SLA

• A service-level agreement (SLA) defines the level of service expected by a customer from a
supplier, laying out the metrics by which that service is measured, and the remedies or penalties,
if any, should the agreed-on service levels not be achieved. Usually, SLAs are between companies
and external suppliers, but they may also be between two departments within a company
KPI
• A Key Performance Indicator is a measurable value that demonstrates how effectively a company
is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their
success at reaching targets. High-level KPIs may focus on the overall performance of the enterprise,
while low-level KPIs may focus on processes in departments such as sales, marketing, or a call
center.

Failure Modes
• Failure Mode and Effects Analysis (FMEA) is a tool used to When a process, product or service is
being designed or redesigned, after quality function deployment.
• When an existing process, product or service is being applied in a new way.
• Before developing control plans for a new or modified process.
• When improvement goals are planned for an existing process, product or service.
• When analyzing failures of an existing process, product or service.
• Periodically throughout the life of the process, product or service
Best Practices
• A best practice is a method or technique that has been generally accepted as superior to any
alternatives because it produces results that are superior to those achieved by other means or
because it has become a standard way of doing things, e.g., a standard way of complying with
legal or ethical requirements.
Best practices are used to maintain quality as an alternative to mandatory legislated standards and
can be based on self-assessment or benchmarking

Difference Between KPI and SLA

SLA: Service Level Agreement (SLA) is an agreement between two parties regarding a particular
service. SLA must contain quantitative measurements.
• Represent a desired and mutually agreed state of a service
• Provide additional boundaries of a service scope (in addition to the agreement itself)
• Describe agreed and guaranteed minimal service performance
• Example: Reaction time, Resolution time, Compliance to agreed deadlines
KPI: On the other hand, Key Performance Indicators (KPIs) are metrics that target service
providers organization objectives – both tactical and strategic. Usually, these metrics are used to
measure:
• Efficiency and effectiveness of a service
• Service operation status.
• KPI examples (organization or service oriented): average reaction time for all customers, service
desk employee load, incoming ticket volume trend, required capacity to fulfil SLA promises to
customers
Summary – SLAs are about minimal, expected and agreed quality of a service provided to a
customer; however, KPIs are about desired operation efficiency and organization goals.
It is important to measure both service level compliance and key performance indicators in order
to keep promises and excel service quality.

What is a month-end close?

Before we get down to the nitty-gritty of month-end closing procedures, you need to learn what it is.
So, what is a month-end close? In accounting, a monthly close is a series of steps a business follows
to review, record, and reconcile account information.

Businesses perform a month-end close to keep accounting data organized and ensure all
transactions for the monthly period were accounted for.

Before you can begin closing your books, you need to round up some information. Some
information you need to gather before you close your books may include:

• Revenue totals

• Bank account information

• Inventory levels

• Petty cash fund amount

• Financial statement information

• Balance sheets

• Total fixed assets

• Income and expense account information

• General ledger data

Keep in mind, each business’s month-end accounting procedures can vary depending on the type of
business, accounts, and accounting method.

Month-end closing process

To keep your accounting books as accurate as possible, you need to stay organized. Use the tips
below to ensure your month-end close process runs smoothly.
1. Record incoming cash

When closing your books monthly, you need to record the funds you received during the month.
Some incoming cash you might need to record includes:

• Revenue

• Loans

• Invoice payments

Compare your invoices with your records to make sure you are not missing any customer payments.
Make sure you sent an invoice to every customer you completed work for during the month. If you
find any discrepancies, fix them right away.

For example, say you did not receive payment from your customer, John. Contact John to inform him
of the missing payment. And, let John know about any late fees associated with an unpunctual
payment.

2. Update accounts payable

Chances are, you probably do not have time to record transactions every day. If this is the case, make
sure you write down your purchases and organize receipts. That way, you can keep your accounts
payable in tip-top shape for your monthly close.

After tracking your transactions, record them in your books at the end of each week or month.
During your monthly close, cross-check your records to make sure you paid all bills and invoices.

3. Reconcile accounts

During your month-end close process, you need to reconcile all your accounts. To do this, match
your records to your account statements from outside entries, such as the bank. Make sure your
records for the month are accurate by performing a bank statement reconciliation.

Typically, you can break your accounts down into three categories:

• Cash, checking, and savings accounts

• Bank loans and notes

• Prepaid or accrued accounts

Start with one of the above categories and work your way to the others. Divvying up the records
when reconciling your bank statement can help you stay organized and catch errors at month-end.

