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How Payroll Updates FI/CO?

Most people misunderstand how Payroll updates FI/CO?

Payroll updates FI/CO automatically just like MM and SD automatically update FI/CO, right?
Some Payroll-to-FI/CO data must be transferred manually
Payroll and FI/CO have defined integration points through which data is passed, just like MM/SD
Unlike MM/SD, though, some integration points require human intervention
This causes a lot of confusion between the Payroll and FI/CO teams during both the implementation
and after go-live
Payroll-FI/CO Integration Points
The integration points between Payroll and FI/CO are:
Creating the DME (payments)- automatic (check register only)
Posting to Accounting - manual
Posting third-party Remittance automatic
Running the Payroll - Calculation Steps:
First, well release the payroll: This sets a system parameter that allows the payroll to be run. In
this step you select the payroll area and payroll dates you are processing.
Next, well select Start payroll, enter screen parameters and launch the payroll
process: This will generate wage types and assign cost centers. Well check the results by viewing
the Remuneration statement.
Finally, well select the Exit payroll step: This sets payroll process system parameter to
finalized, so additional processing may be completed.
Note: None of these steps will update FI/CO in any way

Creating DME - Payments

Next, well create the Data Medium Exchange (DME). This step prepares the payroll
remuneration data for ACH & check printing. You specify one of the following DME types:
Payroll Check
ACH Transfer (Direct Deposit)
Wire Transfer
Payroll uses the A/P Payment Program for the ACH and check printing processes.
The check register will be updated.
In contrast to A/P payments, the G/L (FI/CO) will not be updated.
After doing this, your check register will be out of balance with your outgoing payments G/L account
in FI/CO. FI/CO will also be out of balance with Payroll because no expense or liability postings will
have been transferred yet.

How to Generate the DME?

