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. 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. 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. 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 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 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 6. Vendor Reconciliation Process: The vendor account is reconciled to ensure all transactions are accurately recorded. SAP Transaction: FBL1N (Vendor Line Item Display). Details: The accounts payable team reviews vendor statements and resolves any discrepancies. Accounting Entry: No new accounting entry is posted at this stage. 7. Reporting and Analysis Process: Reports are generated to analyze procurement performance, vendor performance, and spending. SAP Transactions: ME2N (Purchase Orders by PO Number). ME23N (Display Purchase Order). Other reporting tools. Details: Key metrics include lead time, vendor performance, and cost savings. Accounting Entry: No accounting entry is posted at this stage. Summary of Accounting Entries in P2P Cycle Goods Receipt (GR): Debit: Inventory Account (or Expense Account) $1,000 Credit: GR/IR Clearing Account $1,000 Invoice Verification: Debit: GR/IR Clearing Account $1,000 Credit: Vendor Account $1,000 Payment Processing: Debit: Vendor Account $1,000 Credit: Bank Account $1,000 Key Integration Points in SAP Material Management (MM): Handles procurement, inventory management, and goods receipt. Financial Accounting (FI): Manages invoice posting and payment processing. Controlling (CO): Tracks costs associated with procurement. Sales and Distribution (SD): For services or goods related to sales orders. Benefits of the P2P Cycle in SAP Streamlines procurement processes. Ensures accurate financial records. Improves vendor relationships through timely payments. Provides visibility into spending and procurement performance.
