Purchasing - A/P

Contents:
◼ Introduction to the Procurement Process
◼ Purchasing Items
◼ Purchasing Service
◼ Troubleshooting Issues in Purchasing
Purchasing - A/P: Business Example

◼ You purchase your warehouse goods from external vendors. Normally, you
use the purchase order document to order goods. In some cases, however,
you submit your order by phone and your vendor delivers the items
immediately. In this case, the process modeled in the system must be as short
and quick as possible.
◼ If the delivered goods do not meet your quality standards, you want to return
them to your vendor. This can happen either before or after you have received
the invoice.
◼ You purchase services such as web design and landscaping from vendors
using purchase orders. Other services such as electricity or rent are
purchased without purchase orders.
Purchasing Items: Unit Overview Diagram

Purchasing - A/P
Topic 1: Purchasing Items
Topic 2: Purchasing Services
Topic 3: Troubleshooting Issues in Purchasing
Purchasing Items: Process Overview

System Configuration

Master data

Warehouse management
Marketing
Inbound Outbound
Purchasing & Service
logistics logistics
Sales
Production

Financial controlling

Purchase Order Goods Receipt A/P Invoice Outgoing

PO Payment
Purchase Order

◼ 10 printers are currently in stock

◼ We order 5 more from our vendor
◼ Five appear on the inventory reports as ordered
◼ 15 will be available to promise,
◼ Although only 10 are physically in stock

◼ Purchase Order Definition: A purchase order is a commercial document issued by a buyer to a seller specifying the
items (goods or materials) or services—along with agreed-to quantities and price—that the seller will provide the buyer.
◼ Accounting and Inventory Effects: When a purchase order is added in SAP Business One, no value-based
accounting changes occur. However, the order quantities are listed in inventory management. You can view items and
quantities on order in various reports and windows, such as the inventory status report and the Item Master Data
window. Obviously, having such real-time access to this information can play a key role in optimizing a company’s
purchasing and inventory management business processes.
Key Master Data in Purchasing: Vendor

One or more control

accounts for
vendors

Possible
transactions
◼ All purchasing
transactions

Vendors
◼ There are three types of business partner master records in SAP Business One: vendors,
customers, and leads. Vendor data identifies who is supplying the goods and services.
• You use vendor master records in purchasing to handle all purchasing transactions.
Accounting manages the relevant transactions in one or more control accounts.
• Vendor codes are alphanumeric and must not overlap with the G/L account numbers. The
codes must not contain mathematical operators, since these would be misinterpreted by the
SQL database. Underscores, however, are allowed.
◼ Beforepurchasing documents can be created, the vendor must be entered in the SAP
Business One list of business partners.
◼ To locate existing vendor information, either click on the button to the right of the Vendor field in
the document header or press the Tab key in the Vendor field. The List of Business Partners
appears in a pop-up window.
◼ Ifyou are authorized, you can enter new vendor information while creating a purchasing
document. To do so, click on the New button on the bottom of the List of Business Partners
pop-up window.
◼ Ifyou plan to issue the vendor a check or bank transfer using the payment wizard, make sure
you have defined the payment method in the vendor business partner master data record.
Addresses in the Purchase Order

Company / Purchase Order

Warehouse Vendor
Logistics Tab

Ship to Address

Pay to Address
◼ It
is important to understand how the Ship to and Pay to addresses are used in the
purchasing process.
◼ Ship-toaddress come from two places, depending on the setting chosen for the
Service/Item Type field.
◼ Thecompany ship-to address is displayed under the Logistics tab and is defined in the
Administration module. This address is used for service-type purchasing documents.
◼ The warehouse ship-to address is used for purchasing documents with items. The
address is taken from the warehouse associated with the first row in the document.
This setting is found in Document Settings → Use Warehouse Address. Warehouse
addresses can be set up and changed in Setup → Inventory → Warehouses.
◼ Pay to address: This information is displayed under the Logistics tab and is defined in
the vendor business partner master data record. Make sure the Pay to address is the
one you want for a given purchase since this information prints on the check when
payment is issued.
◼ Addresses can be overwritten inside a purchasing document.
Key Master Data in Purchasing: Items

