- By Surajit Mohanty
Introduction
Organizations often transact with affiliates or entities within the Group for inventory/services. Selling companies typically don’t manage inventory in their warehouses but drop ship products from a centralized warehouse. SAP Advanced Intercompany Sales AIS automates the intercompany process. This article explores SAP AIS and its benefits.
What is SAP Advanced Intercompany Sales AIS?
SAP AIS was introduced with S/4HANA 2022. Transfer prices and Intercompany profit were further improved with S/4HANA 2023.
The typical cross-company dropship process starts with a sales order in the selling company and delivery from a separate company, as shown in Figure 1. The delivery company creates an intercompany billing document that generates an intercompany supplier invoice in the selling company. These documents support arms-length transfer prices. However, these documents are still linked to the external customer invoice, which is a potential audit concern.
AIS automatically creates an intercompany purchase order in the selling company code, a corresponding intercompany sales order in the delivery company code, and a sales order in the selling company code. These three documents carry the transfer and external customer prices and integrate with intercompany billing, supplier invoices, and external customer invoices. Figure 1 shows an advanced intercompany sales flow overview.
Figure 1: SAP Advanced Intercompany Sales Flow
Key Features of SAP Advanced Intercompany Sales AIS
SAP AIS offers the following six features to improve intercompany transactions:
1. Intercompany Purchase and Sales Order Automation
AIS automatically creates an intercompany Purchase Order for the selling company with the transfer prices, as shown on the top left in Figure 2. This purchase order uses internal intercompany Business Partners and a receiving plant in the selling company, such as the Transit Plant, shown in Figure 3.
Figure 2: Purchase Order and Sales Order
An Intercompany Sales Order is added to the delivery company code as shown in Figure 2.
Figure 3: Transit Plant in the Selling Company Code
2. Automated Intercompany Billing
The solution automates the creation of intercompany invoices, eliminating manual data entry. It guarantees that invoices adhere to tax regulations in the jurisdictions of both the selling and delivering entities, ensuring consistency and compliance.
3. Transparent Pricing and Profitability
SAP AIS provides transparent pricing between entities. It considers transfer prices, markups, and taxes to determine accurate revenue and costs, helping businesses stay profitable and comply with regulations. You maintain a purchase Info record in the selling company code, and the same pricing can be copied to the Intercompany sales order, as shown in Figure 4.
Figure 4: Example of Transfer Prices maintained in Purchase Info Record
4. Seamless Document Flow
SAP AIS automates creating and synchronizing sales orders, delivery documents, and invoices between selling and delivering entities. This seamless document flow ensures that all stakeholders have access to the transactional data.
5. Compliance with Tax and Legal Requirements
The separate purchase order and sales order to handle the buy and sell create the boundaries that tax authorities seek in any Intercompany sales.
6. Enhanced Reporting and Analytics
The solution offers a value chain monitor, as shown in Figure 5, the central app to manage the end-to-end document flow. This app can be used to drill down and manage any document.
Figure 5: Monitor Value Chain App
How SAP Advanced Intercompany Sales Works
Let’s look at the typical workflow of an intercompany sales transaction:
- Sales Order Creation: A customer orders from the selling entity. The sales order is created in SAP, capturing all relevant details, such as the product, quantity, and pricing. The delivery plant is a plant from the delivery company code. This cross-company code plant triggers this order's advanced intercompany sales process step.
- Purchase Order in Selling Company: This order will be automatically created using the purchase info record-based transfer prices.
- Sales Order in the Delivery Company: This will also be automatically created in the delivery company code
- Outbound Delivery: This is manually created for external customer sales orders. As soon as the post-goods issue is completed, the system triggers the Stock in Transit SIT based goods movements, as shown in Figure 6.
Figure 6: Stock In Transit movement types
SIT integration moves the title or ownership of the inventory from the delivery plant to the selling plant in several steps, as shown in Figure 7.
Figure 7: Stock In Transit Steps
Step 1: Movement from unrestricted Stock in the delivery plant to Stock in transit
Step 2: Goods Issue from Stock in transit of delivery plant (Intercompany Cost of Goods Sold Posting in Delivery company code)
Step 3: Goods Receipt into Unrestricted Stock in Selling Transit Plant (Selling Company Code)
Step 4: Goods transfer from unrestricted stock to stock in transit in the selling plant (External Customer shipment)
Step 5: Goods Issue from stock in transit to external customer (cost of goods sold posting in the selling company code)
Billing Documents and Supplier Invoices: As soon as goods movements are complete, the external customer Invoice (F2 Billing Document) and Intercompany billing (IV2) will need to be created (this can be scheduled using background jobs) as shown in Figure 8. The intercompany supplier invoice will be automatically created. This is the concluding step of the AIS process
Figure 8: Billing Documents and Supplier Invoice
SAP AIS ensures transparency, accuracy, and compliance, making intercompany sales seamless.
Use Cases for SAP Advanced Intercompany Sales
SAP AIC is particularly beneficial for organizations in industries such as:
• Manufacturing: Where production in different regions supplies products to central sales entities.
• Wholesale and Distribution: For companies managing extensive global supply chains.
• Pharmaceuticals: To comply with regulatory and tax requirements across multiple countries.
Conclusion
SAP AIS helps organizations simplify and automate intercompany processes and achieve financial and operational harmony. Pricing, billing, compliance, and reporting enable businesses to operate more efficiently and transparently. For enterprises with global operations, SAP AIS provides robust and compliant intercompany trade management as companies expand internationally.
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