[S/4HANA Accruals Management] [Cloud version] Q2 – How is the Purchase Order Item converted into S/4HANA Accrual Engine?
Hello there! This series blogs about S/4HANA Cloud Accruals Management – Purchase Order Accruals, are created specially for you.
- Business users who would like to know the features and logic
- Functional Consultants who would like to know the features and logic, and in addition, design based on SSCUI capability
- Technical Consultants who would like to know the features and logic , and in addition, extend default logic by leverage the SAP Cloud BAdI capability
requisite to understand this blog:
- [S/4HANA Accruals Management] [Cloud version] Q1- What kind of Purchase Order Item is Accruals relevant?
In case you still don’t have the answers yet for above question, you are welcomed to visit it before plunge into the sea.
Q2 – How is the Purchase Order Item converted into S/4HANA Accrual Engine?
Before starting into discussion, let’s review a very simple architecture for the conversion logic.
In the SAP S/4HANA Accruals Management – Purchase Order Accruals ,
- An accrual object represents a purchase order.
- An accrual sub object represents a purchase order item that is subdivided based on the account assignments.
To better answer this question, I draw a chart flow with step sequences. Allow me to explain the logics one by one.
① Check Accruals Relevancy for the purchase order item
This step is mainly to check ‘What kind of Purchase Order Item is Accruals relevant’. This part is already explained in last chapter.
② Classify Purchase Order Item
This step is to classify the purchase order item. With SAP S/4HANA Cloud there are pre-delivered accrual classifications.
- SDELS – Lifetime dates from delivery schedule
- SPERP – Lifetime dates from performance period
How does this fit into a real business world? To help you better understand the basic logic, I will list example for each item categories.
a) Standard Item
In most cases for materials purchasing, expense to be accrued for a purchase order item will be distributed by delivery schedule (SDELS), this is what we call ‘Standard Item’
b) Lean Service Item
In most cases for service purchasing, a purchase order item is ‘Service (2)’ (not a ‘Limit item’) in product type and ‘<Blank> – Standard’ in item category., we call it ‘Lean Service Item’. For this kind of purchase order item, expense to be accrued will be distributed by performance period in a linearization way (SPERP).
c) Limit Item
In some case for service purchasing, you only know the maximum amount of service but have no clue whether/when/how much you will use the service. The purchase order item is created with a ‘Limit Item’, (the item category is ’A- Enhanced limit’), then expense to be accrued will be distributed by performance period in a linearization way (SPERP).
③ Determine Expense Accrual Period
This step is to determine over which period should the expense to be accrued. This period is defined by the characteristics Start of Life and End of Life.
Based on the classification in step ②, there are Standard Item, Lean Service Item and Limit Item,
- A. For Standard Item, expense to be accrued will be distributed by delivery schedule. Taking consideration of when you create the purchase order, you will find the expense accrual period as below.
- Start of Life = Minimal (creation date of the purchase order: earliest delivery date of the purchase order item)
- End of Life = the latest delivery date of the purchase order item
- B. For Lean Service Item and Limit Item, expense to be accrued will be distributed by performance period in a linearization way. Since there is a dedicated start and end date maintained in purchase order item, you will find the expense accrual period as below.
- Start of Life = period of performance start date
- End of Life = period of performance end date
④ Determine Accruals Calculation Model
This is to determine how the accruals should be calculated in each period.
Technically, system uses the combination of Accrual Item Type and Accrual Methods to generate the Accrual sub objects.
- A. For Standard Item, the accrual items of such an accrual object are created with a default method for planned costs based on delivery schedule.
- In most cases for this purchase order item, the Expense Accrual Period has zero impact on the accrual calculation.The only exception is that, you define the accrual item for planned costs with ‘cost distribution’ accrual method. In this case, the total amount of the accrual sub object will be distributed using life start and end dates.
- B.For Lean Service Item and Limit Item, the accrual sub objects are usually using accrual methods with distribution for planned costs.
By default, SAP S/4HANA Accruals Management cloud version has been released with default Accrual Item Types and Accrual Methods, with assignment to the document type/item category/accrual classification. This default settings ensure that the Accrual Engine calculates the accrual amounts for each period using the correct algorithm.
Accrual item type SCSTPLN calculates the planned costs of the purchase order item (based on account assignment) for each period.
- Plan Costs Accruals Accrual Method SPLN_LIN_P means planned cost with linear distribution per period.
- Plan Costs Accruals Accrual Method SPLN_DELSL means planned cost based on delivery schedule.
Now let’s go through the process again with business scenarios (a deeper level into calculation and posting logic will be explained in a separate chapter)
a) Standard Item
For example, a purchase order item for 9 pieces of cake with a price of 1 € each are created with below delivery schedule and with one account assignment.
|Delivery Schedule in PO item||Planned Cost for Accruals Calculation|
|15 June||2 pieces||1€ * 2 = 2€ (June)|
|15 July||3 pieces||1€ * 3 = 3 € (July)|
|15 Aug||4 pieces||1€ * 4 = 4€ (Aug)|
With accrual calculation method SPLN_DELSL, the planned costs for accrual calculation are derived from the delivery schedule, you would find the planned cost at right side.
b) Lean Service Item
For example, a purchase order item for consulting service which will perform from 01.June to 31.Aug. The consultant should work 9 days with a daily cost rate of 1000 €.
Accrual calculation method SPLN_LIN_P assumes that the consultant works the same number of days in each period. The planned costs for accrual calculation will be,
|Planned Cost for Accruals Calculation|
|1000€ * 3 = 3€ (June)|
|1000€ * 3 = 3€ (July)|
|1000€ * 3 = 3€ (Aug)|
c) Limit Item
Typical example: You order a repair service for your coffee machines for up to 9000 € for the first quarter. You purchase the service using a limit item with period of performance of 01.01. until 31.03. and limit of 9000 €. The planned costs for accrual calculation are 3000 € in January, 3000 € in February and 3000 € in March. As nobody is drinking coffee, the coffee machines do not need any repairs. You do not get any invoice for the limit item. However, you accrued 3000 € every month.
I hope you could now answer the question, How is the Purchase Order Item converted into S/4HANA Accrual Engine? If not, go through the blog once again. Don’t hesitate to raise your further questions in the comments side and let the experts help you.
Now, if you fully understand the function and logic, get yourself ready for next chapter!
[S/4HANA Accruals Management] [Cloud version] Q3 – How can I influence the way Purchase Order Item converted into S/4HANA Accrual Engine? (SSCUI + Cloud BAdI)
or back to review what you’ve understand so far.
[S/4HANA Accruals Management] [Cloud version] Purchase Order Accruals one-stop-shop