Item master fields useful In purchasing

◼ Preferred Vendor
◼ Manufacturer Catalog Number
◼ Purchasing Unit of Measure
◼ Customs group for imported items
◼ Tax information
◼ In the purchasing process, item master data identifies what is being purchased.
◼ Frequently the same items are purchased, inventoried, and sold. The information is the same; it is
just used differently. This is the advantage of using an item master record which can be copied into
any document in the purchasing, sales, production, MRP, inventory, and service modules.
◼ The header of the item master data record contains general information about the item, including a
unique ID number assigned by the user, a description (including a description in a foreign language),
and settings to determine the type of the item, the group it belongs to, the price, and the applicable
price list. Checkboxes on the right indicate whether the item is kept in inventory and whether it is
offered for sale or purchase (in many cases both apply). The item can be marked as a fixed asset
with another checkbox.
◼ The General tab of the Item Master Data window has a mix of information about the manufacturer of
the item, additional identifiers, shipping methods, and issue method.
◼ The Purchasing Data tab indicates the main vendor who sells the item, how to identify the item in a
catalog, the units of measurement used for the item for purchasing purposes, and the actual size of
the item. For items with a purchasing history, you can click on the chart icon on the lower left of the
tab to display a graphical purchase analysis.
◼ Ina purchasing document, you can locate the List of Items (goods and materials), by pressing the
tab key from the Item No. field in the document’s Contents tab. From the resulting pop-up window,
you can select from the list or enter new data by clicking on the New button.
 Document Document - Drafts Document
Vendor / Customer Y1000 Vendor / Customer Y1000 Vendor / Customer Y1000

Save
Item Descr. Quantity Price as Item Descr. Quantity Price Item Descr. Quantity Price
Add
A03 Printer 20 249,90 Draft A03 Printer 20 249,90 A03 Printer 20 249,90
B10 Cartridge 40 4,50 B10 Cartridge 40 4,50 B10 Cartridge 40 4,50

◼ You can save every document of sales or purchasing as a draft. When you enter a document you can choose File →
Save as Draft.
◼ Drafts are often used when approval is needed to create a purchase order. The document is saved as a draft, then
the draft document is forwarded to an approver. Once the document is approved, the purchase order is added and a
copy is sent to the vendor.
◼ You can display a list of all the document drafts. Choose either Sales - A/R → Sales Reports → Document Drafts
or Purchasing – A/P → Purchasing Reports→ Document Drafts.
◼ You can select all the documents that you have saved as drafts. By double-clicking a document in the list, you can
display it and edit the data. If you choose Add you add the document.
◼ Draft documents remain in the system after they have been further processed.
◼ Important note: you specifically have to remove drafts that you no longer need.
Documents Output

