The sales process in SAP Business One leverages a high degree of integration between the individual sales document levels, as well as close links between purchasing and warehouse management. The sales document chain contains the following document levels:
|2.||Sales quotationSales order|
|3.||Sales orderDeliveryDelivery (for inventory items only)|
|4.||If required: returnsReturn (reverse of delivery, for inventory items only)|
|6.||A/R invoiceIf required: A/R credit memoA/R credit memo (reverse of A/R invoice and delivery)|
Apart from the incoming payment level, located in the Banking module, the structure of the windows is very similar. Therefore, in the following sections, we will present their individual characteristics in relation to a document level. Any minor differences with document levels in the purchasing area are presented separately.
Program operation in the document window is based on the same concept as described in Section 3.4. When the window is opened, it is in Add mode. Once you have entered all the required data, click on the Add button to create the document (for example, the sales quotation). To call existing documents, click on the button (Find Data Record) or press Ctrl + F to switch to Find mode.
When you switch to Find mode, the cursor automatically jumps to the Document Number field, because the document search is often based on the document number.
You also can browse the document using the data record buttons (see Figure 3.4.2). Because the most recently created document has the highest document number, you can go to this document very quickly by clicking the (Last Data Record) button. As soon as you modify an existing document, the button in the lower left-hand part of the screen changes from OK to Update. Click on this button to confirm the changes you have made. Then, click on OK or Cancel to close the document window.
The structure and functions of the document headers of sales documents are similar to those of purchasing documents. One difference is that, in the Sales Quotation document level, the usual Delivery Date field is replaced by the Valid Until field, which is used to specify the validity period of a quotation. This is the date until which the customer can place an order under the conditions specified in the quotation.
All functions in the sales document body and their uses are basically identical to those in the document body of the Purchasing module. For this reason, we will deal here either with functionality that occurs in sales documents only, such as Availability check of inventory items and Create a purchase order from a sales order. We’ll also describe those that are more frequently used in sales documents than in other documents, such as List of last prices and Summarize document rows.
The order of items in the Contents tab is more or less the same as the order in purchasing documents. All columns and fields that you need to add from the pool can be added using the button (Form Settings) in the Table Format tab.
SAP Business One provides an efficient instrument for quickly checking the availability of an item used in the document row. You can switch this functionality on or off by checking or unchecking the Activate Automatic Availability Check checkbox. The menu path to reach this is Administration N System Initialization N Document Settings N Per Document tab N “Sales Order” document). Figure 6.2 illustrates these parameters.
The availability-check function is activated by default and is visible in the document row in the sales order. As soon as you use an item in the document row whose available stock is in danger of falling below zero because of the sales order that has just been created, the availability check is activated. A window then opens, as shown in Figure 6.3, where you now have a range of options.
Figure 6.2 Document Settings: Activate Availability Check
Figure 6.3 Availability Check in “Quantity” Field (Sales Order)
In the example shown in Figure 6.3, the Quantity Available is made up of the following figures: In Stock (2 items) — Committed (5 items) + Quantity Ordered (9 items) = Quantity Available (6 items). Because this situation could cause a delivery bottleneck later on, the automatic availability check is started. As you can see in the Item Availability Check window shown in Figure 6.3, you have five options here:
- Continue By choosing this option, you ignore the possible bottleneck and return to the document.
- Change to Available Quantity This option automatically uses the available quantity so that the quantity does not fall below zero.
- Display Quantities in Other Warehouses Displays the Warehouse quantity of the selected item in other warehouses.
- Display Alternative Items If alternative items were created for this item, this option lists the alternative items based on their percentage similarity with the original item.
- Delete Row This option removes the checked row.
Select one of these options and confirm the item availability check by clicking the OK button.
The quotation is the most important document level from the sales point of view. SAP Business One supports the pre-sales phase in particular, especially by means of the Opportunities module, described In Chapter 11, Sales Opportunities). For this reason, the Last Prices Report is provided as a useful tool for pricing in sales quotations. At the touch of a button, this report provides you with an overview of the last prices you assigned to the selected items, sorted by business partner and sales document level.
To call the Last Prices Report, use the Ctrl + Tab key combination in the Price After Discount field (see Figure 6.4).
You need to create a sales quotation for a high-profile customer. The price of each item requested is negotiable. To ensure that you are offering the customer consistently good terms, you quickly compare the prices that you assigned to this item in your last three quotations.
