Service procurement is required to be done with some material issue

[Former Member]

Hi Experts,

Please help me for a scenerio where a Service procurement is planned like Ploughing and for the same a material like Fuel Diesel is issued for this purpose.

Requirement : The value of diesel is required to be adjusted e.g Rs 100/Litre for the Area where ploughing is done. and the rate at which ploughing is to be done is fixed e.g, Rs 1000 for 100 Sq ft.

Example :

Area where Ploughing to be done : 200 Sq ft

Rate : Rs 100 per Sq ft

Fuel (Diesel) : 100/Litre

Fuel to be issued : 50 Litre

Valuation :

Service Procurement : 200 X 100 = 2000

Goods Issue = 50 X 100 = 500

Net Payable =2000 - 500 = Rs 1500

Pls suggest wayouts, already thoughtof scenerios is Subcontracting, Condition type and SALE/Purchase

Regards,

AKS

Subject was edited by: Jürgen L

[BijayKumarBarik]

Hi,

Can you consider the enter activities of material consumption and service facilities  is into a project and create WBS element for each activities.

Create PO for material consumption with account assignment category P  and for service provided by vendor, create PO with account assignment category P and item category D.

Discuss with FI/CO and PS team  where the above processes will be suit for each stage and cost tracking for reporting purpose.

Regards,

Biju K

[Former Member]

Thanks Bijay for the response but i am afraid client dont have PS implemented hence no point of suggesting a solution in project system.

[BijayKumarBarik]

Hi,

If PS not implemented , then you can control with internal order only. Discuss with FI/CO team for material consumption with internal order and reporting at the end.

Regards,

Biju K

[JL23]

why does a value of Diesel stock needs to adjusted when you create a PO for ploughing ?

Isn't it normal that you do a goods issue when someone removes the material physically using MM movement types like 201?

And why has this goods issue in your case to be done at a fix price? Isn't it supposed to reduce the material from your own stock at whatever price your material has? Why shall the remaining stock of Diesel get revaluated if the fixed goods issue price is not equal to the Diesel valuation?

Can't you sell that material to your service provider?

[Former Member]

Hi jurgen,

Value of stock(diesel) is required to be adjusted in order to reduce two operations of payables generation through service entry sheet and then miro and again the amount of fuel to be recovered against the vendor and to have a link between these two functions.

Secondly 201 requires a cost center and i want to post the diesel valuation to vendor and not to a cost center.

Lastly NO the diesel price is not fixed have given values as an example, it will be the MAP of deisel to be charged to Vendor.

NO REVALUATION to be done here.

Ashutosh

[JL23]

A vendor is coming to you to plough your field and his price includes the Diesel  which he gets from you.

Wouldn't it be much easier from the operation if his service price was without the fuel?

It is finally a zero-sum-game, but it creates extra effort for both parties.

Since this is a service and not a kind of manufactured finished good, I don't see a need to include those fuel costs in the PO  or service entry sheet, since they will not be transferred to the finished goods price anyway.

To bill the vendor with your Diesel costs you either have to create a debit note in FI or a sales order in SD.

If you use SD then you have the goods issue via the delivery note. If you debit via FI then you do your goods issue in MM to cost center, if you have no cost collector like PM  or CO order.

[Former Member]

Thanks Jurgen for the suggestion, Yes the Service price in Service order is exclusive of Fuel cost and also it will not be mentioned in PO as these are two separate operations.

But yes Fuel is issued against which order is required for administrative and billing purposes as there is some calculation on the Area ploughed is to the litres required for ploughing.

Have mentioned the suggested approach to this problem if you have a better suggestion then that then you are most welcome !!!

Regards,

Ashutosh

[Prasoon]

Hi,

   Please check whether it can be with a PM order, where you can create an order with external procurement for services and consumption material. This will generate a PR for external service and a reservation for the material. The GI can be done against the reservation from PM order and external procurement can be done by converting the PR to PO. You may check the option and revert back.

   Alternatives will be through pricing conditions in services level (OLMSRV - Conditions) with a discount condition.

Regards,

AKPT

[Former Member]

Hi Prasoon,

Thanks for the reply but PM isn't implimented for my client to test this scenerio.

Secondly for the condition type option already have explored it as a discount condition but what about material issue (quantity) as this option will only adjust values but no goods issue.

regards

Ashutosh

[former_member218071]

Hi,

check if below process helps

- Create internal order for service provider

- Issue material against this internal order

Option 1 -

- Create service entry for services performed & process MIRO

- Ask accounts to pass FI entry debiting the service provider & crediting the internal order

Option 2 -

- Create service entry for services performed

- treat the material issued as un-planned service & add service with negative quantity while making service entry. this will be equal to quantity of material you issued & your rate for the material

- make provision for system to accept negative unplanned service quantity by maintaining limits in PO item details - limits tab& un-check "Serv based IV" at invoice tab

- use same internal order as cost object while making service entry for this negative quantity

regards, Rakesh

[Former Member]

Hi Rakesh,

Option 1 suggested looks feasible, let me explore it further. By doing this we will have a track on Fuel issuance against any particular service order order and also adjustment.

So steps will be :

1. Service Order generation.

2. Service entry sheet posting.

3. MIRO for SES.

4. Internal order creation with a mention of Service order as the linking factor.

5. Goods issue against internal order (movement type 261).

6. Adjustment entry from Diesel(IO) to Vendor Account.

Please suggest if any alternative for step 6 available with accounting entries.

Regards,

Ashutosh

[former_member218071]

Hi,

As the entry is pure FI entry, the accounts/FI person can confirm the exact G/L. This G/L will be "P&L account"

FI entry will be posted as below

     Service Provider Vendor Dr

     Identified G/L Cr with internal order as cost object.

After posting this entry there will be credit balance on internal order as material issued value is not match with debit value. So this credit balance has to be settled to proper cost object by costing person.

Please check with your FI person & he can guide you better in this entry

Regards, Rakesh

[Former Member]

Thanks Rajesh, for the suggested solution, have decided the solution as below mentioned :

Steps to be done :

1. Service Order generation.
2. Service entry sheet posting.
3. MIRO for SES.
4. New Internal Order order type creation for these type of cases.
   
5. Internal order creation with a mention of Service order as the linking factor(Requesting Order field) referencing New Internal Order type.
6. Goods issue against internal order (movement type 261).
7. Adjustment entry from Diesel(IO) to Vendor Account.

FI entry : New G/L accounts will be created. This G/L will be "P&L account".

FI entry will be posted as below

     Service Vendor Dr

     New G/L Account Cr with internal order as cost object.

8. Net Payment to Vendor, here select both the line items “Original invoice” and “Adjustment entry” while making payment.

This seems to me the most feasible option to this problem although there might be a better solution available. If there are any then please revert back otherwise considering this solution.

Thanks,

Ashutosh