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Commitment Management in SAP #2 The

process
Assumption for this blog
This is the second blog in the series of blog on Commitment Management. It is a good idea to read the previous blog
before you read this blog.

The blog refers to Cost Center as the cost object. However, any reference to Cost Center will apply similarly to
Internal Order and Project as Cost Objects.

The process of Commitment Management


Commitment process flows through 5 stages:

Create Commitment

Use Commitment

Fulfil Commitment

Report Commitment

Carry Forward Commitment

Create Commitment
Commitments are created against cost center when purchasing documents are issued for delivery of goods or
services to that cost center.

There are three factors in a Purchase Order that affect creation of commitments:

Purchase Order value: The commitment amount is the amount of the Purchase Order in purchase order
currency. SAP converts this transaction currency to Local Currency, Group Currency and Controlling Area
currency.

Account Assignment: Only Purchase Orders against cost centers, internal orders and projects create
commitments. The commitment is created in combination of that cost object and the corresponding cost element
specified in the Purchase Order

Delivery Date: Commitment will only reflect in the period in which the commitment is due for delivery. For
example, if the delivery date on a Purchase order falls in period 12/2011 and you execute the commitment report
for period 11/2011, this Purchase Order will not reflect as a commitment.

Below is an example of a Purchase Order against cost center 1324

The cost center report reflects the commitment amount, which is the amount of the Purchase Order.

Use Commitment
Commitments are used or Commitment amounts are reduced when goods or services against these purchase orders
are received. If the goods or service receipt is a partial receipt, then the balance on the purchase order is the
outstanding amount of commitment.

Upon goods receipt: For every goods receipt performed against the cost object, the system reduces the
commitment value and increases the actual cost

Upon invoice receipt (where Goods Receipt indicator is not set on Purchase Order): For every invoice receipt
performed against the cost object, the system reduces the commitment value and increases the actual cost

I performed a partial goods receipt against the Purchase Order 4500017205 that I had created above.

This partial goods receipt (amount $1,225) reduced the amount of commitment and increased the amount of actual
cost.

Fulfil Commitment
The commitment amount reduces to zero in the following situations:

If the goods or service receipt is a full receipt against the purchase order, then the balance on the purchase order
is zero and the commitment is fulfilled and the outstanding amount of commitment is zero.

When delivery completed indicator is set on the Purchase Order to indicate that no further goods receipt are
expected against that Purchase Order item

I will set the delivery completed indicator on the Purchase Order line item to indicate that the balance of 50 units will
not be delivered.

This released the amount of commitment and set the commitment from this Purchase Order to zero.

When Final Invoice indicator is set on Purchase Order to indicate that no further invoices are expected against
that Purchase Order item. This has the same effect as setting the Delivery Complete indicator. It resets the
commitment amount to zero.

I created a Purchase Order 4500017207 with no GR required. After a partial invoice, I will set this Purchase Order to
Final Invoice.

This will release the commitment and set the balance to zero.

If you set the lock or mark for deletion indicator on the Purchase Order / item

Report Commitment
Commitment amount is information available for reporting. SAP has standard reports that compare the cost objects
budget against actual and commitment. There are several standard reports. Below are two commonly used reports.

You can do this from

Controlling > Cost Center Accounting > Information Systems > Plan/Actual Comparisons > Cost Centers:
Actual/Plan/Commitments

Plan amounts have been updated against the cost center 1323 as part of the planning cycle.

At the time this report was executed, the cost center has incurred actual costs of $1.225 against cost element
621030.

There are outstanding Purchase Orders worth $ 4,025 against the same cost element.

This means that the total assigned or utilised amount against cost element 621030 in cost center 1323 is $ 5,250
($1,225 + $ 4,025).

This compares to plan amount of $ 2,083.24. The available amount is (negative) $ 3,166,66. This means that the cost
center 1323 has over spent an amount of $ 3,166.66 against cost element 621030 for third party fees compared to
the plan.

You can also execute the report to compare budget against commitment and actual
Controlling > Cost Center Accounting > Information Systems > More Reports > Range: Actual/Budget/Commitments

There are further reports to list Commitment line items. You could drilldown to this line item report from any of the
above reports.

If you want to create your own report and use Commitment as a field in that report, then Commitment amount is
available as a field in Library xxx Table xxxx

Carry-forward commitment
At the year-end, customers should carry forward the outstanding commitments to the next fiscal year. Commitments
are carried forward to the first fiscal period of the next fiscal year. For example, outstanding commitment of period
11/2011 is carried forward as commitment of period 01/2012.

You can do this from

Controlling > Cost Center Accounting > Year-End Closing > Commitment Carryforward

Conclusion
The process to create and fulfil or carryforward commitments is very simple. The transaction to post Commitment
occurs in the background as users process business transactions. Commitment values are then available as
information for reporting purposes.

Commitment Management in SAP is an easy-to-setup and easy-to-use feature in SAP. In the next blog, I will explain
the steps to activate and configure Commitment Management.