4. Review petty cash

If you use petty cash or have a petty cash fund, you need to account for those at month-end, too.

Record all the receipts for items you purchased using petty cash. Make sure your receipts and
records match the balance of your petty cash fund. If it does not, chances are you are missing a
transaction.

To compare your petty cash fund to your records, physically count the leftover cash in your fund. If it
does not match up, you might be missing a receipt. Or, you might have forgotten to record the used
petty cash in your books.

5. Look at fixed assets

Your fixed assets are long-term items that add value to your business. Things like buildings,
equipment, furniture, vehicles, and land are considered fixed assets.

Your fixed assets usually do not convert directly into cash. And because fixed assets are generally
larger purchases, they can depreciate over time.

When closing your books at the end of the month, record any payments related to your fixed assets.

6. Count inventory

If you want to make sure your inventory is correct, you need to perform monthly inventory counts.
Counting your inventory monthly allows you to accurately record inventory levels in your books at
month-end. Plus, doing a monthly inventory count can help you decide what items you need to
replenish and how frequently.

You might need to monitor some types of inventory more than others. If you do not accurately track
your inventory, you could experience problems like inventory shrinkage. Say you own an ice cream
shop and you have milk in your inventory. Because milk can spoil, you would need to check your
perishable food inventory more frequently.

Use your inventory count to adjust and reconcile your books when you complete your end-of-the-
month procedures.

7. Organize and review financial statements

At month-end close, you have the responsibility of organizing and reviewing all your financial
statements. These mainly include your:

• General ledger

• Business balance sheet

• Profit and loss statement

Consistently organize your statements each month. That way, you are not scrambling at month-end
looking for documents. One way to stay organized is by using basic accounting software to track
your transactions and store your reports.

You can also use your financial statements as an opportunity to improve your small business. For
example, when you review your statements, you might notice that you have been spending a lot of
money for a product that is not selling. You might decide to use cheaper materials to produce the
product. Or, you might decide to switch up the product altogether.

Reviewing statements can help you catch issues early on, like overspending, and prevent problems
later with your books.

8. Check revenue and expense accounts

At month-end close, review your revenue and expense accounts to confirm they are accurate. Check
to see if you recorded your expenses in the correct accounts for the period. Be sure that accruals and
prepaid expenses are recorded accurately in your books.

9. Review information before closing

Before you completely close the accounts at month-end, consider having a second set of eyes review
your work. The person reviewing your accounting information could be a manager or supervisor who
has experience handling your books.

If you do not have another person you can ask to review your information, double and triple check
your own work to ensure the information is accurate.

10. Prepare for next month

To keep on top of your monthly accounting responsibilities and cut down on time spent closing your
books, create a monthly financial calendar. Your calendar can help you prepare for closing your
books for the next month. And, your calendar can help you avoid falling behind on your books.

On your calendar, plan out when you are going to collect reports, record transactions, and close your
books. Establish a closing date by which all expenses and income must be posted. Be sure to
communicate the closing date with anyone who has access to adjusting the ledger.

As time goes on, you can tweak your calendar if you find a process and order that works better for
you and your business.

Importance of closing your books monthly

Closing your books monthly is essential for your business. It can show you your business’s financial
information and what areas you need to improve in. Closing your books monthly can also help you
make decisions about your business’s finances, prevent costly mistakes, and prepare you for tax time.

If you are not completely sold on the idea, here are the pros of closing your books monthly (in a
nutshell):

• Keeps your financial statements and books accurate

• Makes tax filing simpler

• Backs you up during an audit

• Gives you a clear snapshot of your business’s financial condition

• Prepares you for the future

• Prevents future accounting mistakes

GR/IR Clearing
Overview
GR/IR (goods receipt/invoice receipt) clearing is a function that you execute to clear
the Purchases in Transit and Unbilled Payables accounts when both the goods
received and the associated invoices have been recorded in the system. This
determines any differences between the values of the goods receipts and the invoices.

Purchases of goods and services involve the following events:

▪ Receipt of the goods or services

 ▪ Receipt of the invoice

▪ Payment

Since the final cost is not usually known until the invoice has been received and paid,
GR/IR clearing is necessary to value each of these events as accurately as possible.

You execute GR/IR clearing as a run in the Inventory Accounting work center, GR/IR
Clearing view.

To enable each purchasing transaction to be valued at actual cost, the transactions

entered at different times must be matched up and, if necessary, revalued.

The following cases are possible:

▪ The goods or services are received before the invoice.

▪ The invoice is verified and entered before the goods or services are received.

