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Cross-Company: Verrechnung zwischen rechtlich selbständigen Einheiten

Organize Intercompany transactions efficiently in SAP S/4HANA

At a time of global competition, organisational structures in companies are undergoing constant change. Tax, organisational and legal factors have led to a situation in which several legally independent companies exist within a corporate group that carry out business transactions with each other. All these factors make it of great importance that you efficiently organize intercompany transactions. Distribution and services businesses specialise in sales in different markets, while production units focus on the development and manufacturing of the products. 

Challenges due to legally independent units within a corporate group

The problems that arise from a standard distribution process of this kind can include the following:

  • Unnecessary duplicate entries with additional sources of error due to the transfer of the data
  • Implementation and maintenance costs of an automated solution such as those that arise with certain customers
  • Problems with changes: what happens if the customer changes their order after the purchase order has already been sent to the company? In a situation of this kind, how is the content between the order and the purchase order kept in sync? What happens if production wants to change something, and how does this information make its way to the customer order?

Possible ways of displaying Intercompany processes

Sale to end customer

In this case, an end customer purchases products from an internal trading partner outside the actual group, the distribution company. The delivery, however, actually takes place from the inventory of another group unit, the production company. The distribution company charges the goods to the end customer, while the production company delivers the goods directly to the end customer and issues an internal invoice to the distribution company.

Cross-Company: Sale to end customer

In this process, the distribution company initially enters the customer order from the end customer and then creates a purchase order which it forwards to the production company. There, a customer order is created (the ordering party is the distribution company). The delivery to the end customer takes place using a delivery document. The invoicing to the distribution company takes place regarding this delivery, and the distribution company then issues the invoice to the end customer. This process corresponds to the standard drop shipment.

Internal group procurement

In this case, the customer and supplier are both companies in a corporate group. The customer orders the goods which are delivered and charged by the supplier. The customer becomes the owner and adds the goods to their inventory. They then consume the goods as raw materials or components in their in-house production facility or sell them on as merchandise.

Cross Company: Internal group procurement

In the case of internal group procurement, a purchase order is entered in the distribution company. The supplier is the production company that enters a customer order (the ordering party is the distribution company). The delivery of goods is shown in SAP through a delivery. The production company issues an invoice to the distribution company, where it becomes an incoming invoice.

Possible scenarios in SAP S/4HANA

Both the “Sale to end customer” process and the “Internal group procurement” process can be considered to be conventional delivery processes. Both procedures can be shown in the SAP system on an optimum basis through the following scenarios:

  • Intercompany sale (sale to end customer)
  • Intercompany stock transport (internal group procurement)

Both scenarios in SAP allow for a considerably more streamlined mapping of intercompany, also known as cross-company, processes than the conventional approaches of “Sale to end customer” and “Internal group procurement”.

Intercompany sale

Cross Company: Sales

In the following example, we take a closer look at the 5 steps outlined above:

  • Entry of the intercompany order in the selling company code
  • Entry of the delivery in the producing company code
  • External invoices in the selling company code
  • Internal invoices in the producing company code
  • Incoming invoice in the selling company code
  1. Intercompany Order

A customer order is entered in the company code of the distribution company (company code 2000). In the item of the customer order, however, a delivering plant is determined which is assigned to the company code of the production company. This means that the goods can be delivered directly from the producing plant to the end customer. Additionally, the dispatch point also forms part of the plant facility of the production company.

In this order, the condition type “internal moving average price” is also determined through the pricing. This is the price which was agreed between the producing and distributing company and which is invoiced by the production company to the distribution company. This condition is statistical in order and does not affect the value of the order. It only presents the moving average price of the production company to the distribution company as additional information.

Since the plant of the production company was entered directly as the delivering plant of the item, the passing on of requirements takes place directly in this plant. The availability check also checks against the stock balances and/or the planned inflows and outflows in the producing plant. This means that both the purchase order in the distribution company and the customer order in the production company can be omitted. In comparison with the mapping of the “Sale to end customer”, two process steps are therefore dropped.

  1. Delivery

Regarding the customer order in the distribution company, a delivery document is then created in SAP in the plant of the production company (company code 1000). This does not at first glance differ from the processing of the delivery in the normal order process. However, in the case of a cross-company sale, the question of the determination of the distribution area is then raised. The distribution area is usually taken from the customer order. In this case, this is not possible, however, because the customer order is in another company code. A distribution area must be therefore allocated to every (delivery) plant in advance for the internal allocation.

  1. External Invoice

In contrast to the “normal” order processing, in the cross-company sale scenario, two invoices concerning the delivery are created. Firstly, the external invoice is generated in the company code of the distribution company. The distribution company uses this to invoice the delivery to the end customer. The revenues are posted in the financial accounting and transferred to the profitability analysis. Here, the costs in the profitability analysis are not usually determined from the moving average price, however, because, as is well known, this reflects the valuation price in the production company and therefore the planned production costs from the point of view of a different company code. The costs in the profitability analysis are therefore frequently determined using the “internal moving average price”. This is the price that the distribution company pays to the production company. From the perspective of the distribution company, the internal moving average price, therefore, represents the costs of sales.

