these tasks, he could enter a sales order for one amount, bill the customer a higher amount and pocket the difference when payment came in. He could hide this fraud by adjusting the customers invoice to reflect the original sales order ; or, he could remove the heater from the warehouse and deliver it anywhere, even his own home. By segregating these duties or functions, Almika is reducing the likelihood that a single employee could commit such frauds. Just telling an employee that he is not allowed to do certain tasks or access information is usually insufficient to prevent people from doing so. A well-designed integrated ERP system such as Business ByDesign allows users to access the functions they need to fulfill their given tasks and responsibilities within their roles, but prevents them from accessing areas within the system which

are not needed to complete their job responsibilities. We will experience this system-enforced segregation of duties in this exercise. You will be asked to assume various roles as you complete each business transaction. Try to imagine yourself actually handing over a task to another employee within the company as you change roles. Business roles within SAP Business ByDesign give each employee access to various work centers based upon their authorization. Therefore, as you progress through the exercises, you will have to logout and log back in as a different role to access different work centers. This reflects the real life situation where employees are given different roles, responsibilities and authorizations dictated by legal and functional objectives.

2.3 Specific Information

The roles in the procure-to-pay business cycle transactions for this assignment are listed below: SAP Business ByDesign User ID SALES02P SALES01P Password Role Employee Last Name Jacob Menson Stone Smith Loblanski Black Green Warner Employee Student Name First Name Kate Bob Richard Mark Luther Edward Iris Bill

Welcome1 Welcome1

Sales Representative Sales Manager Production Manager Warehouse Operator Warehouse Manager Chief Financial Officer Financial Accountant Purchaser

SUPPLYPLANNER01P Welcome1 WAREHOUSE02P WAREHOUSE01P FINANCIAL01 FINANCIAL02 PURCHASE02 Welcome1 Welcome1 Welcome1 Welcome1 Welcome1

2.4 Master and Organizational Data

Each SAP Business ByDesign reference system contains essential master and organizational data, which reflect the typical organizational structure of a mid-size company of a specific industry and allow you to run the industry-specific processes using the appropriate master data; for example, materials, vendors, or customers. The following graphic gives you a high-level overview of the organizational structure of ALMIKA.

Master Data for the Business Scenario The following table shows the specific master data you will use for this section. Master/Org. Data Type Customer Product Supplier Target Logistic Area Freight-Forwarder Ship-from-Location Logistics Area Name and Value Silverstar Wholesale Corp. (CP100110) Cylinder customized Trade (P100710) AMS Inc. (S100200) Warehouse (P1100-20) ABC Cargo Worldwide (S100800) Almika Heating Cleveland (P1100) Warehouse (P1100-20) Usage Sales Procurement (driven by Sales Demand) Procurement Procurement (stock) Sales - delivery Sales - delivery Internal warehouse

Approval Limits The following table shows some of the controls that have been put into the reference company to simulate a real business environment. Approval Type Shopping Cart Approval Purchase Order Approval Supplier Invoice Approval Incoming Payment Approval Outgoing Payment Approval Payment Deduction Approval (Incoming) Expense and Reimbursement Approval Limit $500 3,500 5,000 none 10,000 50 500 Currency USD USD USD USD USD USD USD

3 Business Scenario: Procurement (Procure-to-Pay)

You will execute the business scenario for Procure-to-Pay. The demand for procurement will be generated from a sales order. You will start by creating a Sales Order for Material P100710, Cylinder customized Trade. This material is purchased from a vendor and resold to customers through two sales organizations P1110 Sales Heating and 2100 BR Columbus. The distribution channel is Direct Sales. There is no in-house production for this material. The purpose of creating the Sales Order is to generate demand that will trigger the procure-to-pay business process. At the end of this procurement process you will end up with inventory of the material P100710, Cylinder customized Trade.

3.1 Objectives
1. Perform different roles within the company and understand the responsibility and authorization for each role within the business process. 2. Experience the end-to-end integration of SAP Business ByDesign o Generate demand for a product that Almika sells to its customers by creating a sales order o Use supply planning to generate a purchase proposal for the shortfall of inventory to satisfy the demand o Explore and assign a source of supply for a purchase proposal o Understand why a purchase approval is important in the procurement process o Receive goods into inventory o Learn how to process supplier invoices including appropriate approvals for payment

3.2 Overview of Business Tasks

Here is an overview of business tasks and the roles that will perform those tasks.

Roles
Sales Representative Supply Planner Supply Planner Purchaser CFO Warehouse Manager Financial Accountant CFO Financial Accountant
3.3 Login
We will be using the following tenant for this workshop.

Business Tasks
Create a Sales Order (generates demand) Create a Purchase Proposal to satisfy demand Release Purchase Proposal to Purchase Request Convert Purchase Request to Purchase Order Approve Purchase Order Post Goods Receipt Create Supplier Invoice Approve Supplier Invoice

Make payment

https://my106203.sapbydesign.com
During this assignment, you will be logging in with different login IDs depending on your role within the business process. The roles and passwords are given in section 2.3 of this document. If at any point during these exercises, your web browser warns you that the Cache limit has been reached, click yes to increase the limit and continue. IMPORTANT NOTE: Since we are sharing login information, if you do make a mistake logging in and lock a user for any reason, notify your instructor IMMEDIATELY so that the login is not blocked for other students.

