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There are three possibilities for period-end when you’ve activated the material ledger:
Let’s discuss each in detail. By activating SAP Material Ledger, you may or may not affect your current period-end processing steps as follows:
You can choose standard or moving average price for inventory valuation. Let’s discuss each method in detail. You change the price control indicator with Transaction MM02 or by following menu path:
Logistics • Material Master • Material • Change
Navigate to the Costing 2 view to display the screen shown in Figure 1.
Figure 1: Costing 2 View Valuation Data Section
You typically retrieve the standard price for purchased materials from purchasing info records during a costing run. Purchasing info records store vendor quotations per material and represent an estimate of plan purchase price.
When you purchase materials valued at standard price, you post a purchase price variance (PPV) during goods and invoice receipt if the actual purchase price is different from the material standard price. Since PPV represents the difference between plan and actual purchase price you can use it as a measure of your purchasing department performance. You may have Purchasing analyze and explain an increase in unfavorable PPV postings at period-end. You can easily analyze PPV postings if you nominate the purchasing cost center as the receiving cost object for PPV expense account postings and then run a standard cost center report. Let me show you how.
Businesses have leveraged Enterprise Performance Management (EPM) technologies to improve profitability by bringing significant improvement in financial and operational insight. With Enterprise Performance Management (EPM), improved operability and reduction of the cost of ownership with direct integration into SAP S/4HANA platform provides integrated analytics solutions.
Our Approach is based on expertise, experiences, best practices in your industry, and methodologies using pre-packaged content – Starter Kits and pre-configured applications supporting the BPC components.
Businesses have leveraged Business Planning and Consolidations (BPC) for a year now and are now challenged by working with several new products at the same time, including SAP Business Warehouse (SAP BW) 7.4/7.5, the Enterprise Performance Management (EPM) add-in, version 10.0 SP30 (frontend for standard SAP BPC), and SAP Analysis for Microsoft Office (frontend for embedded SAP BPC) and they need to decide if they need to go to BPC Embedded, Cloud or BPC S/4 HANA Standard.
Parallel Valuation in Asset Accounting
Many companies operate in multiple regions and countries. Therefore they need to report on their fixed assets based on various legal and valuation frameworks. SAP S/4HANA provides the tools and processes to fulfill these parallel valuation requirements. Still, some of those requirements could be technically challenging to meet, such as when different fiscal year variants need to be used in the different valuation frameworks.
The fiscal year variant (FY variant) determines the financial periods and their calendar assignments, which are used to post documents in financial accounting.
I'm writing a book on SAP Product Cost Planning and in the process getting a better understanding of the importance of cost component views in product cost estimates.
The cost component split and cost component views provide valuable insight into a cost estimate. Setting up cost components correctly in a cost component structure leads you to a multi-faceted understanding of a product cost within a single cost estimate. At the beginning of the implementation our priority was to develop standard costs and we ignored additional information we could have obtained with a better understanding of cost component views.
Many SAP installations experience long run-times during Material Ledger close. This Blog explains a function that can help expedite Material Ledger close.
Knowing how much a product costs is essential to determining actual profitability. Yet most decisions are based on the standard cost of the product, given that it is not always easy to get an accurate picture of the actual cost. Actual costing functionality provided by the Material Ledger component of SAP Controlling bridges this gap. It provides the ability to capture actual costs by tracking variances at the material (product) level. This section provides an overview of actual costing in SAP Material Ledger.
Writing an effective S/4HANA business case is both a science and an art. As a business and digital transformation specialist, this continues to be my most important takeaway.
The science part is easier to handle. SAP provides you with tools and you probably have your own that you devise and use such as metrics and KPIs which assist you determine the quantitative aspects of what you want out of S/4HANA.
Art is the more difficult aspect since no two customers are alike. You can't use a one size fits all approach. I approach each business case discussion with a minimum set of success factors or criteria. Here are a few of the key components:
Business drivers: Don't forget the word business in ‘business transformation’. You need to derive your business case for implementing/converting to S/4HANA from your enterprise corporate strategy & KPIs
Pain points: Most organizations hate this cliché but there's no escaping it. You can rephrase it to challenges or maybe improvements needed. This aspect is related to business drivers but whereas business drivers are strategic, pain points are tactical and emanate from the business user community
Key success factors (KSFs): Qualitative key factors such as better user experience, opportunities for innovation and real-time analytics
Stakeholder analysis: Even the most air-tight business case will not succeed if you do not have the right level of stakeholder engagement and support. So, it is important that you analyze and ensure that you maximize stakeholder buy-in
Organizational readiness: Some organizations do not consider an assessment of their organizational readiness before embarking on a business transformation journey. There needs to be an organic appetite for change
Let's me move to the science aspect of an S/4HANA business case. SAP provides customers with many tools to help quantify their case for S/4HANA. Among the tools we employ are SAP Transformation Navigator and Business Scenario Recommendations (BSR). Some customers use their own tools, techniques snd calculations. Popular financial KPI's include Net Present Value (NPV) and Internal Rate of Return (IRR). KPIs can be leveraged in every functional/business process area the business transformation is covers.
Building a powerful business case for your S/4HANA journey requires extensive planning and execution. If you would like to learn more on this important topic, please attend my session How to Build a Business Case for S/4HANA during SAP Controlling Conference in San Diego, CA, October 7-10.
GR/I
R is the SAP process to perform the three-way match – purchase order, material receipt, and vendor invoice. You use a clearing account to record the offset of the goods receipt (GR) and invoice receipt (IR) postings. Once fully processed, the postings in the clearing account balance.
Clearing is performed at the purchase order (PO) line item level based on quantity entered. Price variance and exchange rate variance are calculated. You can write off small differences using transaction MR1.
Purchase Price Variance
This discussion assumes you are using standard price control (S) for purchased materials. The quantity and amount on the GR and IR postings are important. You must have posted GR to record purchase price variance (PPV). There is no PPV posting for just IR. There can be additional variance postings on IR after GR is posted for differences between PO price and actual price paid.
When posting GR, the price variance is based on the PO price, unless IR has already been posted, then it is based on actual price paid. If IR has already been posted, the GR will be based on the IR up to the quantity of the IR, after that is will use the PO price again.
After all postings to a PO line item, the net PPV posted will be the difference between the actual price paid and the standard cost of the material.
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