Create Pre-Program DME
Create DME
DME Management
Run payment program to print/generate DME
The results:
Payroll checks and ACH files for the direct deposit were generated
The check register has been updated and reflects the newly printed payroll checks, but FI/CO has
no payroll information!
You can run payroll and generate checks without transferring to FI/CO. In other words: you can
successfully run the payroll, cut the payroll checks, and distribute them to employees without
updating FI/CO at all!
Post To Accounting
To solve this Payroll-FI/CO discrepancy, well manually execute transaction PCP0. This is an
important, separate step after generating payroll and cutting checks (DME).
PCP0 updates FI/CO Expenses, Liabilities and Assets:
It uses the employees home cost center to determine the cost center to post to.
It uses the mapping of wage types to symbolic accounts to G/L accounts to determine the correct
G/L account/cost element to use.
I'll explain these elements and relationships in detail later.
Note: When viewing the FI/CO update document, use menu path Extras>Original Document to jump
to the payroll Remuneration statement (which lists the wage types/employees that make up the
FI/CO posting).
Third-Party Remittances
R/3 allows you to automatically create payables to different vendors as a result of HR/Payroll.
Examples include:
Garnishment Processors
Taxing Authorities
Benefit Providers
This is a separate step done after payroll and the update of payroll results to FI/CO:
Posting third-party Remittances isnt required to run the next payroll
Employee withholdings such as garnishments can NOT be passed to the A/P vendor if the third-
party Remittance Posting Run is not executed.
In this step the Integration Is Automatic. Once you post your third-party Remittances, the proper A/P
vendors accounts are updated so that you can process them like any other liability through the A/P
payment program.
Posting With CATS
CATS = Cross-Application Timesheet
Time Capture and Data Transfer Tool
Is an additional piece of functionality that can be used for Payroll and FI/CO
CATS can be used as the time transfer tool to update HR/Payroll with hours worked by
CATS can be used to enter one-time earnings/deductions for employees
Using CATS you can capture an employees time across different cost centers (projects, etc.)
Update HR, CO or both with time worked by employee by activity
CATS updates HR/Payroll
CATS feeds the payroll system with the actual hours worked and one-time earnings/deductions for a
pay period
CATS is very helpful for hourly paid employees
CATS updates CO
Updates CO with the hours actually worked by cost center for an employee
The payroll expense posting for an employee is sent to the employees home cost center in the
Payroll to FI/CO Update
Using CATS you can create an activity allocation to credit the home cost center for hours not worked
by the employee and debit the cost centers where the employee actually worked
An Example
Employee John works 80 hours over a two-week pay period
John is an hourly employee who makes $15/hour and is assigned to costcenter 123-A as his home
cost center
Johns company uses CATS as a time entry/capture tool
Over the two-week period John worked 40 hours in cost-center 345-B, 30 hours in cost-center 678-
A, and 10 hours in his home cost-center 123-A
His gross pay for the period is 80hours*15/hr = $1200
From the Payroll to FI/CO transfer Johns home cost-center 123-A is debited $1200 (the entire 80
hours that he worked)
The CATS interface will credit Johns home cost-center 123-A 70 hours -- (times a pre-defined
activity rate - $15/hr) $1050 via an internal activity allocation. This will leave a net debit of $150
(10hrs * 15/hr) on Johns home center
The other side of the CATS interface activity allocation will debit cost-center 345-B 40 hours for a
total of $600, and debit cost-center 678-A 30 hours for a total of $450
CATS is a great tool to use when you have hourly employees, especially when these employees can
do work over several projects or cost-centers. CATS even allows you to charge the worked cost-
centers for different activity rates depending on the type of work/project the employee is working on.
CATS allows you to spread costs over the cost-centers actually worked, instead of the employees
home cost-center which is the SAP default when posting from Payroll to FI/CO.
Configuring the Payment Program
As was shown in the previous section, Payroll uses the A/P payment program to generate
checks and ACH payments (DME). You use the same configuration techniques that you use
for A/P.
Create House Bank and Accounts
Create Payment Methods
Assign to Accounts
Create RFFOUS_C and RFFOUS_T variants
Even if you dont use different bank accounts for A/P payments and payroll payments you
should create a new payment method for payroll check and ACH transfers:
Enables easier reconciliation of checks, accounts, and check register to G/L
Allows you to have a greater degree of authorization to view/create/change payroll checks
Mapping Payroll Components to FI/CO Integration Point Configuration
In this section well show the configuration behind the Payroll FI/CO integration points:
Defining Wage Types (Gross to Net)
Defining Symbolic Accounts
Mapping Wage Types to Symbolic Accounts
Mapping Symbolic Accounts to the G/L
HR Payee Payees to Vendor Accounts (for Garnishments and third-party Remittances)
Step 1 - Defining Wage Types
Wage Types are elements used in the payroll schema to represent different types of payroll
activities (e.g., wages, deductions, taxes):
Wage types for gross wages, net wages, and taxes are delivered standard and ready to use
Employee deductions and earning codes are delivered as examples
Wage types are created or modified by the Payroll team
The payroll schema uses wage types to calculate Net Payroll from Gross Payroll:
Similar to SD condition types and pricing procedures
The wage types used in payroll are what will ultimately drive our G/L postings and accounts used in
Step 2 - Defining Symbolic Accounts
Symbolic Accounts are names used in HR/Payroll instead of G/L account numbers:
Theyre similar to account keys in SD
