INTRODUCTION TO ERP

Enterprise resource planning (ERP) systems are dominant business application that
allows businesses to combine a variety of different functions. In particular, ERP application
can help in the establishment of wide range of e-commerce based practises, it consists of
web-based ordering and order tracing, inventory management, and built-to-order goods. ERP
application helps companies to highlight their roles at current contemporary issues related
with business by incorporating e-commerce.

INTRODUCTION TO SAP
SAP stands for Systems Applications and products in Data Processing. It is a German
based company founded in the year of 1972 by 5 IBM engineer Claus Wellenreuther, Klaus
Tschira, Dietmar Hopp, Hasso Plattner, Hans-Werner Hector and it is located at Walldorf,
Germany. SAP is a market front-runner in providing ERP software and its related services.
SAP is the worlds 3rd biggest leading autonomous ERP software maker supporting all sizes
of businesses facilitating them to function successfully, sustainable growth and maintain
healthy competition in the current market. SAP provide a wide variety of services to its
clients with the help of its 15000+ trained and certified advisors with their superior skills
throughout 25 different industries.
SAP have beyond 3,35,000 customers in 190 nations around the world.
82,426 employees are working for SAP from 130 countries.
199 Million users.
Total 1,25,600 installation done by SAP.
SAP is a listed company it is traded as SAP in Frankfurt Exchange and NYSE.

SAP provide a wide variety of ERP applications including Financial management,

CRM, SCM, PLC management and Human capital management.

Modules of SAP

SAP FICO

SAP SD
 SAP MM

SAP HCM

SAP FICO

SAP FI means Financial Accounting and it is one of essential modules in SAP ERP
application. Financial Accounting helps in to collect and store the financial data of a
company. SAP FI facilitate to the company evaluation of financial performance of a company
in the current market. It is having link with other SAP modules like SD, PP, MM, SCM, etc.
General ledger account, Account receivables, Account payables, Asset accounting are the sub
modules of the SAP FI module.

SAP CO means Controlling is other important SAP module given to a company. It

helps in coordination, checking and optimization of organizational processes. SAP CO
comprises configuring and managing master data that have cost centre and profit centre, other
cost elements, and internal orders and functional areas. Cost centre, Profit centre, Internal
orders, COPA are the sub modules of SAP CO module

SAP SD

Sales and Distribution in SAP ERP system is one of the important module. It is helps
to store the information about customer and product of a company.SD used to control the
billing, shipping, selling and delivering of products and services of an organisation. The SAP
Logistics module helps in managing customer relationship initially from drafting a quotation
to sales order and billing of the product or service. SD module is connected with other
modules like Material Management and FICO.
 SAP MM

SAP MM is one of the important module in SAP ERP application that deals with
material management and inventory management. Material Management refers to the process
that ensures no shortage of resources to smooth supply chain process in the company. MM
helps in accelerating productivity and reducing costs. At the same time, SAP MM is pretty
useful to adapt changes that are common in any business environment. It deals with the
Procurement Process, Account Determination, Master Data & Inventory Management,
Valuation of Material, Material Requirement Planning, Invoice Verification.

SAP HCM
SAP HCM modules offers a complete and combined set of tools to support for the
organization to effective maintenance of the employees in the organisation. With the help of
SAP HCM manager can hire the best talent, ensure employee goals with business objectives,
encourage employee skills, and measure performance to provide incentives.

Basic Settings
In SAP ERP application, basic settings cover the important steps taken for configuring
basic requirement of SAP FI module. It includes following configuration

Basic settings include Define Company

Define Company Code
Allocate Company Code to Company
Define Fiscal Year Variant
Define Business Area
Define Posting Period Variant
Assign Posting Period Variant to Company Code
Define Field Status Variants
Assign Field Status Variant to Company Code
Define Tolerance Groups
Define Accounts Group
Define Retained Earning Account
Define Chart of Accounts
 Define Tolerance Groups for Employees
Define Open and Close Posting Period
Assign Fiscal Year Variant to Company Code
Assign Chart of Accounts to Company Code
Define Document Type and Number Ranges

Master Data
Master data in SAP is an important for any transaction happen in the organisation. In
the organisation production, transfer of stock, sale, purchase, inventory management etc.
These are all requires certain important information is to be maintained to carry out the
business operation well-organized manner.
FI consist of Master data like General Ledger account, Vendor master data, Customer
master data, Asset master data, Bank master data and in Controlling master data contains Cost
Element, Cost Centre, Profit Centre etc.
Document control
A document structure is a formal and comprehensive organised list of connected
documents containing their document type, document number, document part, quantity and
version. Document structures support to organize complex information by creating
information units. Document control helps to manage the whole documentation on a complex
product, which contains text file, some technical drawings, films containing operating
instructions and various service manuals. A document control is formed to maintain
document info record. The document control contains text items and document items. Only
we need to enter certain amount of data as general item data.

