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Getting Started with SAP MM

SAP Procure to Pay Process
Agenda

1. Overview of SAP Procure to Pay Process

2. Transactions in SAP Procure to Pay Process

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Overview of SAP Procure to Pay Process

The Procurement Department can satisfy purchasing requirements of other

departments of a company by issuing:
A Purchase Order: in this case an RFQ (Request for Quotation) process first is
needed.
An Open Contract: in this case, in addition to the RFQ process, the purchasing
task is finalized by means of the Purchase Order referred to the Open Contract.
 Overview of SAP Procure to Pay Process

 The RFQ process is always carried out by the Procurement Department before
issuing a contract. Usually the ultimate aim of this phase is to select a supplier 4

among several of them, in relation to the goods or services to be purchased.

 A Goods Receipt allows the warehouse of department who ordered purchases to
certify the received quantity of goods while a Service Entry allows them to certify
the acceptance of services. Both tasks are performed only in relation to a
Purchase Order/Contract Release Order.
 The following sub-process, which name is Invoice Handling, contains the tasks to
match the invoice to the Contract Release Order or the Purchase Order. It contains
also the tasks needed to check the invoice data against the Contract Release
Order or Purchase Order data, such as quantity and values by each position

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Transactions in SAP Procure to Pay Process

 Purchase Requisition 5

Purchase requisition is an internal document which is issued/created whenever the

goods (stock/non-stock) and/or services are required. Several types of document will be
available to be used. SAP system checks automatically various parameters like budget
availability and requires an approval workflow for the requisition mainly based on its
value and internal delegation of authorities, as well as other technical parameters (like
item category or purchasing group). The requisition created in the system can also be
revised if needed.

SAP Transaction Code: ME51N

Menu: Logistic -> Material Management -> Purchasing -> Purchase Requisition ->
Create

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Transactions in SAP Procure to Pay Process

 Request for Quotation (RFQ) 6

RFQ is required when you don’t know your vendor and need quotations from several vendors for a
material/service. It is the complete set of process that is triggered once a purchase requisition has been
received. Requisition line items can be grouped together in the same RFQ process. Once the quotations
are received from your vendors, you maintain the records in SAP system thus changing the RFQ document
to a Quotation.

SAP Transaction Code: ME41

Menu: Logistic -> Material Management -> Purchasing -> RFQ/Quotation -> Request for Quotation ->
Create

 The following RFQ Document Types exist in the Sri Lanka system.
ZQ01 - Import RFQ
ZQ02 - Local RFQ

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Transactions in SAP Procure to Pay Process

 Open Contract 7

Open contract is a general agreement with the vendor for a given period of validity with agreed price
list. With reference to the same contract multiple Contract Release Orders can be generated until it
is expired or outstanding value is available.

SAP Transaction Code: ME31K

Menu: Logistic -> Material Management -> Purchasing -> Outline Agreement -> Contract -> Create

 There are two types of Contracts in SAP:

 Quantity contracts(MK): It is a contract which a company negotiates for a certain quantity to be ordered
of a product during a specified period
 Value contracts(WK): It is a contract which company negotiates for a certain value and purchase of
goods or services can be ordered up to the contracted value for a specified period.

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 Transactions in SAP Procure to Pay Process

 Purchase Order 8

Purchase order is an agreed upon official document from the customer to vendor for customer’s intent to buy or receive
one/multiple materials with agreed prices, lead times/delivery dates, quantities and specifications. The budget commitment is
automatically created. Tolerances for goods and unplanned services can be foreseen.

SAP Transaction Code: ME21N

Menu: Logistic -> Material Management -> Purchasing -> Purchase Order -> Create -> ME21N – Vendor/Supplying Plant
Known

 There are multiple document types currently used in CAMSO Loadstar (primarily in Sri Lanka). These document types dictate
what are the PR (Purchase Requisition) types can be used with the item category (Sub Contracting, Standard, Consignment,
Third Party, etc.) These document types are primarily used as key information to identify the procurement process:
 Standard Purchase Order (Raw Material, Engineering, MRO, Finished Goods)
 Rubber Procurement
 Blanket Purchase Order (Framework Order)
 STO
 Outline Agreements - Scheduling agreement
 Outline Agreements - Contract
 Return Purchase orders
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Transactions in SAP Procure to Pay Process

 Goods Receipt 9

Goods Receipt is the step in the procurement cycle where the actual goods ordered via
a Purchase Order/Contract Release Order are received by the company and it is
checked for the required quality / quantity. If the goods quality meets the required
criteria, a Goods Receipt transaction is posted in the SAP system with reference to the
Purchase Order / Contract Release Order. This transaction has dual effect of changing
the stock quantity (for entered materials) and at the same time entry in the financials
module is also passed for the debiting the stock against the payables to the vendor.

SAP Transaction Code: MIGO

Menu: Logistic -> Material Management -> Inventory Management -> Goods
Movement -> MIGO

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Transactions in SAP Procure to Pay Process

 Invoice Handling 10

The process is triggered whenever a vendor invoice received for the purchases is to be entered in the
SAP system. The invoice entered initially is considered to be in the “Parked” status, which means that
no financial entry or posting has been done and the invoice details exist in the system for record
keeping and further approvals. At this stage a “3 way check” in the standard SAP system is triggered in
which the invoice received is checked automatically versus the reference purchase order and the good
receipt document for the accuracy of price/quantity. Any discrepancy observed here can be adjusted for
variances and disputed amounts. The invoice can be put on a status of block for payment. Once the
invoice is approved via the defined workflow in the SAP system, the invoice can be actually posted. It is
usually done by the responsible person in the Accounts Payables department of a company. The
process usually overlaps joint functionality in the MM and FI modules.

SAP Transaction Code: MIRO/MIR7

Menu: Logistic -> Material Management -> Logistics Invoice Verification -> MIRO/MIR7 Enter Invoice

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Transactions in SAP Procure to Pay Process

 Payment 11

If the invoice is approved via workflow, the last step in the cycle of
purchasing is the payment to the vendor. This is done by entering a
transaction in the SAP system called the “Automatic Payment Run”,
which is usually triggered periodically based on the payment terms /
due dates as mentioned in the purchase order. The result of the
payment run can be a check printed via SAP for the intended vendors
or the results of the payment run can be exported to external systems
for online banking portal via which the vendor payments are
transferred electronically.

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