To correctly handle each case, the system uses clearing accounts in addition to the
inventory and expense accounts:

▪ Unbilled Payables: Goods or services that have been received but not invoiced

▪ Purchases in Transit: Goods or services that have been invoiced but not
received

If the prerequisites below are met, the two clearing accounts are posted each time
goods or an invoice is received, regardless of whether the counterpart event has
occurred. This maintains a consistent accounting process for similar business
transactions (goods receipt or invoice receipt).

Once both the goods and the invoice have been recorded in the system, the clearing
accounts must be cleared against each other by means of a GR/IR (goods
receipt/invoice receipt) clearing run.

Prerequisites
 ▪ You have entered purchase orders in Supplier Relationship Management
(SRM) during the procurement process.

▪ You have entered third-party purchase orders in Supply Chain Management.

▪ You have entered all transactions (receipt of goods/services and invoices) that
result in postings on the GR/IR clearing accounts with reference to a purchase
order item. This enables the transactions to be matched up.

▪ The goods receipt is valued with a nonzero value.

▪ The following checkboxes are selected in each purchase order item:

▪ Goods and Services Receipt Expected

▪ Invoice Expected

▪ Evaluated Receipt Settlement

Account Movements
The following account movements (disregarding tax postings) take place when you
enter the receipt of the goods or the supplier invoice:

▪ Goods Receipt

The inventory or expense account is debited with the provisional value of the
delivery (purchase order price x quantity delivered). With material inventories, the
valuation can differ. Accounts from the following groups can be used, depending
on the transaction:

▪ Material Stock

▪ Fixed Asset Inventory

▪ Material Consumption

▪ Expenses for External Services

▪ Deferred Costs
 The GR/IR clearing account Unbilled Payables is credited with this value.

When purchases are for immediate storage in stock, you can value the material
with two different cost methods: Standard or Moving Average. With
the Standard cost method, the difference between the inventory value and the
purchase order value is posted to the valuation differences account.

▪ Invoice Receipt

The supplier account is credited with the value of the invoice.

The GR/IR clearing account Purchases in Transit is debited with the value of
the invoice.

The clearing run can be started once both the receipt of the goods for a purchase
order item and the receipt of the invoice have been confirmed in the system. You
can set up a clearing run depending on your own requirements and also set its
frequency as you require. The run first compares quantities to determine the
quantity for which both a goods receipt and an invoice have been confirmed.
Based on this quantity, the system determines the values to be cleared.

The clearing run:

▪ Values the common goods receipt/invoice receipt quantity with the invoice
value per unit of measure and clears the Purchases in Transit account
with the resulting amount

▪ Values the common goods receipt/invoice receipt quantity with the value
per unit from the goods or services receipt (purchase order price) and
clears the Unbilled Payables account with the resulting amount

▪ Allocates price differences caused by valuation differences to the original

account of the goods or services receipt (exception: standard price)

▪ Posts exchange rate differences to a separate exchange rate difference

account and not to the original account used for the goods or services
receipt
 ▪ Allocates any differences that arise when materials are purchased for
immediate storage in stock to the Price Differences account instead of
the material stock account

The following balance sheet accounts are required when stock materials are
purchased:

Assets:

▪ Inventories

▪ Purchases in Transit

Liabilities:

▪ Trade Payables

▪ Unbilled Payables

Note
These accounts are included in the standard charts of accounts.

Posting Example
Goods Receipt
Your supplier delivers 10 pieces of an item for a total value of EUR 500 (Standard cost
method).

The system posts this goods receipt to the relevant asset account for materials. The
offsetting account is Unbilled Payables.

Invoice Receipt
The supplier sends an invoice for 10 pieces with a total value of EUR 550.

The system posts this invoice to the Payables account. The offsetting posting is
to Purchases in Transit.
To value the goods receipt with the actual procurement costs, and therefore account for
any value differences between the goods receipt and the invoice, you start the clearing
run.

The clearing run performs the following calculations and postings:

1. Calculates the average price per piece based on the goods receipt and the
invoice

2. Determines the quantity that applies to both the goods receipt and the invoice

3. Multiplies this quantity by the previously calculated average price

4. Debits or credits the clearing accounts with these values

5. Compares the valued goods receipt with the valued invoice

Since you selected the Standard cost method for the material, the difference is posted
to a separate price differences account.

Postings
In this example, the GR/IR clearing run generates the following postings:

1. Goods receipt:

Debit Material, credit Unbilled Payables EUR 500 (10 ea.)