This report can also be called using the menu path: Inventory N Inventory Reports N Last Prices Report. If this report is called directly from within the sales quotation, the BP Code (business partner code) and Item No. fields are pre-populated. In Figure 6.4, the contents of these fields are business partner “C23900” and item number “LM4029,” and only the information relevant to these fields is displayed.
Figure 6.4 Last Prices Report Called from Sales Quotation
Besides selecting or pre-selecting the business partner and item number, the Last Prices Report window also allows you to specify the following options (see Figure 6.4 in each case):
- Sales document level The upper left-hand side of the window contains a list of all possible sales document levels, from A/R Invoices to Delivery Notes, Sales Orders, and Sales Quotations. Check the levels for which you want the prices of the selected items to be displayed.
- Display number of last prices In this field in the middle of the window, enter the number of past prices that the report should return. The default value for this field is 10.
- Special Prices checkbox Check this box to also display the last-used special prices for this item.
- Date, Quantity These fields also refer to special prices in cases where scale prices and a validity period are relevant to this item.
- Document column This column displays the document type with the internal SAP Business One ID of the document level. The Appendix in Section 15.2.3 contains a list of these document IDs. The historical document number is shown to the right of each document ID. Click on the orange-colored arrow in this column to call each document.
- Date column This column displays the date of the document.
- Quantity column This column displays the quantity of the selected item in the historical document.
- Price after Discount This displays the historical price of the selected item.
The example in Figure 6.4 shows that a planned price of USD 400.00 for the selected item LM4029 for business partner C23900 is not consistent with past prices. The item has previously been offered at USD 500.00, as the sales quotation (QU 8) and both sales orders (OR 5 and 7) show.
Summarizing document rows
With the Summary Type, SAP Business One gives users the option of summarizing document rows by similar characteristics. The Summary Type field is located in the upper right-hand area of the Contents tab (see Figure 6.5).
This summary function can be used for documents with the Item document type only, and has two forms:
- By Items All document rows with the same items are summarized to form a single document row. However, document rows can be summarized only if the properties of the item rows are the same. This applies first and foremost to item number, item description, price, and warehouse. If all these properties are the same in all item rows, the individual quantities are totaled, and only a single item row remains after the summarizing has taken place.
- By Documents All document rows with the same base documents are summarized to form a single document row. All item-specific fields are hidden in this case. This summary type cannot be used for the first document level (that is, sales quotation).
Figure 6.5 Summary of Document Rows
The document summary function is useful in the case of a document that is created from multiple base documents with multiple document rows. The document can also be printed in this summarized form. If summary “by items” is used, item rows that are the same are summarized into one row to maintain the clarity of the document.
For a customer, you create a delivery note consisting of four similar sales orders, each with 10 document rows. Before summarizing, the delivery note would have 40 document rows. After summarizing, this number is considerably smaller. Because the customer uses the delivery note to check the delivery, there cannot be four versions of an item row.
The Sales Order document level provides a special function in addition to the usual fields we already have explained for the purchasing documents. This function enables you to create a valid purchase order directly from within the sales order. To do this, fill the Purchase Orders checkbox in the Logistics tab. Once you have added the purchase order, the Purchase Order Confirmation window opens, as shown in Figure 6.6.
Figure 6.6 Purchase Order Confirmation Started from Sales Order
The Purchase Order Confirmation window is subdivided into the Order table on the left-hand side and the Purchase Order table on the right-hand side. The Order table displays all item data of the sales order that you just created, and contains the following columns:
- BP Code This column shows the business partner code of the preferred vendor who is entered for this item in the Purchasing tab under Item Master Data (see Section 4.6).
- Warehouse This column indicates the warehouse to which the vendor delivers the item. By default, the same warehouse is used as in the sales order you just created.
- Item No., Quantity, Price after Discount These columns display the corresponding item attributes from the sales order.
The item rows in the Order table are grouped into the columns from left to right. First, all item rows with the same preferred vendor are summarized, then all item rows with the same warehouse, and last all item rows with the same attributes. The total of the quantities is added up at the top of each tree structure. This means that the total is displayed after the warehouse and the preferred vendor item rows. You can open and close the tree structure in both windows by clicking Expand and Collapse, respectively. You can do the same for each row by clicking on the orange-colored triangle . You also have the option to change the quantity and the price in each item row and to change the warehouse and the preferred vendor. If the preferred vendor is changed to a vendor that already exists in this table, the item rows of this preferred vendor are added to the existing one.