You can think of symbolic accounts as an intermediate step to determining the proper G/L account
The types of symbolic accounts are:
Financial Balance Sheet
Cost Income Statement
Vendor Vendors
Customer Customers
Symbolic accounts have an employee grouping key, which allows the symbolic account to be
associated with different G/L accounts:
Employee groupings are done with the payroll schema during payroll processing
Hourly employees may post to a different G/L account than salaried
How to Add/Maintain Symbolic Accounts:
Use IMG Payroll>Payroll:USA>Posting to Financial Accounting>Activities in the HR
System>Employee Grouping and Symbolic Accounts>Define Symbolic Accounts
IMG Payroll>Payroll:USA>Posting to Financial Accounting>Activities in the HR System>Employee
Grouping and Symbolic Accounts>Define Symbolic Accounts
Step 3 - Mapping Wage Types
Next, Wage Types need to be mapped to symbolic accounts so R/3 can determine which G/L
accounts to update:
Use IMG path: Payroll>Payroll:USA>Posting to Financial Accounting>Activities in the HR
System>Wage Type Maintenance>Define Wage Type Posting Attributes
Note: There are no debits and credits in the bizzaro world of Payroll. Use a + like a debit and a like
a credit.
Important Tips:
Know what each wage type is used for before maintaining them
Know how each wage type relates to financial transactions: Make sure your payroll and FI/CO teams
When in doubt create a new symbolic account: Sometimes the intended use of the wage type is not
completely understood or may change over time. Often, when it comes time to change how the
wage type is posting in the G/L, people will take a short cut and change the mapping of the symbolic
account that is assigned to that wage type. If that symbolic account is assigned to other wage types
that are posting correctly, you can break more than you are fixing.
There are no debits and credits in the bizzaro world of Payroll. You have to choose between a + or
a -
Step 4 - Mapping Symbolic Accounts to G/L Accts
Next, you need to map symbolic accounts to G/L accounts:
Technically, the task resides in the FI module
The mapping is an Automatic Account Assignment T030 just like any other FI automatic account
Very Straightforward
Use Transaction code OG00 (shown below)
Work closely with Payroll team to coordinate how the symbolic accounts are being used
Be careful about changing the mapping. Make sure that the symbolic account you want to change
isnt assigned to another wage type that needs to post where the symbolic account is currently set to
Step 5 - Mapping HR Payees to a Vendor Acct
I described a third-party remittances feature earlier. During payroll you can also accrue
liabilities for and pay. Garnishment Processors and the other types of vendors are posted to
AP during the third-party Remittance process.
Benefit Providers
Tax Authorities
Garnishment Vendor Processors
Other deduction vendors
Garnishment Processors are directly connected to an AP Vendor:
When creating a garnishment document for an employee, the user selects an AP Vendor directly
All other types of vendors go through the third-party mapping process
The key integration point is mapping/linking the HR payee to an A/P Vendor account.
Enhancing FI/CO Updates and Cash Management
Std. R/3 Lacks an Automatic Payroll-FICO Link
As was shown earlier there is no automatic integration link between Payroll and FI/CO: The
integration between the two is manual and somewhat forced.
A vanilla implementation of Payroll with FI/CO (which SAP assumes and allows for in
standard functionality) is as follows:
Step 1: Map net payroll results (outgoing cash) to your bank clearing account or another clearing
account. This is done when you map symbolic accounts to G/L accounts.
Step 2: Manually journal from the clearing account to the bank clearing account. Done via a manual
journal entry, either FB01 or FB50.
Going with this standard approach has disadvantages:
Its cumbersome:Especially for corporations that use one company code to make payments for other
company codes.
Its error prone manual processing always allows more room for error
There is no financial link between the general ledger line items in the bank clearing account and the
check register
SAP Has Released a Solution!
Using the enhanced functionality provided in OSS 90320 you can automate your clearing journal
entries and link your G/L line items to the check register! OSS 90320 allows you to create program
RFPYHR00 in your SAP system available from Release 3.0a
Program RFPYHR00 requires the payroll result to be posted to a clearing account:
Pick a single clearing account for each company code and map it to the proper symbolic accounts
Automatically journals out of the clearing account and into the proper bank clearing account and
company code-based off of the DME run in the payment program
This program is a must-have in a cross-company code payroll scenario
Important Steps When Using RFPYHR00
Its important to do things in the following order or your updates could get out of order or you
could lose your linking of checks in the check register to line items in the G/L:
Transfer payroll to FI/CO
Create DME
Print DME
Note: If you run RFPYHR00 after creating the DME but before you print the DME your payroll
checks in the check register wont be linked to an Warning accounting document.
Key Points:
In standard R/3 you must manually transfer payroll results to FI/CO. There is no automatic
integration posting like in other parts of SAP
You can automate payroll-to-FI/CO payment postings, however, by applying OSS 90320 this creates
program RFPYHR00 in your system and RFPYHR00 is a must-have for cross-company code payroll
The Payroll Payment Program doesnt update FI/CO like it does in A/P, it only updates the check
Payroll-to-FI/CO integration is supported by configuration
Wage types are mapped to symbolic accounts
Symbolic Accounts are mapped to G/L Accounts
Mapping Payroll Payees to A/P Vendors is the key integration step for third-party
CATS can be used to spread labor costs over different cost centers
Create new payment types in the A/P payment program for payroll payments