150+ years ago the world went through the industrial revolution. People moved from working the land to cities and factories. Factories produced goods and to do so they needed materials which in today’s procurement world we would call Supply Chain Management. At that time plant maintenance and supporting services were done in house but time has changed. The world has moved on and today more and complex services are increasingly important to businesses and individuals. If a gadget does not come with an extra service we probably just keep on searching for a better deal.

How has this increased focus on services changed the procurement world?

In the SAP P2P world everyone knows how to create a PO for goods: add vendor, a description, a quantity and a price and pretty much PO is ready to leave the door.

BUT How about services?

At the beginning many service procurement attempted using a normal goods PO with QTY 1, price 1500, and add to description ‘service x’. However when it comes to receiving or invoicing we can be left scratching our heads.

One option was to receipt the full quantity. The 1st invoice will post nicely but in a partial invoicing scenario any further invoices will block, unless processed as subsequent debit.

A second option was to post partial receipts for 0.15, 0.3 etc up until 1. AP have to manually calculate this amount for each invoice which makes processing time slow.

To get around these issues some organisations have arrived at the idea of ‘flipping’ the QTY and price.

Sticking with our example this ‘service PO’ becomes QTY 1500 whilst the price is 1. This way we can receipt as much as we need up until the total QTY and it will match the invoice nicely.

Will it really?

The invoice normally still arrives in the old-fashion way of QTY 1, price 300 so AP or the system has to flip the invoice QTY/price around accordingly to match the PO. No time is saved – the problem is changed rather than solved.

Even though this concept is not classed as best practise it keeps bumping its head up where organisations have a separate (non-SAP) ordering/ requisitioning system passing PO data to ERP (SAP).

How could this be? To build integration with quick turnaround times for service POs probably this is the easiest way or most commonly used method but deep down we know there must be another way.

What makes services so special? How complex can they be?

If you work in services procurement in SAP you probably faced yourself some of the below:

A true SAP service order requires configuration in SAP MM module, creation of service masters (optional but nice to have), posting of service entry sheets which then generate the GR for invoice matching. (SES can be auto approved or routed for approval) and it may be useful to add some service exceptions to handle such invoices.

Is it worth going through all this trouble?

The answer to that is really a case of “swings and roundabouts” which depends on many factors: on the maturity of the organisation and the maturity of the vendors’ sales systems; the time and effort needed to implement the solution and processes, the knowledge and experience of users, the balance of compliance/control and ease of use.

The aim is to post an invoice only when the SES assignments are complete and accurate but still make the invoices flying through the system as easily with as little touch as possible with maximised control.

The use of the Service based IV flag is significant to the complexities of invoice processing against multiple service lines on a single PO item, with multiple items on a service entry sheet.

Standard MIRO processing can appear to ignore the SR-IV flag in that for a PO item – for which an invoice has been posted – then a second invoice without a SES will derive the already consumed SES and consequently post with a price block. This is a ‘feature’ of the standard SAP function MRM_ASSIGNMENT and based on our experience it is unlikely to have its behaviour changed.

Ideally a service PO is raised with unit of measure AU in which case the QTY is disregarded – the receipted value is what matters in invoice matching.

There are a number of factors to consider with regards to processing invoices in the ‘true’ service procurement scenario:

  • The most obvious issue is a missing SES.
    • Who is creating the SES? Requester or a central group of people? Once a SES is accepted the GR will post automatically, realising the invoice block.
    • Mentioned SES accepted? Keep in mind that while a GR does not require approval, a SES can be approved by someone other than the person who created it. If this is a business need, a process can be designed to distinguish which stage the SES is and route it to appropriate people or auto approve it to speed up the process.
    • How about if our Service PO was for 1 receptionist for 4 month, accepting weekly time sheet where most time sheet has the same hours – invoice value but ideally we would want to match the invoice to the correct week
    • or what if multiple invoices arrive against 1 SES
  • The other obvious exception could be to stop an invoice if the price do not match:
    • Sticking to our previous example we have a SES for 100,150, 200 but what if the invoice is 170 so none of the SES matches the invoice amount?
    • or the invoice arrive with 1700 which is over the service PO amount?

There is no right or wrong way but we think a good way is to handle it.

After All the aim is to make life a little easier for Accounts Payable and reduce erroneous postings, ideally by making the system propose service lines only which are relevant to the invoice. ES2P has worked on a number of VIM projects, where we’ve implemented such solutions for Service Based PO invoices. Why not drop us a line if you want to find out more.

  • SES – Service Entry Sheet
  • GR – Goods Receipt
  • PO – Purchase Order
  • QTY- Quantity