 Whenever the assignment asks you to enter your participant ID#, use the number given you
in the front of these printed materials. Since all of us are logging in with the same login information, your ID# will help us follow your work within the system.

3.4 Create Sales Order

Logon and Work Center Information Logon ID / Role SALES02P Sales Representative / Kate Jacob

Work Center / View

Sales Orders

Common Tasks

Procedure Field Name Common Tasks list Click New Sales Order. (Account) Name CP100110 (Silverstar Wholesale Corp.) Your participant ID# < current date plus 7 days > Press Enter or Tab Data to Enter Activity / Button / Comment

External Reference Requested Date

Items table Product ID P100710 (Cylinder customized Trade) 100 ea You may use the calculator icon to enter this number. Click Submit, and choose Send Order Confirmation to Account.

Quantity

10

Write down the Sales Order Number (at bottom of screen) Log off, Click Yes on the message window. Restart Application (You will do this each time a new role becomes responsible for a step in the process.)

3.5 Planning and Release Purchase Proposal

Logon and Work Center Information Logon ID / Role SUPPLYPLANNER01P Supply Planner / Richard Stone

Work Center / View

Supply Planning

Products

Procedure Field Name Products view Show list All Products by Selection P100710 Click Go. Select the line item. (Select the line with an Exception) Click the left most column in a row to select a row. (Clicking on the Product ID or Description takes you to its master data.) Click Open. Product Planning Details screen Supply and Demand List Write down the Available Stock Data to Enter Activity / Button / Comment

and Find ProductID

P100710 (Cylinder customized Trade)

11

Select your Sales Order Number row by scrolling down and looking at the Document ID column. Make sure that the Quantity is 100. Write down the Projected Stock

Click New Planning Proposal. (You may need to scroll to the top of the frame to view this option.) A new row is created at the bottom of the list. A warning will occur enter a quantity greater than zero. This prevents you from creating a zero order. In the new row, enter 100, the quantity of your Sales Order. Click Enter. Write down your purchase proposal document ID number.

Supply and Demand List Youll see that a purchase proposal was generated with the quantity you have proposed. (The row may be moved up.) Change the Date on the proposal to one week from today. Enter Product Planning Details screen Click Save.

12

Select the line with your purchase proposal document ID. Click Release. The Purchase Proposal converts to a Purchase Request and the line will be selected. Click Save. Write down the Purchase Request ID (Document ID) If the Document ID does not appear, click Save again. Note: The document ID may be at the very bottom of the list. Click Save and Close.

3.6 Process Purchase Request and Order

Logon and Work Center Information Logon ID / Role PURCHASE02 Purchaser / Bill Warner

Work Center / View

Purchase Requests and Orders

Purchase Requests

Procedure Field Name Data to Enter Activity / Button / Comment

Purchase Requests view Unassigned Purchase Requests Select the line item for your purchase request ID from the previous step. Make sure you select your own Purchase Request ID.

Show list

Click Assign Source of Supply Product ID P100710

13

Product Description Open Quantity Gross Price

Cylinder customized Trade

This value is set by the system. This should be the same quantity as your Purchase Request and Sales Order

$85 Supplier IDs may appear in the Available Source of Supply table list (scroll down). Select the Supplier and click Assign to Selected Purchase Request. Otherwise enter the supplier in the purchase request row. Save and Close

Supplier

S100200 (AMS Inc.)

Purchase Requests view Assigned Purchase Requests Click Go. Your Purchase Request now has AMS Inc. as the Supplier.

Show list

Select the row of your purchase request and click Edit.

Purchase Request:### view Notes Your participant ID# (you may have to click view all to see the notes tab), Add a row and choose internal comment for the type of comment. Type your participant ID in the details. Click Save. Click Close. Purchase Requests view Assigned Purchase Requests The system will automatically take you to this view. Select the row of your purchase request, for which the purchase order is to be created, and click Quick Order. Write down the Purchase Order ID that is created automatically (see bottom of the screen).

Show list

14

Click Close.

3.7 Approve Purchase Order

Logon and Work Center Information Logon ID / Role FINANCIAL01 Chief Financial Officer / Edward Black

Work Center / View

Managing My Area

Approvals

Procedure Field Name Approvals view Show List Open tasks Select your Purchase Order approval line item. Read the Business Task description. Click Approve. Click Refresh. The approval list does not show that your Purchase Order is in need of approval anymore. It has been approved. Data to Enter Activity / Button / Comment

15

3.8 Post Goods Receipt

Logon and Work Center Information Logon ID / Role WAREHOUSE01P Warehouse Manager / Luther Loblanski

Work Center / View

Inbound Logistics

Purchase Orders

Procedure Field Name Purchase Orders view Show list Purchase Order ID Open Purchase Orders Select your purchase order row, and click Post Goods Receipt. Data to Enter Activity / Button / Comment

Create Inbound Delivery and Goods Receipt screen Delivery Notification ID Actual Delivery Date(Date / Time / Time Zone) Your participant ID# This is the delivery notification ID of the supplier / freight forwarder.

