Different Incoterms - Post Goods Issue

[Former Member]

Hi

I'm looking for the best practice of handling different incoterms in standard sales order operation, meaning when a goods issue should be posted.

Saying we have a sales contract with DDP term and transfer of ownership is at goods receipt at customer's warehouse. We create a sales order and delivery accordingly. What is the right practice of goods issue post?

Option1 - we post goods issue when the goods leaves our plant because that's the definition of Good Issue. But then there comes two problems. First of all, there is a possibility that billing document creation and goods issue happen in different fiscal period, which is not align with accounting rules. Second, since the transfer of ownership does not happen until goods receipt, the goods-on-the-way is still our property. However Goods Issue post will move the amount from inventory to cost of goods sold.

Option2 - we post goods issue when the customer confirms their receipt. It doesn't bring the 2 issues described above but how do we monitor the goods in transit? I mean there is no document or action in the system reflecting this physical movement.

Looking forward to any input. Appreciated.

yu

[moazzam_ali · Accepted solution]

Hi

Your concerns are correct and this happens in many companies. When do we need to do PGI? It must be when the material physically leave your location. When you send materials to customer it means the material is no more in your system or custody. The responsibility lies with transporter. If customer receives quantity greater or less than actual issued quantity then this is covered in POD (Proof of Delivery). Usually customer can receive the quantity less than we have issued not more than we issue.

Read POD document from google and you will have this idea.

For fiscal period difference in PGI and billing it depends on your business. If they can create billing and PGI at same time then there will be no difference but if they want to use POD process then they have to wait for the customer's confirmation and then do the billing. In this case there will be difference of fiscal periods and I don't think so there will be any issue with this as this is normal practice in those companies where they have many days delay in delivery and billing.

Thank$

[Former Member · Accepted solution]

Thank you MoazzaM. Let me do some study on POD process first. Is it a standard SAP function to tackle the situation I mentioned or just a workaround? Is it after goods issue posting?

[moazzam_ali · Accepted solution]

Hi

Yes this is standard SAP process. You can study about it in my following document. There are SAP documents links in it.

http://scn.sap.com/docs/DOC-46672

And this is done after PGI. Rest go through the link I have provided.

Thank$

[former_member182378 · Accepted solution]

zh,

MoazzaM has presented some valid points!

Onces the goods leave the plant, PGI should be done.

The plant should reflect the actual quantity that in physically in the it. When user looks at the stock (t-code MMBE) he / she should see only that qty that is in the plant (and not goods that have already left the plant).

Further, PGI impacts the valuation of inventory, changes the status of the delivery which could be crucial for reporting, analysis.

DDP signifies the goods are the responsibility of the seller during the transportation process too. The visibility of goods during transit can be seen via the system of the 3PL (transportor).

I feel PGI and specific incoterms (DDP) are two different functions and should not be mixed up.

[Former Member · Accepted solution]

Hi

In fact our concern is more about the moment of goods issue and billing creation - how do we make sure the cost and revenue always happen in the same fiscal period. At Goods Issue posting, we accept the amount transfer from inventory to cost of goods sold. But revenue happens only with billing document. What is the right procedure of doing this?

yu

[moazzam_ali · Accepted solution]

Hi

If your company is following month end closing and they want to make sure posting of every document in same period then what other option do we have except posting billing documents in same period. If there is a long delay in delivery and billing then they have to change their business process. SAP gives facility to create billing on same day when delivery was created or you can create it later. Its your business scenario which differs. In SAP there is no other way in my mind.

Thank$

[Lakshmipathi]

In delivery releated Billing, you should be aware even if you generate billing document at a later date, system will populate the billing date as PGI Date.  This being the case, even if you generate billing document in the subsequent month, the billing date would be the same as PGI date but of course, the accounting document would be in the next month, provided the FI period is open.

In one of my earlier projects for a manufacturing unit, Business requirement is such that no PGId deliveries would be allowed to generate billing document in the subsequent month.  This means, whatever deliveries are PGId during a particular month, the same month, billing documents would also be generated.  For that, we had to go for enhancement to prevent generation of billing documents for a delivery that is PGId in previous month.  Whatever deliveries that are not invoiced, users would cancel the delivery and redo the PGI process in the subsequent month. So it is up to the Business to decide as to how their inventories should be handled and accordingly, we can map in SAP.

G. Lakshmipathi

[Former Member]

Thank you Lakshmipathi for sharing the experience. We are not opening the future fiscal periods for postings. I thought it's a quite general requirement that companies wanted to have cost and revenue happen in same period. So the standard solution is to open future FI period? It doesn't sound feasible in our business.

yu

[shashi_thakur]

Hi Zh y,

Agree with MoazzaM, - POD process would suit your requirements better. As regards the difference in posting dates-you also have the option of modifying the posting dates programmatically, provided the previous period is open and the gap between them is not in several months.

Regards,

Shashi

[former_member182378]

zh,

Even if you follow option 1 (deffered PGI)

- Then too during transit there is no visibility of stock in SAP system!

- If some goods are damaged, the how would you "amend" that in the SAP system?

Picking is already done for the entire qty in the delivery.

Second, since the transfer of ownership does not happen until goods receipt, the goods-on-the-way is still our property. However Goods Issue post will move the amount from inventory to cost of goods sold.

[Former Member]

Hi TW

Yes you are right, we cannot have any visibility on stock in transit but at least we know the goods have left our warehouse at PGI time. Regarding the quantity variance at customer's plant, we have very rare cases happened like that so the requirement is not really on the table yet. I'm more interested about the standard process of goods issue.

yu