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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.

1
Enterprise Structure Configuration
  • Create Company Code (Transaction: OX02)
  • Create Plant (Transaction: OX10)
  • Create Storage Location (Transaction: OX09)
  • Create Purchasing Organization (Transaction: OX01)
  • Create Purchasing Group
  • Assign Plant to Company Code
  • Assign Purchasing Organization to Company Code or Plant
These configurations form the foundation for all MM and FI operations.
2
G/L Account Configuration

Ensure all necessary G/L accounts are available:

Path: SPRO > Financial Accounting > General Ledger Accounting > Master Data > G/L Accounts > Create G/L Account with Reference

Key accounts needed:

  • Inventory G/L accounts
  • GR/IR (Goods Receipt/Invoice Receipt) clearing account
  • Expense accounts
  • Price difference accounts

Verify G/L accounts in transaction FS00 for your company code.

3
Valuation Area Grouping
Path: SPRO > Materials Management > Valuation and Account Assignment > Account Determination Without Wizard > Group Together Valuation Areas

Assign valuation group code (e.g., "001") to your plant/company code combination.

This grouping allows plants with similar account determination behavior to share configuration.
4
Material Ledger Activation

Material Ledger activation is mandatory in S/4HANA:

Path: SPRO > Controlling > Product Cost Controlling > Actual Costing/Material Ledger

Three steps required:

  1. Assign currency type to Material Ledger type (e.g., type 9000 for company code currency)
  2. Assign Material Ledger type to valuation area (your plant)
  3. 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.
5
Account Determination Configuration
Path: SPRO > Materials Management > Valuation and Account Assignment > Account Determination > Configure Automatic Postings

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.

1
Purchase Requisition (PR)
MM Transaction

Purchase Requisition creation (Transaction: ME51N, ME52N, ME53N)

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)
MM Transaction

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)
MM FI Integration Transaction

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
MM FI Integration Transaction

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
FI Transaction

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)
FI MM Integration

If using Material Ledger Actual Costing, additional processing is required at period end:

  • Single-Level Price Determination (Transaction: CKM3)
  • Multilevel Price Determination (Transaction: CKM3N)
  • Mark Prices (Transaction: CKM4)
  • Release Period for Closing (Transaction: CKMC)

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:

Transaction: BP

This replaces the former multiple transactions:

  • XK01, XK02, XK03 (Central Vendor)
  • MK01, MK02, MK03 (Purchasing View)
  • FK01, FK02, FK03 (Accounting View)

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