SAP Accounts Payable is an integral part of both Financial Accounting and Materials management purchasing. This FI-AP application manages the vendors, their deliveries, the invoices, the payables and their payments.
With Cash Management you can use Accounts Payable in SAP to plan and optimize the liquidity with invoice information. This is because it is designed to support all standard payment methods like checks and Bank transfers.
You can also make outgoing payments manually or through an automatic payment program (APP). Since the FI-GL is always updated with the postings made in FI-AP. Thus, you can easily and effectively manage the payables with the many vendor evaluations available in the form of reports and tools.
The Accounts Payable (AP) is the amount of money that a business entity owes to vendors/suppliers for availing of their goods/services. It is the management of short-term payment obligations to the vendor/supplier. Additionally, it is part of the P2P process in SAP (procure-to-pay) that covers all activities from procurement to invoice processing & vendor payments.
The workflow of the SAP AP P2P process includes the following steps:-
Purchase Order
The PO, Purchase Order is a legally binding agreement that the company issues to the vendor. It has all details of the product/service ordered and the quantity and price agreed upon.
Goods Receipt Document
The receipt of the goods/services report is a confirmation of the acquisition of the ordered product/service from the vendor. Importantly, the details on the receipt report must match those on the PO issued earlier.
Vendor Invoice
Concurrent to or after the receipt of the ordered goods, the business would receive the invoice/bill for the product from the supplier of the goods/services. The processing of the vendor invoice is the sole responsibility of the AP department. It subsequently verifies the details on the invoice by a three-way match among the PO. This includes receipt report, vendor invoice and also the scheduled payments after approval.
You may want to read: Interview Questions on Logistics Invoice Verification
For a better understanding of FI-AP, I will include the following sections:-
The vendor master record contains all the data you need to manage your vendors. Such as their details – name, address, language and phone number. It can also be the tax information, bank details, account control data and payment and purchasing data.
In addition to FI, these are also used in materials management ( MM). The master data further controls how business transactions are recorded and processed by the system. Though Master data may have inconsistencies. However, you can prevent inconsistencies in master data by maintaining it centrally.
| Master Data | Segment | |
|---|---|---|
| General Data | • Address • Control ( Tax type, industry etc ) • Payment transactions ( bank key, bank etc ) • Contact person | |
| Company Code Data | • Accounting information ( recon A/C, w/tax code etc) • Payment transactions ( payment terms, payment methods, tolerance group etc ) • Correspondence ( dunning procedure, dunning level, dunning block etc ) | |
| Purchasing Organization | • Purchasing Data • Conditions ( order currency, incoterms etc.) • Control data ( automatic purchase order, GR-based invoice verification) |
Also Learn: Master Data in SAP
Once you have the master data in the system available to your vendors, the next logical step is to configure the system. This is to handle the business transactions the way you want to meet your organization’s specific processing requirements. Unless you maintain the correct settings, your system users will find it difficult to process the transactions with the speed and accuracy needed to support the business.
Transaction Code- OBB8
The terms of payment represent the specifications of the payment conditions such as the number of days by which the payment is to be made or whether there is a discount for early payment. Generally, the shorter the credit or payment period the higher the discount offered and vice versa.
In the SAP system, you define the payment terms as rules using a four-character key. It enables the system to automatically determine the appropriate payment terms. Once these are defined, you can assign these terms to the vendor or customer master records. The system proposes the payment term key and payment terms. You are surely able to change these if needed when entering a document into the vendor account.
Transaction Code – OB70
You can use this functionality to change settings after configuring the discount base. This is while maintaining the company code global parameters.
There may be situations when you want to release a payment that had been blocked earlier. Once released you can then pay for that line item. For this, you need to configure the workflow with the document types for payment release. This is the level at which the release happens, finalized who can release the payment and up to what amount.
Outgoing payments typically represent the payments you make to your external and internal vendors. The external vendors are your business partners from whom you purchase goods and services. While the internal vendors are your staff or other divisions of your company who are represented by separate vendor masters in the system.
Some of the settings under manual outgoing payments have already been defined under the global settings. Under this setting, we have to configure the following:-
You can use SAP’s payment program to handle both outgoing and incoming payments automatically. These are built to meet several payment methods (check, Bill of exchange etc). Also, the program comes delivered with the required forms and print programs. These subsequently, help to meet the country-specific payment requirements of almost all the countries in the world.
It further enables you to clear open items (between customers and vendors). Also to make inter-company payments, process both domestic and foreign payments and block payments etc. Besides creating conventional payment documents, it can supply payment data form of magnetic tape or a compact disc to the payment program. This prints a variety of outputs such as payment lists, payment forms and checks.
Further, the payment program determines what to pay when to pay and how to pay through the payment rules. These are the rules that you define in the payment program configuration. However, if required, the payment program can even group several open items that are to be paid into a single payment. The rules further determine the due dates for the payments and payees to whom the payment should be made. It also includes house banks from which the payment should be processed and the appropriate payment methods relevant for the payee or country.
Learn: Historical Facts about SAP and SAP Application
Reports help you to analyze Accounts Payables in terms of evaluations. It enables you to monitor and manage the account balances, open items to be paid and reconcile payments with payables. They also take advantage of discounts offered to you by the vendors.
| Transaction Code | Report Name |
|---|---|
| F.40 | Account List |
| F.41 | Open Items |
| F.42 | Account Balances |
| S_ALR_87012078 | Due Date Analysis for Open Items |
| S_P99_41000099 | Payment List |
| S_ALR_87012086 | Vendor List |
In this blog, you have learned about SAP Accounts Payable and Vendor Master Data. You should surely now have an understanding of how the information in a master record is organized under three segments. i.e.-
Further, as a part of customizing business transactions in accounts payable, you learned how to define the terms of payment and cash discount base. You also learned various configuration settings required for payment releases involving single and multi-level releases. We finally discussed highly structured detail, the settings required for outgoing payments for both manual and automatic payments.
Read Related: Vendor Master Data Structure in SAP
Also, Cash Management has an important role with Accounts Payable to define Liquidity as understood.
You read the most important components of SAP Accounts Payable. These components play a major role in the payment program process and workflow of the business. Since all components are related to each other, they all make a special purpose in the whole payment process.
Similar to Accounts Payable in SAP, the Accounts Receivable (FI-AR) also plays an important role in SAP Financial Accounting. Hence being an SAP FI person, you must give equal focus to SAP Receivable Management (or Accounts Receivable) as well.
Since AR and AP are both inter-connected to make the whole receipt-payment system of the business smoother, you should understand both with due weightage.
Further, this part of SAP Finance is also relevant for SAP FICO job purposes. It is a definitive segment for interviewers to ask questions in SAP FI_AP interviews.
Finally to be a fully-equipped SAP FICO consultant, SAP Accounts Payable is a must-learn for you. This means, that not just to learn or get selected for a job, but also to work efficiently, you should focus on its conceptual and practical part, which is part of the SAP FICO Training.
Watch video: AP Process in SAP FICO
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