Faisal Mahboob Integration of Materials Management with Financial Accounting in SAP” cm (O Galileo Press Bonn + BostonPreface The link between Materials Management and Financial Accounting is important. For all procurement, inventory, and invoice verification processes that Materials Management helps keep track of, the account postings are often the reasons, the result, and the guiding principles to those actions. As a consultant, super-user, project manager, or solution architect who understands the dependency of Mate- rials Management and Financial Accounting, you will have a better understanding of the SAP system, and can provide far more efficient and effective solutions. The integration of Materials Management and SAP ERP Financials is a topic of significant relevance to companies that are looking to create a smooth and effi- cient procurement process. So, integrating Materials Management and Financial Accounting correctly is quite important. And, building a flexible, integrated Mate- rials Management solution set allows your business to grow and maintain the SAP systems with less component reengineering as you grow, saving resources and time. This is a practical book that teaches you about the integration of Materials Man- ‘agement and Financial Accounting in SAP ERP. This book explores the relationship between Materials Management in SAP ERP (which we'll mainly refer to as Materi- als Management throughout this book) and SAP ERP Financials Financial Account- ing (which we'll refer to as Financial Accounting for short) both at the functional and technical level. It's primarily aimed at Materials Management consultants who are looking for knowledge on integration issues. However, the book addresses other audiences as well. It explains the business concepts to the layman in the functional basis sections. From there, functional design is discussed for consul- tants who need to develop a better understanding of the ins and outs of Materials Management. The checkpoint and real-time issues sections provide super users, team managers, project managers, solution architects, and other decision-makers with practical, hands-on information. In addition, the technical elements sections are provided for technical and techno-functional consultants. Finally, the trouble- shooting tips are provided for consultants performing support, maintenance, and troubleshooting work. These topics are often interwoven with each other and should be studied as a whole. 5Preface With this book we aim to fill the gap of knowledge that exists today regarding the integration between Materials Management and Financial Accounting in SAP ERP. In addition, this book discusses the functionality and technicalities of the system, so that you can develop a thorough understanding of the subject. For this book, we've gathered scattered bits and pieces of knowledge gained from years of experi- ence in the industry, compiled it, and made it useful and applicable to the study of these integration topics ~ both in terms of functionalities and technicalities. In Chapter 1, you'll be introduced to the concepts of business and learn about the purpose and scope of the book. Chapter 2, Overview of SAP ERP, is an introduc- tion to finance, logistics, and human resources. It describes the organization of the core components of SAP within business, and SAP's evolution of tools. In Chapter 3, you'll explore the elements of Materials Management in SAP ERP, Financial Accounting, and the relationship between them. You'll also be intro- duced to various troubleshooting techniques. Chapter 4, Basics of Configuration and the Processes in Procurement, covers the purpose of purchasing and its inte- gration with Financial Accounting, and provides an introduction to the aspects of Customizing. Chapter 5, Procurement of Stock and Consumable Materials, describes the vari- ous functionalities, configuration, and technical aspects of the procurement of stock and consumable materials. Chapter 6 focuses on the condition technique and price determination in purchasing documents, and also discuss the basics of material price changes. Chapter 7, Balance Sheet Valuation, teaches you about the various balance sheet valuation procedures such as LIFO and FIFO in the context of accounting princi- ples, such as the principle of conservatism and the regulatory principles Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Stan- dards (IFRS), Chapter 8 discusses material price changes and the various account postings associated with them. In Chapter 9, Accounts Payable Invoice from Materials Management, you'll learn about the various functional aspects and technicalities of invoice verification. Pay special attention to this chapter, because there's a lot of interaction between Mate- rials Management and Financial Accounting in this process. Chapter 10 takes the concept of invoice verification further still and helps you understand variances and blocking of invoices. 16