S/4HANA Finance Integration in Sourcing & Procurement
S/4HANA Finance Integration in Sourcing & Procurement
Comprehensive overview of Finance (FI) integration with Materials Management (MM) in SAP S/4HANA
Overview
Configuration
Master Data
Process Flow
Business Partner
FI-MM Integration Overview
In SAP S/4HANA, the integration between Finance (FI) and Materials Management (MM) is crucial for end-to-end procurement processes. This integration ensures that inventory movements are properly reflected in financial accounts.
Materials Management (MM)
Purchase Order Creation
Goods Receipt
Inventory Management
Service Entry
Invoice Verification
Finance (FI)
General Ledger
Accounts Payable
Asset Accounting
Material Ledger
Payment Processing
Account Determination
Material Ledger
Key Integration Points
G/L Account Determination: Links MM documents to appropriate FI accounts
Material Ledger: Provides valuation and actual costing capabilities
Business Partner: Unified approach for vendors/customers
Automated Postings: GR/IR account for 3-way matching
Key Components Required for FI-MM Integration
Component
Description
Responsibility
Impact
G/L Accounts
General Ledger accounts for inventory, expenses, etc.
Finance Team
Required for financial postings from MM transactions
Account Determination
Rules that determine which G/L accounts are used
MM/FI Teams
Controls financial impact of inventory movements
Material Ledger
Tracks material values and provides actual costing
Controlling Team
Mandatory in S/4HANA for all valuation areas
Valuation Area Grouping
Groups plants with similar account determination
MM Team
Simplifies account determination configuration
Business Partner
Unified approach for vendors and customers
MM/SD/FI Teams
Mandatory in S/4HANA, replaces traditional vendor master
Important: Material Ledger activation is mandatory in S/4HANA. Without it, inventory postings will not be possible, even if material masters can be created.
Required Configuration Steps
To enable proper FI-MM integration in SAP S/4HANA, several configuration steps must be completed in the correct sequence.
Assign currency type to Material Ledger type (e.g., type 9000 for company code currency)
Assign Material Ledger type to valuation area (your plant)
Activate Material Ledger for the valuation area
Then run transaction CKM_START to complete activation:
Transaction: CKM_START
Important: Material Ledger must be activated after creating a plant but before creating material masters. Without this, no inventory postings will be possible.
This links MM transactions to specific G/L accounts based on:
Transaction/event type
Valuation class
Chart of accounts
Valuation area grouping
Transaction: OBYC (Account Determination for MM transactions)
6
Business Partner Configuration
Configure Business Partner roles and settings:
Path: SPRO > Cross-Application Components > SAP Business Partner > Business Partner > Basic Settings
Key configurations include:
Business Partner Roles (vendor, customer)
Number ranges
Field control (which fields are required/optional)
Account groups
Master Data for FI-MM Integration
Proper master data setup is critical for successful FI-MM integration. The following master data elements play key roles.
In S/4HANA, vendors are managed as Business Partners with the vendor role assigned. This requires data at three levels:
Generic Data (BP Role: FLVN00)
Name and address information
Contact details
Tax information
Identification numbers
Tables: BUT000, BUT020, BUT100, ADRC
Company Code Data (BP Role: FLVN00)
Reconciliation account (G/L)
Payment terms
Bank details
Withholding tax
Tables: LFB1 (linked via CVI)
Purchasing Data (BP Role: FLVN01)
Purchasing organization settings
Partner functions
Incoterms
Delivery and payment terms
Tables: LFM1 (linked via CVI)
Business Partner is mandatory in S/4HANA, though traditional vendor tables (LFA1, LFB1, LFM1) still exist behind the scenes, linked via Customer/Vendor Integration (CVI).
Materials require data across multiple views to support proper financial integration:
Basic Data
Material type
Industry sector
Unit of measure
Material group
Accounting View
Valuation class (crucial for account determination)
Price control (S/V)
Standard price or moving average price
Material Ledger indicator (automatic in S/4HANA)
Purchasing View
Purchasing group
Planned delivery time
GR processing time
Automatic PO
Important for FI: The Valuation Class in the material master is a key element for account determination. It determines which G/L accounts will be used for this material in MM transactions.
Purchase Info Records store material-vendor specific information and impact financial processing:
Pricing conditions: Affect material valuation during GR
Planned delivery time: Impacts scheduling and GR timing
Tax information: Affects tax calculation in invoice verification
Account assignment: Can control which cost objects receive charges
When a purchase order is created, the system can pull price information from the Purchase Info Record, which then determines the value posted to inventory and GR/IR accounts.