Document
Vendor / Customer Y1000

File → Send → E-mail File → Send → Fax

A03 Printer 20 249,90

B10 Cartridge 40 4,50

File → Preview File → Print File → Export

File (PDF, Text, XML, MS Word,

MS Excel, or Image)
Print Preview Printout

Y1000 Y1000 Y1000

A03 20pcs 49,90 A03 20pcs 49,90 A03 20pcs 49,90

B10 40pcs 4,50 B10 40pcs 4,50 B10 40pcs 4,50

Total 1178 Total 1178 Total 1178

... ... ...
Goods Receipt PO

◼ 10 printers are currently in stock

◼ We ordered 5 more from our vendor
◼ The vendor delivers 5
◼ After goods receipt, 15 are in stock
◼ Definition ofa Goods Receipt PO: In SAP Business One, a goods receipt PO is created when you
receive goods from a vendor. In most companies, the person in the warehouse or the office
responsible for taking delivery of shipments executes the goods receipt PO. For services, the person
for whom the services are rendered usually issues the document.
◼ How to create a goods receipt PO: A goods receipt PO can be created new by selecting the
document name in the module menu, or it can be built from an existing purchase order. If you are
basing your goods receipt PO on an existing PO, you may copy all the data contained in the PO or
use the draw document wizard to select the data to copy from one or more existing Purchase orders.
Even if you copy all data from an existing PO you can still adjust quantities and prices—as well as
dates, vendor, and item information—before you post (add) the document.
◼ Regardless of how you create your goods receipt PO, there should be no differences between the
data in the goods receipt PO and the vendor’s shipping document (packing slip) sent with the items,
because the details in the vendor’s document are legally binding. If there are any discrepancies
between the base PO data and the vendor’s shipping document, you should resolve them with the
vendor before you post your goods receipt PO.
◼ Accounting and Inventory Impact of a Goods Receipt PO: It is essential that the quantities and
prices in your goods receipt PO match the vendor’s shipping document. Unlike a purchase order, a
goods receipt PO cannot be amended after it has been added to SAP Business One because it
triggers both inventory and (when using perpetual inventory) accounting transactions.
Two options to create a follow-up document: Copy
to/ Copy from
Copy to
◼ Open saved document to copy
◼ All items copied to new
document
◼ No options available on how
items are copied
◼ However, you can delete items
and adjust quantities after
copying
Copy from
◼ Enter business partner in a new
document
◼ Choose one or multiple documents
from a list
◼ Draw document wizard allows you
to:
◼ customize rows and quantities
copied
◼ select the exchange rate to use
◼ Purchasing documents build on each other. Often, a purchase order becomes a goods receipt PO
that records the vendor’s delivery and finally an A/P invoice when the vendor’s bill is received.
◼ Youcan quickly copy a document to the next document in the sequence using the Copy To button.
The original document is called a base document; the document you create from it is called a target
document. Building one document from another saves time and effort. It also reduces the
possibility of errors.
◼ When you copy all of a base documents items and quantities, it will be closed and you will not be
able to copy it again to another document.
◼ The other method for copying a document is Copy from. The Copy From button allows you to select
a base document or documents from which to create a new document. Clicking Copy From starts
the draw document wizard.
◼ Oftenthe first step in building one document from another is locating the base document you want
to use. For example, goods may be delivered to a warehouse and a goods receipt PO needs to be
entered. How do you find the relevant purchase order? One tool for locating such documents
quickly is the Open Items List. The report shows all open documents of the type you select in the
drop-down list in the upper right. You can then select the relevant purchase order, for example, and
create a goods receipt with a single click on the Copy To button. When one document is built from
another in this fashion, all the relevant information is copied from the base document to the new
document, reducing both data entry time and errors.
Effects of the Goods Receipt PO

1
4

3 2

◼ Once the Goods Receipt PO is added to the system it has the following consequences:
1) The purchase order (base document) cannot be changed.
2) The goods receipt PO creates a journal entry to increase inventory value, and therefore cannot be changed.
3) The system updates the stock quantity in inventory.
4) Items that have been partially or completely delivered appear in light gray in the purchase order document.
When all items are received, the purchase order status changes to Closed.
◼ Note: The journal entry is created only when you run perpetual inventory, however the quantity is increased
regardless of type of inventory method.
A/P Invoice

◼ You receive an invoice from the vendor for the 5 printers

◼ You enter an A/P invoice to reflect the vendor invoice
◼ The A/P invoice is the basis for payment to the vendor
◼ Definitionof an A/P invoice: An A/P invoice is entered into SAP Business One when you a receive an
invoice from the vendor. It will be used to trigger a payment to the vendor.
◼ How to enter an A/P invoice: You can create an A/P invoice new by selecting the document name in
the module menu or by basing it on one or more POs or goods receipt POs. If you are basing your A/P
invoice on one or more existing purchasing documents, you may copy all the data contained in the PO
or use the draw document wizard (see Chapter 10) to select the data to copy from one or more existing
POs or goods receipt POs. Even if you copy all data from existing purchasing document(s), you can still
adjust quantities and prices—as well as dates, vendor, and item information—before you post the
document.
◼ Data entry tip. Use the Document Date field in the A/P invoice header to enter the vendor’s invoice
date. This is important for accounting and auditing reasons as the invoice date and the posting date may
differ. You may also wish to change the name of the Vendor Ref. No. field in the document header to
Vendor Invoice No. This field prints on the check and allows your vendor to tie the payment to their
invoice.
◼ Accounting Impact of an A/P Invoice: The posted A/P invoice generates entries in the general ledger
and updates the vendor account with the amount owed to the vendor.
◼ Inventory Impact when a Goods Receipt PO is not referenced: In those cases where a vendor’s
invoice arrives at the time the items are received, the resulting A/P invoice also increases inventory
quantities and values.
Effects of the A/P Invoice

4 3

1 2

Quantity increases only if no prior

goods receipt is referenced.