2. Invoice receipt:

Debit Purchases in Transit, credit Payables EUR 550 (10 ea.)

3. GR/IR clearing:

Debit Unbilled Payables EUR 500 (10 ea.) + Price Differences EUR 50 (10
ea.), credit Purchases in Transit EUR 550 (10 ea.)

Tools and Reports for GR/IR

The following transactions are useful for GRIR processing and reporting:
 • CKM3N - Material Price Analysis

• FBL3N - G/L Account Line Item Display

• FS10N - G/L Account Balance Display

• F.13 - Automatic Clearing

• F.19 - Analyze GR/IR Account and Accrual

• ME23N - Display PO History

• MR11 - GR/IR Account Maintenance

• MB5S - List of GR/IR Balances

• MR11SHOW - Display/Reverse MR11 document

• KKML0 - Material Ledger Drilldown Reporting

Maintaining Exchange Rates

Use

If you have to calculate customs values, such as invoice amounts and transaction costs, in different
currencies, the appropriate exchange rates must be maintained in the system. You can define an
exchange rate for each worklist and exchange rate type and change the status according to how you
configured your system. The system always uses the most up-to-date exchange rate when
calculating customs values.

You can also upload the exchange rates that a country's customs authorities define for a certain
interval and publish on their Web sites. These exchange rates are the basis for value information, for
example, and the dependent calculation of customs duties for a transaction.

Prerequisites

You have configured a worklist with a maintenance interval and a tolerance in percent for each user,
and source and target currencies with an exchange rate quotation for each exchange rate, using the
following Customizing activities:

▪ SAP NetWeaver General Settings Currencies Define Worklist for Exchange Rate Entry
 ▪ SAP NetWeaver General Settings Currencies Assign Exchange Rate to the Worklist

Procedure

In the area menu, choose Customs Management Master Data Other Currencies.

Maintain Exchange Rates

1. Choose Maintain Exchange Rates.

2. Select the worklist for which you want to enter or update an exchange rate.

3. Choose Enter Exchange Rates for Worklist.

The system displays an overview of all the exchange rate types within your worklist.

4. Choose Fill Date Fields with Default Date, if appropriate. For each exchange rate type, the
system copies the current date into the Valid to column. If you want to define the start of the
validity period separately, enter the appropriate date in the Valid from column.

5. Enter the exchange rate.

a. If you want to enter the exchange rate as a 1:1 relationship between the source and
target currency, enter the exchange rate in the Rate 1:1 column.

b. If you want to enter the exchange rate as a different relationship, enter the exchange
rate in the Exch. Rate column. Use the Ratio column to specify the relationship
between the source currency and the target currency.

6. Save your entries.

Uploading exchange rates

1. Choose Upload Currency Exchange Rates

2. Choose the exchange rate type

3. Choose the to-currency into which you want the system to convert the values in the customs
declaration. The to-currency is the local customs authorities' currency. If you need a reference
currency for exchange rates, enter it as the to-currency.

4. Choose the file format in which your country's customs authorities provide the exchange
rates from the dropdown list.

5. If you want to start a test run first, set the Test Run flag.

6. Choose Execute.

7. A dialog window appears in which you select the file where you saved your authorities'
exchange rates.

8. When you click Open, the system uploads the exchange rates.
Document indexing is the process of associating or tagging documents with different “search”
terms. If we go back to the example we’ve been using about invoice document management, there
are a number of ways we might want to search for an invoice:

• Invoice number

• Vendor name

• Purchase order number

• Or maybe even what was bought

However, every organization is different; you might need to search by date or department. The point
is that indexing is a path to the documents. That path is based upon your business processes and
your staff.

There are also different types of indexes. If your documents are text documents, you might have
indexed the documents for full text search where you can find a phrase contained in the documents.
All document management systems have some level of system indexing too. Default system indexing
might be the date or document type or some other identifier that describes the document. In our
example we’ve been using an invoice, we might search for invoice number. Or we might have given
the document a document type of “invoice” so we can search on all invoices.

No matter what indexes we use, the power of document indexing is revealed when we do a search
later on. Remember in our example where there was a problem with an invoice? Now imagine that
the invoice and all associated documents were related via a sales order number so that when we
searched for the invoice in the system all the related documents also were immediately available.

Setting up the indexes is one of the key factors in having a successful document management
implementation.