G/L Accounts required for MM-FI integration include:
Account Type
Usage
Transaction
Inventory Accounts
Balance sheet accounts for inventory value
GR for PO (DR)
GR/IR Clearing
Temporary account for 3-way matching
GR for PO (CR), Invoice Receipt (DR)
Expense Accounts
Consumption of materials, services
Goods Issue, Invoice for non-inventory
Price Difference
Records variances between PO and invoice
Invoice Verification
Vendor Accounts
Accounts Payable subledger accounts
Invoice Verification (CR)
G/L Account attributes like reconciliation account settings determine how MM transactions affect the balance sheet and P&L.
These master data elements influence financial outcomes by controlling vendor selection:
Source List: Defines valid sources (vendors) for materials
Quota Arrangement: Distributes procurement volume across vendors
Since different vendors may have different prices and terms, these settings indirectly impact material valuation and cash flow timing.
End-to-End Process Flow with Financial Integration
Following is the procurement process flow highlighting the financial integration points.
Financial Impact: None at this stage, but account assignments (Cost Center, G/L Account, etc.) are defined here for later use.
2
Purchase Order (PO)
MMTransaction
Purchase Order creation (Transaction: ME21N, ME22N, ME23N)
Financial Impact: No accounting document created yet, but price and quantity determine future financial postings. Account assignments can be changed if needed.
3
Goods Receipt (GR)
MMFIIntegrationTransaction
Goods Receipt against PO (Transaction: MIGO)
Financial Impact: First accounting document created:
Debit: Inventory G/L Account (determined by valuation class)
Credit: GR/IR Clearing Account
Material Ledger: Updates inventory value in Material Ledger
Account determination uses the configuration in OBYC to determine which G/L accounts to post to based on the material's valuation class.
4
Invoice Receipt
MMFIIntegrationTransaction
Invoice Verification against PO and GR (Transaction: MIRO)
Financial Impact: Second accounting document created:
Debit: GR/IR Clearing Account (clearing the GR posting)
Credit: Vendor Account (Accounts Payable)
Debit/Credit: Price Difference Account (if invoice price differs from PO price)
Debit/Credit: Tax Accounts
This completes the "3-way match" between PO, GR, and Invoice. The GR/IR account is cleared when all quantities are invoiced.
5
Payment
FITransaction
Payment to vendor (Transaction: F110)
Financial Impact: Final accounting document created:
Debit: Vendor Account (clearing the liability)
Credit: Bank Account
6
Period-End Processing (For Actual Costing)
FIMMIntegration
If using Material Ledger Actual Costing, additional processing is required at period end:
Financial Impact: May create adjustment postings between inventory accounts and price difference accounts based on actual costs.
Business Partner Concept
In S/4HANA, the Business Partner concept replaces the traditional vendor and customer master data. This is a key aspect of the FI-MM integration.
Important: Business Partner is mandatory in S/4HANA. All vendors must be created as Business Partners first, with the vendor role assigned.
Why Business Partner?
Principle of One: SAP's approach to simplify by having one way to do things
Single Entity Management: One entity can play multiple roles (vendor, customer, etc.)
Harmonization: Consistent approach across all modules (MM, SD, FI, etc.)
Embedded Products: Facilitates integration with embedded solutions like EWM, TM, etc.
Advanced Module Support: Required for FSCM and other advanced financial functionalities
Business Partner Data Model
Business Partner (BP) Creation
Generic Role
(BP000000000)
Tables: BUT000, BUT020, BUT100, ADRC
↓
Extend to Vendor Role (Company Code Data)
Generic Role
(BP000000000)
Vendor Role FLV00
Company Code Data
Tables: LFA1, LFB1 + CVI Link Tables
↓
Extend to Purchasing Data
Generic Role
(BP000000000)
Vendor Role FLV00
Company Code Data
Vendor Role FLV01
Purchasing Data
Tables: LFM1 + CVI Link Tables
Note: Despite the "simplified" business partner approach, the original vendor tables (LFA1, LFB1, LFM1) are still used behind the scenes and linked to the business partner tables through Customer/Vendor Integration (CVI).
Financial Implications of Business Partner
The Business Partner approach affects financial processes in several ways:
Single point of maintenance for entities that are both vendors and customers
Time-dependent parameters can be maintained (e.g., different addresses valid for different time periods)
Credit management can be unified for the same entity across vendor and customer roles
Migration complexity when moving from ECC to S/4HANA (requires CVI setup)
Business Partner Transaction
All maintenance of Business Partners is done through a single transaction: