ers, consignment, and electronic invoices session 4204

ERS, Consignment, and Electronic Invoices

Session 4204

Al Major

Procter & Gamble

Global Accounts Payable

Welcome

Net Sales FY2002 - $40 billion

Over 300 consumer productssold in 160+ countries

100,000+ employees in 80+countries

Procter & Gamble

Billion $ Brands

Procter & Gamble

ERS, Consignment, and Electronic Invoices:

Overview

How it works

Benefits

Vendor Selection

Issues

Procter & Gamble

Agenda

Payment Processes

• Settlements– ERS– Consignment– Invoicing Plan

• Electronic invoices

• Paper invoices

• Legal requirements by country

“Automation clearly impacts the cost to process an invoice…. At a low level of automation in the A/P department the median cost to process an invoice is approximately $10. The cost then drops by roughly 40% to $5.81 when moving to a medium level of automation and then drops by another 20% when moving to high level of automation.”

Source: A/P Department Benchmarks and Analysis 2003 (IOMA)

Automation

ERS Overview

• Evaluated Receipt Settlement

• Pay upon receipt

• Eliminates vendor sending invoices

• Eliminates 3-way match of purchasing document, goods receipt, and invoice

ERS Overview

• Collaborative effort of Purchasing, Receiving, and Accounts Payable

• Focused on payment process improvement

ERS - How it Works

• Vendor stops sending invoices

• Vendor master ERS indicator, GR based IV indicator, and IP partner function set at purchasing organization level

ERS - How it Works

• Purchasing document ERS indicators set at line item (may include contracts)

• Goods receipts (GR’s) entered as normal creating entry in the EKRS table

ERS - How it Works

• The supplier does not send an invoice

• ERS settlement run periodically (MRRL) to select GR’s and automatically create LIV invoices. Invoices displayed in PO history.

• The goods receipt quantity and purchasing document line item pricing at time of GR is the basis for payment.

ERS - How it Works

• Payment terms from purchasing document. Will handle discount terms.

• Invoices processed for payment

• Reconciliation

ERS Settlement (MRRL)

ERS Settlement (MRRL)

Document selection:

1 – One invoice per vendor

2 – One invoice per PO

3 – One invoice per line item

4 – One invoice per GR.

ERS Settlement Test Screen

ERS Benefits

Eliminates:

• Handling, scanning, posting, and support

of paper invoices

• Processing and support of electronic invoices

• Blocked invoices

ERS Benefits

Reduces:

• Duplicate payments

• GR/IR reconciliation effort

Flexibility with who runs the settlements

ERS Supplier Benefits

• Eliminates cost of sending invoices

• Cash predictability – vendor knows when payment will be made

• Reduction of contact regarding incorrect, unpaid, and misdirected invoices

No Free Lunch!

• Incorrect goods receipts = pay the wrong amount

• Prices incorrect on purchasing documents = pay the wrong amount.

ERS Vendor Selection

• Long term supplier

• Significant number of invoices to eliminate

• Current invoicing process

ERS Vendor Selection

• Prices should be fixed or changes managed per goods receipts

• Pricing should be unitized (extra costs included in the price)

• High goods receipt accuracy

ERS Issues

• Vendor analysis tools

• Control of ERS indicatorsVendor by pur orgPre-existing line items default

offNew line items default on

• Reconciliation processOver-delivery controlsPrice changes coordinationSharing info with vendor

ERS Issues

• Credits Nets prior to settlementCredit memo at next settlement

• Non-valuated goods receiptsNo goods receipt accounting docPricing at time of settlement

Procter & Gamble

Customizations:

• Produce invoice on behalf of vendor in Europe (meet legal requirements)

• Download enhanced goods receipt information to spreadsheet

• Bill of lading from goods receipt to invoice reference to remittance

ERS at least half the cost of MM paper invoices

Overview

How it works

Benefits

Vendor Selection

Issues

Procter & Gamble

Consignment

Consignment Overview

• Also known as Supplier Owned Inventory

• Pay upon usage

• Eliminates vendor sending invoices

• Eliminates 3-way match of purchasing document, goods receipt, and invoice

Consignment Overview

• Vendor “stores” material at customer’s sites

• Material documents created upon issuing the goods to production are settled to post invoices

• Normally driven by Materials Management and Purchasing

• Focused on stabilizing supply and improving cash flow

Consignment - How it Works

• Vendor stops sending invoices

• Set-up material by plant

• Set-up purchasing info record by vendor, material, pur org, and plant (source of price and tax code)

• Set-up standard purchasing organization by plant (OMKI)

• Purchasing document – item category K and standard purchasing organization

Consignment - How it Works

• Goods receipts, goods movements

• Supplier does not send invoice

• Settlement run periodically (MRKO) to select material documents and post IV invoices

• Invoices not displayed in PO history

• Material document quantity and info record pricing are the basis for payment

Consignment - How it Works

• Payment terms from vendor master at company code level

• Invoices processed for payment

• Reconciliation

Consignment - MRKO

• Consignment - How it Works

Consignment Benefits

• Same as ERS

• Pay later after material is used

• Supplier - efficiencies of managing to a safety stock level

No Free Lunch!