Posting control
Two numeric character is used simultaneously with account number to control the
posting at line item level. The posting key determines Account type, Debit/credit posting,
Layout of entry screens. When we enter a posting, we need to enter a posting key for all item.
This key controls how the item is posted in an account. Posting keys is applying for all
company code because it is defined at client level.
The posting key regulates the data that entered in the line item, how these data is to be
processed, how the system helps in updating the data that you entered. Some of the posting
keys are 40- G/L account debit posting, 50- G/L account credit posting, 01- Customer
invoices, 11- Customer credit memos, 25-Vendor payments etc.

Clearing
Settlement of open debit entries with the of open credit entries can be called as
Clearing. General Ledger accounts maintain open item in all customer or vendor accounts to
Clear the item. Clearing process can either be automatic or manual. In the manual clearing,
we need to select the open items to match items for clearing. automatic clearing refers to a
program that control what items need to be cleared based on some pre-determined open item
selection conditions and proposes obligations before clearing the assigned items. Irrespective
of type of clearing, the system generates a clearing document with the details that contains
clearing number in each of the cleared open items. The clearing number is derived from the
document number of the clearing document.

Parking Documents
When we need, any clarification regarding some account that time Parking documents
is used. We can temporarily store or park this document until it cleared or approved then we
can post documents. Parking is not update of an accounts. It simply stores the document,
whereas posting will update the accounts in terms of increase or decrease of the account
balances. The Transaction Code for Parking Documents is F-02 enter the necessary details,
go to the menu click on document and Park the document. To post a parked document
Transaction code is FBV0, go to the menu Document and Post the document.

Other Transaction Codes pertaining to Parking of Documents are as follows

FV50: Post / Delete: Single Screen Transaction
FBV3: Display
FBV4: Change Header
FBV5: Display Changes
FBV6: Refuse

Automatic payment
 SAP ERP application records all the transactions made by a business to help in
managerial decisions. Every business has to make payments to its suppliers for their
purchases, and also to the customers in case the product is returned from the customer
because of damage for this the payment had been made earlier. It turns into problematic to
track the payments which is due and to be made and make these payments manually.
The Automatic Payment Program analyses that which line items are due for payment
and then processes the payment by one of the different methods that are predefined in the
Automatic Payment Program configuration. The APP also helps in netting of line items that is
in case payments and receipts from the same business partner, and then SAP helps in find the
net value of the payment to be made or received and consequently processes the business
transaction. The APP uses the payment terms that are defined in the customer and vendor
masters to determine which line items are due or receipt for payment.

Dunning program
Dunning program refers to a notice to the vendor or customer to make payment on
unsettled invoices. It usually consists of a letter that summarizes the invoices that are due and
politely requests to make payment. At the time of customizing dunning program, we need to
create dunning area at which level dunning has to be done, like business area level or
company code level then only we can make settings for dunning procedure.
The dunning program helps in create and send letters to the customers. Who have not
paid their debts within a specified time range and to remember about their unpaid payments.
the dunning program maintain track record of a customers payment behaviour in the
database to provide this important information to appropriate organizations.

Correspondence
Correspondence can be formed at the time of particular transaction processing in a
business or for already created transaction postings. With the help of the Email and fax the
Correspondence can be sent to customer/ vendor. Correspondence is basically in letter form.
Correspondence can be formed collectively or individually, ad-hoc or via automated batch
job.

Correspondence type Correspondence Description

SAP01 Payment notices

SAP06 Account statements

SAP07 Bill of exchange charges statements

SAP09 Internal documents

SAP10 Individual letters

SAP11 Document extracts

SAP13 Customer statements

New GL Accounting

The main task of G/L accounting is to deliver a complete picture of an external

accounting and accounts. It Records all the transaction carried by a business in a software
system that is fully connected with all the other departments of a company to ensures that the
accounting data is always accurate and complete. New G/L Accounting helps in fulfilling the
legal requirements. General Ledger Accounting also fulfils other requirements like Parallel
Accounting, Integration of Legal and Management Reporting, Segment Reporting, Cost of
Sales Accounting.