  1. Internal Invoice

The internal invoices in the producing company code are also generated regarding the delivery. In this case, the moving average price is no longer statistical but now serves as the determination of the invoice value. The distribution area is adopted from the delivery. Through the internal invoice, an accounting document is generated in the delivering company code. The company code posts the sales revenues, the receivable and the value-added tax. As with the external invoice, an update takes place in the profitability analysis in the delivering company code, in which the revenues and the costs are transferred. The determination of the revenues is based on the internal moving average price and therefore on the price that the selling company code is required to pay to the delivering company code.

  1. Incoming Invoice

In the final step, we come to the posting of the incoming invoice in the selling company code. In the “normal” purchasing process (purchase requisition, purchase order, goods receipt, invoice), the incoming invoice is posted via invoice verification regarding the order and the goods receipt. In the conventional procedure (sale to end customer), this would take place congruently. As the purchase order and goods receipt posting in the distribution company do not apply in the cross-company sale scenario, however, this function cannot be used here, which is why the invoice must be entered directly in financial accounting as an accounts payable document.

Intercompany stock transport

Cross Company: Stock transport

In addition to “intercompany sale”, the “intercompany stock transport” process is a possible mapping scenario in SAP S/4HANA.

In the following example, we take a closer look at the 5 steps outlined above:

  • Entry of the stock transport order
  • Entry of the replenishment delivery
  • Completion of the internal allocation
  • Goods receipt posting in the distribution company
  • Entry of the incoming invoice
  1. Stock Transport Order

In the first step, a stock transport requisition is entered in the distribution company. Each stock transport requisition becomes effective in the plant of the distribution company as a planned acquisition in the materials planning. At the same time, it is posted as a planned outflow (purchase requisition call) in the production company. With the conversion of the stock transport requisition into a stock transport order in the distribution company, the required release order becomes a release order in the production company. The stock transport order contains the supplier master data (in the document header), which represents the production company as a vendor in the distribution company. This vendor master data includes the details of the delivering plant, which allows the system to recognize that the stock transfer is from another plant. It is also possible to start directly with a stock transport order.

  1. Replenishment Delivery

Regarding the stock transport order, you can now create a delivery with the delivery type “cross-company replenishment delivery” in the production company (company code 1000).

In the forward order processing, the goods recipient is entered in the order and copied into the delivery document. This is not possible in this transaction because there is no customer order, however. The goods recipient is determined through the appropriate setting in materials management instead. There, a corresponding customer master is assigned to every destination plant. Furthermore, the destination plant is entered in the stock transport order by the user.

  1. Internal Allocation

Concerning the delivery, an invoice is created in the production company (company code 1000) with the “internal allocation” invoice type. In contrast to the “cross-company sale” scenario, the external invoice is no longer required. In this case, no conditions can be copied from the sales order which is why, among other things, the internal moving average price must be redetermined. Otherwise, the billing transaction is no different from the creation of the internal invoice in the event of a cross-company sale.

  1. Goods Receipt Posting

In the fourth step, the goods receipt is posted in the distribution company. This takes place concerning the stock transport order. The corresponding purchase order items are then offered for selection. The purchase order history statistics for the stock transport order are updated seamlessly via the goods receipt posting.

  1. Enter Incoming Invoice

In the final step of the procedure, the incoming invoice has to be entered into the distribution company. In contrast to the “cross-company sale” scenario, a purchase order now exists in the distribution company. For the user, there are no differences to the entry of a “normal” incoming invoice.

The cross-company process can also have its pitfalls, however:

How are the incoming order and the order backlog shown properly in the distribution statistics? This is generally based on the customer order. In this case, one of the two orders is missing, though.

Changes to the order are more easily kept in sync, but they also have an immediate effect on production. Is this always intended to occur? In the usual standard distribution process, better isolation and separation takes place due to the separate orders.

Summary

As shown above, intercompany processes can be mapped differently in SAP S/4 HANA. The scenario that makes the most sense for you depends on your specific requirements and the system-related conditions, for example, whether all affiliated companies are in a single SAP system and a single controlling area. We will be pleased to assist you!

Contact us!

If this article has sparked your interest, please do not hesitate to contact me:

Our homepage provides you with further information on internal activity allocation: Guide for internal allocation with SAP

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About the author
Daniel Schneider-Ortscheit
Daniel Schneider-Ortscheit
Daniel Schneider-Ortscheit ist Customer Success Manager at PIKON. His main focus is on the topics of SAP add-ons, individual products and extensions.

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