• Incorrect goods movements = pay the wrong amount

• Prices incorrect on info records = pay the wrong amount.

Consignment Vendor Selection

• Any vendor doing supplier owned inventory

Consignment Issues

• Reconciliation processAccurate goods movementsPrice changes coordination

• CreditsAdjustmentsBack-out, re-enter

• DiscountsTerms from vendor masterNo net doc type (OSS 320272)

Procter & Gamble

• Enhanced MRKO reporting

• AP settlements integrated with imaging/workflow paper invoice solution

• Custom transaction to override reference and document date to match paper invoice

Settlements for:

Recurring charges (eg. property rental)

Progressive payments (eg. paying for stages of a capital project)

Invoicing Plan

Overview

How it works

Benefits

Vendor Selection

Issues

Procter & Gamble

Electronic Invoices

Electronic Invoices Overview

• Computer-to-computer receiving of invoices in a prescribed format

• 3-way match of purchasing document, goods receipt, and invoice

• FI invoices (no purchasing document)

Typically EDI or XML from vendor

Via value added network (VAN), market place, or direct to customer

Mapper from EDI or XML format to IDocs

Web-based invoicing

E-connectivity

IDocs

• IDocs are intermediate documents used to exchange data between SAP and an external system

• Managed via transactions WEDI and BD87

• A logical message type for invoices is INVOIC

• A basic type for invoices is INVOIC01

WEDI Transaction

• IDoc lists icon (WE05)

• Display IDoc icon (WE02)

• Partner Profiles (WE20) – vendor set-up

• Test Tool (WE19)

• IDoc types (WE60) – documentation for basic types

Displaying an IDOC – WE02

1

2

3

1) Control Record

• Unique IDoc numbers

• Current status

• Vendor

• IDoc (Basic) type – Invoic01

• Logical message type – Invoic

2) Data Records

Documentation – WE60

• Execute with basic type (eg. INVOIC01)

• Displays information on all available segments

• E1EDK segments are header

• E1EDP segments are line item

IDoc Test Tool – WE19

• Copy and change existing IDoc

• Build IDoc from scratch

• Execute IDocs selecting the function module

• Duplicate payment checks, etc. are active

3) Status Records

BD87 Transaction

Used to re-processIDocs previously in error status

IDoc Tables

• Control records EDIDC

• Data records EDID4One entry per segmentSDATA field holds actual data

• Status records EDIDS

Partner Profile – WE20

Program Parameters - OBCE

By vendor and legal entity (table T076S)

Conversion Tables

• OBCA (table T076B) – company codes

• OBCB (table T076I) – G/L accounts

• OBCC (table T076K) – cost centers

Tax Code - OBCD

• Table T076M

• For LIV and FI

• IV gets the tax code from the purchasing document

Program SAPLIEDI - post invoices from IDocs

Function module:

LIV IDOC_INPUT_INVOIC_MRM

IV IDOC_INPUT_INVOIC_MM

FI IDOC_INPUT_INVOIC

SAP enhancements MRMH0002 (LIV) and FEDI0001 (IV and FI)

Function Modules

Example

Electronic Invoices Benefits

• Eliminates handling, scanning, posting, and support of paper invoices

• 24 X 7 posting possible

• Human intervention only with errors

Vendor Selection

• Long term supplier

• Significant number of invoices to warrant investment

• Don’t meet ERS guidelines

• No supplier owned inventory

Electronic Invoices Issues

• Reconciliation processVendor sent = received = processed

• Error resolutionDelete idoc / correction from vendor Recycle idocsCorrect and re-process idoc

• Vendor qualification process

Electronic Invoices Issues

• Default bank details for EFT payments

• Extra charges – blocked invoices

• Taxes – calculation differences

Procter & Gamble

User exits:

• Company code from purchasing document

• Tax code from purchasing document

• Distribute extra charges

• LIV duplicate invoice check (OSS 394316)

• No blank bill of lading for GR based IV LIV

Procter & Gamble

• Mexico electronic invoicing pilot

• Co-development with SAP for FI invoices to call Vertex (no OSS note)

• Two FTE’s for a quarter million invoices per year

Summary

• ERSClick….Click….SettleIt’s the work process

• ConsignmentAlong for the Supplier Owned Inventory ride

• Electronic InvoicesLet the IDocs flow

Any questions?

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Session Code: 4204