◼ Once the A/P Invoice is created in the system it can have the following consequences:
1) The Goods Receipt PO increased the stock value earlier. Only if there is no goods receipt PO are the stock values
updated when an A/P invoice is entered.
2) The A/P invoice creates a journal entry to update the vendor’s balance to show the amount due.
3) You cannot change anything in the A/P invoice that would affect the journal entry once the invoice is added to the system.
4) On the goods receipt PO, items that have already been partially or completely invoiced display in light gray. If the invoice
is for the full quantity on the goods receipt PO, then the goods receipt PO status changes to Closed.
Postings in Purchasing Process for Inventory
Items
Item Category:
Inventory Item
Sales Item
Purchased Item
Fixed Assets

Allocation Allocation
Stock Acc. Acc. Vendor
Acc.
100 100
100 100
◼ When you buy inventory items, the system creates the following journal entries:
• The goods receipt PO creates a journal entry that posts the value of the received goods to the
debit side of the stock account and to the credit side of an allocation costs account. The stock
account and the allocation costs account are retrieved from the Inventory Account field and the
Allocation Account field on the Inventory Data tab of the item master record.
• The A/P invoice creates a journal entry that posts the invoiced amount to the debit side of the
allocation costs account and to the credit side of the vendor account. The allocation costs account
is retrieved from the Allocation Account field on the Inventory tab of the item master record.
◼ You need the allocation costs account to check if the goods receipts PO and the A/P invoices match.
You need to reconcile this account on a regular basis.
◼ Ifyou directly post the A/P invoice without first creating a goods receipt PO, the postings to the
allocation costs account are omitted.
◼ To post a purchase order, choose Purchasing – A/P → Purchase Order.
◼ To post a goods receipt PO, choose Purchasing – A/P → Goods Receipt PO.
◼ To post an A/P invoice, choose Purchasing – A/P → A/P Invoice.
◼ Thisgraphic does not cover tax postings or postings of additional revenues and expenses. The
purchase order document is not relevant for accounting.
Document Flow in Purchasing

1 2 3

Warehouse
(Quantity)

General Ledger
(Value)
◼ Aftera document has been added, you can navigate from a document to preceding and
follow-up documents by using the Base Document and Target Document icons.
◼ Now that we have finished the first three steps in the procurement process for items, let’s
review what happens when each document is added.
1) Purchase Order: When you enter a purchase order, no value-based changes are posted in
Accounting. However, the order quantities are listed in inventory management. You can view
the ordered quantities in various reports and windows such as the inventory status report and
the item master data window.
2) Goods Receipt Purchase Order: When you enter a goods receipt PO, the goods are
accepted into the warehouse and the quantities are updated. If your company runs a
continuous stock system, SAP Business One creates the relevant postings to update the stock
values as well.
3) Accounts Payable Invoice: When an incoming invoice is posted, the vendor account is
updated in Accounting.
• If a goods receipt PO is not referenced by the A/P, the stocks also increase when the invoice
is posted.
Payment Processing

◼ We owe the vendor for 5 printers

◼ An A/P invoice has been entered for the amount owed
◼ You create an Outgoing Payment according to payment terms
◼ The journal entry:
◼ Reduces cash (credit)
◼ Decreases the amount owed to the vendor
Purchasing Services: Unit Overview Diagram

Purchasing - A/P
Topic 1: Purchasing Items
Topic 2: Purchasing Services
Topic 3: Troubleshooting Issues in Purchasing
Item / Service Type

Document In Purchasing (and sales)

you can set your documents as
Service Customer C00001 either Item type or Service
Name Smith type.

