This is the second post on the series of posts on SAP Financials: Integration with Other SAP Modules.
1.1 SAP Process and Modular Integration in Brief
By integration, we mean how various SAP Modules relate to allow for seamless process and transaction flows end-to-end. Our scope in this book is concentrated around how various SAP Modules integrate with SAP ERP Financials. SAP Finance is the foundation module of SAP where all transactions of finance relevance ends. We discuss, in the coming chapters, what necessary settings must be done in all relevant sap modules, to ensure seamless process and transaction flow.
1.1.1 SAP MM/SAP FI Process and system Integration
SAP Material Management Module is a part of the SAP logistics Modules and it addresses all the process of procure-to-pay cycle; it is fully integrated with the other SAP modules such as S&D, FI and PP. The MM process starts from sending Purchase requisition to Vendors, to the receipt of goods, billing and payment.
The figure below shows a typical procure-to-pay process flow:
The MM process starts with the pre-purchase activities. Meaning the first contact with the Vendor, involving the processes of raising purchase requisitions, asking for request for quotations from potential suppliers, and evaluating quotations.
Next, you raise a purchase order from the chosen supplier. This step and the one above are purely MM Process with no accounting impact.
The next step after the purchase order is the receipt of the goods ordered from the supplier/vendor. This process triggers the integration between SAP MM and SAP Financials. The good receipt process generates both FI and MM documents.
The next step after receiving the goods is the receipt of the invoice for goods supplied by the vendor. This step triggers the Logistics Invoice Verification Process that generates both FI and MM documents.
The final step in the procure-to-pay cycle is the payment of the supplier invoice and the clearing of the open item.
1.1.2 SAP SD/SAP FI Process and system Integration
Sales and distribution module, (like the Material Management module), is part of the SAP logistics Modules and it addresses all the process of order-to-cash cycle; it is fully integrated with the other SAP modules such as MM, FI and PP. The S&D process starts from sales enquiry from customers to delivery, billing and incoming payment.
The figure below shows a typical order-to-cash process flow:
The SD process starts with the pre-sales activities. Meaning the first contact with the customer, involving the processes of receiving customer Inquiries and sending quotations to Customers.
If the Customer decides to send a Purchase Order, then the next step in the sales process is to raise a Sales Order.
The next step after the sale order is the delivery of goods to the Customer. This is the integration trigger point between the relevant SAP modules of SD, MM and FI.
The billing process follows the delivery of goods to customers. The billing process impacts the SAP modules of SD and FI.
The final step in the order-to-cash cycle is the receipt of the incoming payment from the customer and the clearing of the customer open item.
1.1.3 SAP Payroll /SAP FI Process and system Integration
The payroll process involves all the processes (employee master data maintenance, relevant calculations, DME processes) that lead to payments of employees entitlements (basic remunerations, special payments, overtimes and so on).
Like the other modules of SAP (MM, S&D etc.), the Payroll is integrated with SAP Financials through defined integration points (DME Processes, posting to accounting, posting third party remittances).
The figure below shows a typical payroll process flow:
By “release payroll” we mean carrying out all the necessary process steps (selecting of payroll area, payroll period, locking employees records) to allow for payroll processing. It means the payroll record is set to “release for payroll”.
Start or Run payroll means executing the payroll run for the selected parameters and performing corrections (in case of errors). During error correction, the master records are unlocked for correction and payroll record is set to “release for correction”. After the correction, the payroll is run again for the affected employees.
By “exit payroll”, we mean the payroll control record is set to finalized, allowing for additional processing such as posting to accounting and third-party remittance.
Please note that up to now, we are only in SAP payroll, and SAP Financials are not affected, and therefore, no integration process is triggered.
The Data Medium exchange (DME) processes involve the evaluation of payroll results and creation of the payment data (pre-DME) and sending this data in an acceptable format (in accordance with the DME type) to the bank.
The DME Process triggers the integration of SAP Payroll and SAP Financials.
Posting to accounting, as the name implies is the posting of the payroll results to accounting. The system by this action generates accounting documents.
Third Party Remittances functionality processes payments to external payees (third party vendors) through the transfer of financial posting data from SAP Payroll to SAP Financials.
1.1.4 SAP Travel Management/SAP FI Process and system Integration
The SAP Travel Management Module takes care of all the processes around employees’ travel including requesting and planning a trip, and accounting the travel expenses. The SAP Travel management is part of the modules of SAP Financials and is fully integrated with SAP FI.
The figure below shows a typical travel management process flow:
SAP Travel Management process starts with the traveler creating a travel request in the system, subject to approval by his supervisor or approving manager. The travel request may have information such as the reason for the travel, the destination, the travel duration, the estimated cost of the trip and the requested advance.
The next process after the approval of the travel request is the Travel Planning. This includes the hotel bookings, flight bookings, car rentals and so on, in accordance with the policies and procedures of the organization.
The Travel Expense process includes the completion of the Travel Expense Report after the trip has already taken place. This entails entering data and receipts about the trip. The system, by this process determines reimbursement to or deduction from the employee as an outcome of the trip, and carry out postings of the expenses in accounting.
1.1.5 SAP Loans Management/SAP FI Process and system Integration
SAP Loans Management Module is the module of SAP that manages all aspects of the Loans life cycle. It covers all the process from inquiry by the customer to the expiration of the loan contract.
The figure below shows a typical SAP Loans Management process flow:
The new business cover all the processes of the loan creation lifecycle. It covers process from Customer enquiry of the loan, the application process, the decision on the loan application, contract offer, the acceptance and the creation and disbursement of the Loan Contract.
From the integration point of view, the early stages of the “new business” process does not trigger any integration of SAP LM /CML to SAP FI. It is only upon contract creation (status 60) that such integration happens, (both through master data and transaction integration).
The position management covers processes that affects the loans position. This includes processes around debit positions, repayments, accruals and deferrals and so on. Again, these processes cut across SAP Loans Management and SAP FI.
The cash flow disturbances covers process around the management of changes to the contract due to the inability of the customer to settle installments of receivables due on the loan. Process like reduction, underpayments, arrears, write-offs and waivers and so on are covered here. From integration point of view, these processes cut across SAP Loans Management and SAP FI.
The expiration of contract covers processes around the expiry of the loan contract. This may be through successful execution of the contract (full settlement of the loan as per schedule), early payoff, write-offs, and cancellation and so on.
The brief discussion on the process flow above has set the stage for our subsequent discussions of relevant SAP modules integration with SAP Financials. Our focus will be on only those processes identified as been triggers for integration between SAP modules. The other processes that are relevant only to individual modules and with no impact on integration, will only be discussed when reference to them contribute to a particular discourse.
Starting from the next post (the 3rd in the series) we will start the discussion on “SAP Financials Integration Techniques”.
Please do share your thoughts on this topic. We would love to hear your comments and suggestions.