Procure-to-Pay (PTP) process (T-codes) in SAP

1. ME21N - Create Purchase Order: to create a purchase order in SAP. It allows users to specify the
vendor, material, quantity, and other relevant details for procurement.
2. ME22N - Change Purchase Order: users can make changes to an existing purchase order. They can
modify quantities, delivery dates, pricing, or any other relevant information.
3. ME23N - Display Purchase Order: enables users to view the details of a purchase order. It provides
access to information such as vendor, material, quantities, delivery dates, pricing conditions, and
associated documents.
4. ME2N - Purchase Orders by PO Number: Users can use this T-code to search and display purchase
orders based on specific criteria such as purchase order number, vendor, or material.
5. MIGO - Goods Movement: MIGO is used to perform goods receipt, goods issue, or stock transfer
within SAP. It updates inventory levels and financial records based on the movement of goods.
6. MIRO - Enter Invoice: MIRO is used to enter vendor invoices in SAP. It allows users to match
invoices with purchase orders or goods receipts, ensuring accurate financial recording.
7. FB60 - Enter Incoming Invoice: used to manually enter an incoming invoice that is not associated
with a purchase order. It is typically used for services or expenses without a procurement process.
8. F-53 - Post Outgoing Payments: F-53 is used to post outgoing payments, such as vendor
payments, in SAP. It updates the accounts payable and general ledger records accordingly.
9. FBL1N - Display Vendor Line Items: to display line-item details for a specific vendor. It provides
information on invoices, payments, and open items associated with the vendor.
10. F-58 - Payment Run: F-58 is used to execute a payment run, which generates payment
documents for multiple vendor invoices based on defined selection criteria.
11 F-03 - used for GL and BP clearing.
12 BP - It has all the details of the vendor.
13 ME2L - purchase orders by vendor
14 F110 - Automatic Payment Program
Automates the payment process by selecting vendor invoices due for payment, generating payment
files, and posting the payment documents in the system, widely used for regular payment runs.
15 ML81N : To enter purchase of services : This T- code is used to maintain record of all the services
that are procured.
16 MB5B: Material Report
17 SU01D: see the user
18 ML84 : PO details
19 FB03- To view financial document number
20 MIR4- To view material base document number
21 FBRA - To reverse clearing document
22 F-48 for Advance payment
23 MD04 - Display Stock/Requirements Situation
24 Sq00- sap query
25 VL03N - display shipment
26 Vt03N - outbound delivery
27 MR8M- cancel invoice document.
28 FBV0- delete duplicate FI documents.
29 F-44 Used for BP Clearing
30. ME51N-Create Purchase requisition
31.ME52N-Change Purchase Requisition
32. ME53N- Display Purchase Requisition
33.ME54N-Purchase requisition
34.ME55N-Collective of Purchase requisition
35.ME56N-Assign Source to purchase requisition
36.ME5A- Purchase Req: List Display
37.XK01- Create Vendor
38.XK02- Change Vendor
39.XK03-Display Vendor
40.ME41-Create Request for quotation
41.ME42-Change Request for quotation
42.ME43-Display Request for quotation
43.ME5F-Release Reminder Purchase Requisition

What is Vendor Master in SAP?

The vendor master tables in sap provide information about the vendors that supply an enterprise. This
information is stored in individual vendor master records.

T-code Se16n to go to VMD Tables

https://www.youtube.com/watch?v=76nMuLhz_c4 Additional Learning

The common key to most of the Vendor master tables in LFINR and BUKRS which represents
the Account Number of Vendor/Creditor and Company Code respectively.
SAP Vendor Master Tables and Description

SR. NO. SAP TABLE DESCRIPTION

1 LFA1 Vendor Master General Section

2 LFB1 Vendor Master Company Code

3 LFBK Vendor Master Bank Details

4 LFAS Vendor Master VAT Registration Numbers

5 LFM1 Vendor Master Record Purchasing Organization Data

6 LFM2 Vendor Master Record Purchasing Data

7 LFC1 Vendor Master Transaction Figures

8 LFC3 Vendor Master Special G/L Transaction Figures

SR. NO. SAP TABLE DESCRIPTION

9 LFAT Vendor Master Tax Groupings

10 LFINFX Assignment Delivery Information

11 LFB5 Vendor Master Dunning Data

12 LFCTX Pushbutton Text

13 LFMH Vendor Hierarchies

14 LFBW Vendor Master Record Withholding Tax Types

15 LFEI Vendor Master Preference for Import and Export

16 LFCPR Function Code Profile Per Step

17 LFINF Delivery Information

18 LFMC Vendor Master Short Texts for Condition Types

19 LFLR Vendor Master Record Supply Regions

20 LFZA Permitted Alternative Payee