For example, <actual date> / 12:00 / EST

Use default by the system as the actual date.

Click Propose Quantities. Actual Quantity This should be 100. Click Propose Logistics Unit. Target Logistic Area P1100-20 (Warehouse) This is set by the system. Click Save and Close.

Write down your Inbound Delivery number (at the bottom of the screen)

16

Common Tasks, Stock Overview Show List Product ID Storage Location ID On-Hand Stock Identified Stock Select P100710 P1100 (Customized Cylinder Trade) Click Go You will see that the stock quantity increased by the goods receipt amount Create a print screen showing the stock available Close

3.9 Check the General Ledger Entries (optional)

Note: This is only one of many ways to obtain this information. Logon and Work Center Information Logon ID / Role FINANCIAL02 Financial Accountant / Iris Green

Work Center / View

Inventory Valuation

Reports

Procedure Field Name Reports List view Show list By report category Financials Line Item Reports(3) Click on Purchasing Documents Line Items Selection ByDesign initial Click Go Find your PO in the list Data to Enter Activity / Button / Comment

17

Click on the right hand corner of the journal entry field to expand your options. Choose view journal entry List the journal entry below. Show the general ledger accounts, the debits and credits, and amounts.

Click Close.

3.10 Post Supplier Invoice

Logon ID / Role FINANCIAL02 Financial Accountant / Iris Green

Work Center / View

Supplier Invoicing

Invoice Entry

Procedure Field Name Invoice Entry view Show list All Orders to Be Invoiced Select your Purchase Order from the step before. Be sure to use only your own PO. Click New Invoice. New Invoice screen Supplier External Document ID Invoice Date S100200 (AMS Inc.) This is set by the system based on your purchase order. Suppliers invoice number Data to Enter Activity / Button / Comment

Your Participant ID# < current date >

18

Receipt Date

< current date >

Default by the system based on the date from the goods receipt Default by the system, data from the purchase order Default by the system, data from the purchase order

Total Gross Value Total Tax amount

Invoice Description Payment Terms

< no entry > 14 days 3%, 30 days 2%, 60 days due net < no entry >

Additional financial data, any entry possible. Default by the system, data from the purchase order. Additional financial data, any entry possible. Default by the system calculated from the credit terms.

Payment Reason Due date Posting Date Invoice Entry

< current date > Net Click Check. A message should appear at the bottom of the screen indicating no errors. Click Post.

Write down your Supplier Invoice number from the bottom of the screen.

3.11 Approve Supplier Invoice

Logon and Work Center Information Logon ID / Role FINANCIAL01 Chief Financial Officer / Edward Black

Work Center / View

Managing My Area

Approvals

19

Procedure Field Name Approvals view Show List Open tasks Select the invoice from the previous step. Read the Business Task description Click Approve. You should receive a message supplier invoice: approved executed Data to Enter Activity / Button / Comment

3.12 Select Items and Make Payment

Logon and Work Center Information Logon ID / Role FINANCIAL02 Financial Accountant / Iris Green

Work Center / View Procedure Field Name Supplier Accounts View Show List: Suppliers with account movement

Payables

Suppliers

Data to Enter

Activity / Button / Comment

Select the supplier row for AMS Inc. (S100200) Click View.

Supplier Account Monitor screen, Trade Payables Tab, Invoice/Payments Show List: Open Items Your document ID Select the row where the Document ID matches your Supplier invoice number Notice that the invoice amount is shown as a negative amount. Thinking back on your financial accounting class, why would it make sense for the supplier invoice to be shown as

20

a negative? Write your answer to question 3.13.6. Click Pay Manually By > Outgoing Check. Check Number Payment Amount <Net Price + Tax Amount Cash Discount> USD 1100062588 Your participant ID# Click Complete Bank Data. Click Post. Write down the check number Default by system chosen sequentially from the check register Default by system based on the invoice amount and credit terms

Bank Account ID Memo

Click Close. Supplier Accounts View Refresh the screen Select the line with your check number. Click on the journal entry on the line with your check. Write down the general ledger accounts and the amounts below. Click Close.

21

Now, use the role of Chief Financial officer to approve this payment. Hint: Refer to step 3.11 for information on how to do this. Once the payment is approved, return to the Financial Accountant role. Field Name Data to Enter Activity / Button / Comment

Payables Work Center, Payment Clearing Show List Completed Payment Clearings Click Go

Payment Clearing screen Payee Name Sort the Payee Name column Find AMS Inc. Confirm that your payment by check is completed. (Match the check number from the previous step with the external reference field)

This concludes the Procure-to-pay exercises!

3.13 Additional Optional Tasks

1. 2. 3. 4. 5. 6. Display the inventory of the product you have procured What is the status of your sales order? What is the Net Value of purchases from AMS Inc.? Display the Balance Sheet for Almika. Display the purchase history of the product you have bought. Thinking back on your financial accounting class, why would it make sense for the supplier invoice to be shown as a negative?

22