Basic Clarification on Formula and Average pricing

[Former Member]

Hi Experts,

I have following clarification on F&A pricing in Purchasing.

1. We have provisional and Fianl prices. At the time of PO system will look for Provisional and then Final or first Final if no conditions then Provisional?

2. Why we have both Final and Provisional and when it will be used in the system? at the time of GR or Invoice?

3.Is there any link to get more knowledge on F & A?

Kindly help me .

I guess Oily and Oily can help me on this.

Thanks in Advance

Savi Manickss.

[Former Member · Accepted solution]

Dear Savi,

Oil & gold and few are comes under the commodity product which its under gone frequent changes on prices even by hours or by days ..

So here For the oil Products u2026the Qty of material handling is huge so the transportation and handling etc etc .. The cycle of this process is long to reach the customer ..it might take 30 days t months time depends on the destination distance ..so this is the case u2026

The oil company and customer have the agreement to calculate the price. And the prices are determined by international committee not by the single company ..and this price list are published in the international market ,based on this prices the company will create the invoice..

So the price are released by the international committee by every working daysu2026so if the company or customer wanted or stick to one day it may loss or gain for any one of them so generally before they start the business they (customer & oil company) will have agreement which its status the prices should by calculated by average of some days (example of 30 day quotes of that monthu2026 ) or average of some monthsu2026.

Need of provisional and final invoice:

Company might go only with final invoice based on their wealth. But the case of volume of the business is more .so if customer agree to give money once the goods get dispatch? Or after it reaches the customer premises ?if itu2019s the case company have to rise the invoice after month time or after the time duration it reaches the customer u2026.

But the general case in Is oil industry. To have better wealth of both customer & company ..the company going with Provisional invoice & Final invoice.

Where after dispatch of material the company will rise the invoice which its takes the price of quotes average of some days 10 days or 5 days depends on the agreement..

Than after the month time or end of the month or after the good reaches the customer.

The company will create final invoice u2026 that time it will take the more number of days QUOTES To calculate the price.

But as per SAP F&Au2026 If you are maintained both Provisional & Final formula in condition If the Final criteria is matched than the system go for final price ..System first check for final price if not able to find final than it goes for provisional invoice.

Even its not able to fine the provisional it will give a error message.

Regards

Raja

[Former Member]

Hi Raj,

Thanks for your time to provide such a good expalaination. I am giving full for you.However i need one more help. Can you give some basic steps to be taken care to set formula pricing in the purchase contract?

once again thanks a lot for your time

Manickss

[former_member761924]

"But as per SAP F&A If you are maintained both Provisional & Final formula in condition If the Final criteria is matched than the system go for final price ..System first check for final price if not able to find final than it goes for provisional invoice."

What exactly do you refer to when you say Final Criteria is matched?

[Former Member]

Hello Savi,

Formula & Average pricing functionality of SAP is used for the pricing of Contracts and Orders (in both Sales and Purchase transactions) of Supply, Exchanges, Lubes and Base Oil Business Units. The F&A pricing is based on external as well as internal price quotations and with the help of formulas determine/compute the correct rate from quotes available for a time period. The rate computation method depends upon the rules defined in the formula.

The formula is stored in a repository and called upon when condition record is created. The formula can also be created directly in the condition record.

Different quotes( Platts, Opis, Manually determined or Pipeline Tariffs) are stored in the standard and customized tables.

F&A pricing is dependent on following

Ø Quotation Source

Ø Quotation Type

Ø Quotation Number

Ø Price Quotes

Ø Price Tables

Ø Formula

Ø Condition Type

Thanks,

Amit c kulkarni.