P2P cycle in SAP (End user)

The Procure-to-Pay (P2P) cycle in SAP is a comprehensive process that integrates procurement and accounting functions. Below is a detailed explanation of each step in the P2P cycle, including the accounting entries at each stage.

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1. Identify Requirement

• • Process: A department identifies the need for goods or services.

• • SAP Transaction: Create a Purchase Requisition (PR).
    
    • • Manual creation: ME51N
    • • Automatic creation: Through MRP (Material Requirements Planning).

• • Key Document: Purchase Requisition (PR).

• • Details: The PR specifies the material/service, quantity, and delivery date.

• • Accounting Entry: No accounting entry is posted at this stage.

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2. Create Purchase Order (PO)

• • Process: The procurement team converts the PR into a Purchase Order (PO).

• • SAP Transaction: ME21N (Create Purchase Order).

• • Key Document: Purchase Order (PO).

• • Details: The PO includes vendor details, material/service, quantity, price, delivery date, and payment terms.

• • Accounting Entry: No accounting entry is posted at this stage.

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3. Goods Receipt (GR)

• • Process: When the goods or services are delivered, the receiving department confirms the receipt.

• • SAP Transaction: MIGO (Goods Receipt).

• • Key Document: Goods Receipt Document.

• • Details:
    
    • • The system updates the inventory stock.
    • • A Material Document and an Accounting Document are created.

• • Accounting Entry:
    
    • • Debit: Inventory Account (if goods are received) or Expense Account (if services are received).
    • • Credit: Goods Receipt/Invoice Receipt (GR/IR) Clearing Account.
    • • Example:
    • • Debit: Inventory Account (Material Stock) $1,000
    • • Credit: GR/IR Clearing Account $1,000

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4. Invoice Verification

• • Process: The vendor sends an invoice, which is matched with the PO and Goods Receipt.

• • SAP Transaction: MIRO (Enter Invoice).

• • Key Document: Invoice Document.

• • Details:
    
    • • The system performs a 3-way match (PO, Goods Receipt, and Invoice).
    • • If the match is successful, the invoice is posted.

• • Accounting Entry:
    
    • • Debit: GR/IR Clearing Account.
    • • Credit: Vendor Account.
    • • Example:
    • • Debit: GR/IR Clearing Account $1,000
    • • Credit: Vendor Account $1,000

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5. Payment Processing

• • Process: The payment is processed based on the payment terms specified in the PO.

• • SAP Transaction:
    
    • • Automatic Payment: F110 (Automatic Payment Program).
    • • Manual Payment: F-53 (Post Outgoing Payment).

• • Key Document: Payment Document.

• • Details:
    
    • • The system generates payment proposals, which are approved and executed.
    • • Payments can be made via checks, wire transfers, or other methods.

• • Accounting Entry:
    
    • • Debit: Vendor Account.
    • • Credit: Bank Account.
    • • Example:
    • • Debit: Vendor Account $1,000
    • • Credit: Bank Account $1,000