P2P stands for Procure to Pay.

The P2P cycle captures the entire business processes between the Organization andthe Vendors.

The five key stages within this cycle are:

Purchase Order Goods Receipt Invoice Verification AP Invoice Outgoing Payment

Purchase Order

A PO is the process by which you purchase goods from a supplier (vendor). It forms a legal contract between the buyer (your Organization) and the vendor. It contains the list of materials you are buying, quantities, prices and delivery information.

A PO may be created based on a Purchase Requisition or a previous PO. Information is also pulled from info records that contain purchasing related information for the vendor-material combination.

The PO details the materials that you are procuring. A material is assigned an account assignment object, such as profit center, which ensures that it is properly represented in reports.

PO can be created in T.code ME21N, as shown below

There is no accounting entries during PO creation and hence no FI document is created in SAP.

Goods Receipt

A Goods Receipt is posted in the system when materials are received into inventory (stock). The main purpose of GR is to ensure that the items you received match the information that was originally part of the PO, especially when you receive items in more than one delivery.

Goods Receipt is the integration point between MM and FI.

Goods Receipt can be posted in MIGO, as shown below

GR has been posted for the above PO.

The accounting entry at the time of GR posting:

Inventory Account (stock – Raw material) Dr

To GR/IR clearing Account Cr

The GR posted will be updated in the corresponding PO, as shown below

Click on the GR document, and select the FI document icon, as highlighted below

Select the Accounting Document in the pop-up

FI Document during GR posting:

The account determination for GR posting is done in T.code OBYC.

Inventory account is provided under Transaction Type: BSX

The valuation class can be obtained from the material master, as shown below

GR/IR account is provided under Transaction Type: WRX

The valuation class determines the GL accounts to hit, when a specific transaction happens. Usually, for a group of materials, a valuation class will be assigned from MM side in material master data (MM01). In OBYC, as shown above different transaction keys eg: BSX, WRX..etc) would be defined. These transaction types determines the type of transaction ( accounting entries).The transaction keys are assigned to the respective movement types in MM side. In OBYC, for respective transaction keys the required GL accounts to hit are configured.

Valuation modifier should be enabled to maintain GL accounts plantwise.

Invoice Verification

Here the vendor invoices are validated before any payments are made to them. Theinvoice verification is done based on goods receipt and follow a three-way matching policy (among the invoice, the goods receipt and the PO).

The system not only validates the quantity, but also the value in goods receipt whiledoing invoice verification. If there are variances, system creates variance postings. Variance postings are posted to general ledger which are customized in MM automatic account determination tables.

Invoice Verification can be posted in T.code: MIRO for the PO created.

As shown below, Invoice has been created for the above PO, as highlighted.

The invoice document posted can be obtained in PO under tab “PO history”, as highlighted below

Click on the invoice document in Purchase Order.

Click on icon “Follow-On Documents”, as highlighted above to get the accounting document

The Accounting entry during Invoice verification is:

GR/IR Clearing Account Dr

To Vendor Account Cr

Accounts Payable Invoice

The invoice verification process takes place within MM, but this generates as AP invoice within the AP subcomponent (FI Document).

The accounting document for the invoice posted in MIRO is shown above.

For all inventory-related purchases invoice is created based on PO in MIRO transaction code. For non-inventory related purchases, there won’t be any PO or goods receipt process. Invoice is posted directly in FB60.

Outgoing Payments

Outgoing payments will make the payment to the open vendor invoices. Either it can be made manually or by using automatic payment program.

Manually, the payment can be made in T.code: F-53

Enter the details such as bank account no. from which payment has to be made, as shown above and click on “Process open items” icon highlighted above.

Select the appropriate line item (invoice to br paid), activate the item and make sure that the not assigned amount is zero before posting the payment document.

The accounting entries while payment for the discussed case is shown below. It will be obtained during simulation.

Automatic Payment can be made in T.code: F110 and the configuration for APP should be done in T.code: FBZP in prior

The Accounting entry while making the payment to Vendor is:

Vendor Account Dr

To Bank Account Cr

Once the invoices (open items) are paid, those open items will be updated as cleared in T.code: FBL1N (Line item Display)