Receivables and Payables

The Accounts Receivable in SAP ERP Application records and controls accounting
data of all customers of an organisation. It is also an integrated part of the sales management.
Transactions posted in Accounts Receivable are automatically recorded in the General Ledger
Account. The system comprises a variety of tools that helps in monitor open items, such as
account analyses, due date lists, flexible dunning program and alarm reports. The
correspondence is connected with these tools can be individually formulated to suit the
organisational requirements.

The Accounts Payable in SAP ERP application records and control accounting data
for all vendors of the organisation. It is also an integrated part of the purchasing system,
because invoices and deliveries are managed according to vendors. The Account payable
system automatically makes the postings in response to the running transactions. Payables to
the vendors are paid through the payment program. The payment program helps in checks
and transfers the payment because it supports all standard payment methods and it also
supports country-specific payment methods.

Accruals and Deferrals

Accruals arises before of a payment or receipt. Deferral arises after a payment or

receipt. There are accruals for revenues and for expenses. There are deferrals for revenues
and for expenses. Accrual of an expense is the reporting of an expense and the interrelated
liability in the period in which they happen, and that period is previous to the period in which
the payment is made. An example for accrual expense is the electricity used in the month of
December, but the payment will be made in the month of January. Accrual of revenues is the
reporting of revenues and the interrelated receivables in the period in which they are earned,
and that period is previous to the period of the cash receipt.

Expenses that was paid in one period, but it will be reported as an expense in a later
period is called as Deferrals of Expenses. A deferral of revenues refers to receipts in one
accounting period, but they will be earned in future accounting periods.

Organisational Structures

Organisational structure in SAP ERP system is a hierarchical diagram that shows how
the entire organisation is mapped in SAP. It includes some organisational units of various
modules created for a particular business related reasons and that are grouped together.
Organizational units include legal company entities, profit centers, sales office etc. It handles
particular business operations. Defining organisational structure in SAP ERP application is
fundamental process of any implementation project. The design is primarily defined by the
business situations performed in an industry. once the enterprise structure in SAP is
determined by the process owner, it will affect many things such as how to perform a
transaction and generate report within SAP.

Master Data for Asset Class

 Asset master can create by copying an existing asset in the same company code or
another company code, it can be also being created from the scratch when it is done for the
first time again while creating the master, SAP allows to create multiple asset in one go,
provided, all such asset is similar.

Asset master data shows the details about the assets, it contains Asset number, Asset
description, Asset sub number, Account determination, Quantity, Item number, Date of
capitalisation, Date of acquisition, Cost centre, Business area, Equipment class, Vendor,
Licence number, Manufacturer, Depreciation area, Depreciation key, Useful life of the Asset.

Asset Transactions

Asset transaction comes under Asset accounting it helps in identify individual

business transactions. A transaction need to be entered for each transaction that affects assets.
Either entry can be posted through manual transaction or in the automatic, based on
specifications made in FI-AA Customizing. Each transaction type is assigned to a transaction
type group. Transactions that effect the procurement and production costs of fixed assets this
includes procurement, retirements, transfer postings, post-capitalization, Manual
depreciation, Down payment, Write ups.

Periodic processing & valuation

SAP ERP application use certain functions and reports in Payment Engine to perform
tasks on a particular date in a determined time cycle. These reports are grouped under
periodic processing. SAP ERP helps in customizing settings to control the number and
distribution of the tasks or jobs running in parallel on a particular server and the maximum
number of processes permitted for parallel processing.

Periodic valuation makes it possible to valuate and select actual data which are
previously posted to Profitability Analysis. Periodic valuation strategy determined specially
for the point of valuation. This function is available for the incoming sales orders and billing
data as well as user-defined record types.
Special GL transactions

Special G/L transactions are special transactions in accounts payable and accounts
receivable that are displayed separately in the subledger and general ledger. This may be
necessary for internal reasons or reporting. For example, Down payments should not be equal
with payables and receivables for goods and services. Subsequently, these are treated as
special General ledger transactions in the General Ledger Accounts Payable and Accounts
Receivable application components. Special General Ledger transactions are already
available in the standard system. We need to change the specifications or define our own
special G/L transactions.

Document Splitting

Document splitting refers to dividing the line item according to selected dimension. it
will divide by profit center wise or segment wise or business area wise. We can use document
splitting to automatically split line items such as receivable lines by profit center or to affect a
zero-balance setting in the document for selected dimensions. This includes Segment, Profit
centers, Business areas, Funds, Receivables, System, customer fields. The system creates
additional clearing lines in document splitting. Document Splitting is a new feature SAP to be
able to bifurcate costs incurred in one Document for different accounting and controlling
purposes.