Description G/L Account Price Document

Item Customer C00001

Name Smith

Item No. Description Quantity Price

Create a Service Invoice

Vendor Invoice Vendor

Master Data

◼ Vendor name ◼ Vendor number

◼ Invoice number A /P Invoice ◼ Vendor name
◼ Invoice date ◼ Address
◼ Description ◼ Vendor number ◼ Payment terms
◼ Amount due ◼ Invoice number ◼ Payment method
◼… ◼ Invoice date ◼…
◼ Description
◼ G/L Account
◼ Total due

Enter data Default data

Check for duplicate invoice
numbers
Postings in Purchasing Process for Non-Inventory
Items
Item Category:
Inventory Item
Sales Item
Purchased Item
Fixed Assets

Expenses Account
EU Expenses Acc.
Foreign Expenses Acc. Vendor
100 100
Troubleshooting Issues in Purchasing:
Unit Overview Diagram

Purchasing - A/P
Topic 1: Purchasing Items
Topic 2: Purchasing Services
Topic 3: Troubleshooting Issues in Purchasing
Partial Deliveries and Overdeliveries

Goods Receipt PO
Purchase Order
Vendor Y1000
Vendor Y1000

#
#
1 6
1 10
2
2 15
3
3 2

1) Overdelivery 2) Add Items

Goods Receipt PO
Goods Receipt PO Goods Receipt PO
Vendor Y1000
Vendor Y1000 Vendor Y1000

#
# # 1 4
1 1 2
2 20 2 3
3 3
4 1
Goods Returns

Allocation
Stock Acc. Acc.
100 100

◼ 20 scanners were ordered and delivered

◼ 2 scanners were damaged in transit
◼ Use the goods return to return the scanners
to the vendor for credit Allocation
Stock Acc. Acc.
100 100

Warehouse
(Quantity)

General Ledger
(Value)
◼ The Goods Returns is the clearing document for a Goods Receipt PO.
◼ When you enter a goods returns, the goods are issued from the warehouse and the quantities are
reduced. If your company runs a continuous stock system, SAP Business One creates the relevant
postings to update the stock values as well.
◼ To reverse a specific Goods Receipt PO, create the goods returns based on it, provided that an A/P
Invoice has not yet been created for that Goods Receipt.
◼ Ifyou have already entered an A/P Invoice for the transaction, use the A/P Credit Memo function to
carry out quantity and value-based corrections in the system.
◼ When you return goods to a vendor, goods cannot be received again with reference to the existing
documents. When the goods are delivered again, you can either enter a delivery without a reference
to a purchase order in the system, or duplicate one of the preceding documents.
◼ Beginning with release 8.8, when a Goods Return is created without being based on a previous
document, the value of a moving average item is the current item cost calculated for the item and not
the unit price entered in the goods return document.
Credit Memo for Purchasing

Allocation
Stock Acc. Costs Acc. Alloc. Vendor
100 100 100 100
◼ 50 CD boxes were ordered, delivered
and invoiced
◼ 5 boxes were defective
◼ Use the credit memo to return items
for credit when an A/P invoice exists Stock Acc. Vendor
100 100

Warehouse
(Quantity)

General Ledger
(Value)
◼ You can use the credit memo document for goods returns that the vendor has already invoiced. The
credit memo then updates the stock quantities and corrects the values in accounting.
◼ You can create a credit memo using services to correct amounts without affecting inventory.
◼ When you create the credit memo, the system finds the same accounts that were used to post the
invoice and posts a negative value to them.
◼ Itis a requirement in certain jurisdictions, e.g. Spain, that sales and purchase credit analysis is
shown separately in the Profit & Loss account to the normal sales and purchase accounts. Account
determination functionality is extended to determine which Profit & Loss accounts are updated on
the posting of sales and purchase credit notes. This functionality allows a user to specify different
posting accounts for sales revenue and sales credits. It also allows the user to specify different
posting accounts for purchase expenditure and purchase credits. If not for any legal requirement this
functionality is useful for analysis purposes when seen directly on the face of the chart of accounts.