You can now transfer the proposed item rows in the Order table on the left-hand side to the Purchase Order table on the right-hand side, either individually or as a group. To do this, select the required item rows on the left-hand side (use the Ctrl or Shift key to select multiple rows). The warehouse and preferred vendor rows are automatically selected. Then, click on the button to assign the selected item rows to the purchase order (see Figure 6.6). To transfer all proposed item rows to the purchase order at the same time, use the button.
This method also works in reverse. Select the item row you require in the right-hand Purchase Order table and click on the button. Use the button if you want to delete all item rows from the purchase order at the same time. Use the and buttons to change the order of item rows in the table; that is, to move individual item rows up or down. Finally, click on the Add button to create the purchase order. One purchase order is then created for each preferred vendor. This purchase order has the corresponding sales order as its base document. From within the purchase order, you can click on the (base document) button to open this sales order.
Alternatively, you can cancel the purchase-order creation process. If you want to carry out this process from within the sales order again at a later date, simply open the sales order, de-select and re-select the Purchase Orders checkbox on the Logistics tab and click on the Update button. The system then reopens the Purchase Order Confirmation window.
You can check the Split Purchase Order box in the upper right-hand part of the window to create one purchase order per warehouse. The Create Draft Doc. option creates a draft version of the purchase order that you can call up again and add later.
The Accounting tab contains the same fields as the A/P Invoice document level. The Journal Remark field allows you to you enter a posting text for the A/R invoice posting. The document type (A/R invoice) and the customer number are specified by default here.
Invoice with installment payments
In Section 4.4, we saw how a due date with multiple installments can be incorporated into payment terms. We will now demonstrate how to set up a situation where a buyer can pay an A/R invoice in installments. In the Accounting tab, apart from the Payment Terms, the number of Installments is shown in the field of the same name (see Figure 6.7).06_07.eps
Figure 6.7 A/R Invoice with Installment Payments
If you select payment terms with installment payments, the installments are calculated immediately and automatically. Click the orange-colored arrow next to the Installments field to open the Installments window with the set installments and due dates. In the example in Figure 6.7, a payment with six installments is defined, with the installments payable at monthly intervals. Every installment represents 15 % of the total payable amount, except for the last installment, which is 25 %.
You also can use the Installments window to change all the settings before adding the A/R invoice. In other words, besides the Number of Installments, you can also change the Due Date, the Percentage, and the Total. After you add the A/R invoice, on the other hand, the only option open to you is to change the Due Date. If you select the Apply Tax in First Installment option, the tax due on the whole amount of the document, plus the 15 % net amount, is due with the first installment. The remaining net amount is then distributed over the remaining installments in accordance with the specified percentages. The Apply Tax Proportionally option, on the other hand, simply distributes the gross amount across the installments in accordance with the percentages.
SAP Business One enables you to create what are known as zero delivery notes and zero invoices in the sales document chain. These are delivery notes and invoices with the document total zero. After you add these, the system outputs the system security message shown in Figure 6.8.
Figure 6.8 Security Message with Document Total Zero
Click Yes to add the document despite the zero total.
If you offer your customers free samples or goods, these are usually delivered with a delivery note or an A/R invoice. A zero delivery note or zero invoice is used in such a case.
Chapter 5, Purchasing, and Section 6.2 already dealt in detail with the structure and functions of the individual document levels. Section 5.2.5 thoroughly explained the further processing options between the document levels. Now, in this section, we will deal with the sales-specific characteristics. First, we will look at where the individual documents fit into the sales document chain overall. Then, we will deal with the characteristic differences between the sales and the purchasing areas.
Figure 6.9 provides an overview of the sales document chain.
Figure 6.9 Sales Document Chain
The sales document chain consists mainly of elements that are based in the Sales module: sales quotation, sales order, delivery, A/R invoice, returns, and credit memo. The exception is the Incoming Payments window, which is located in the Banking module. In terms of content, however, it belongs to Purchasing, as the purchasing chain is completed only once the purchase is paid for. Section 10.2 deals in detail with the functions and uses of incoming payments.
The basic structure of the document chain in SAP Business One is very flexible. It enables you to start the document chain at any point you like, and also to resume it at any point without having to repeat all the levels in the chain.
You do not have to start the document chain with the sales quotation. You also can start with the sales order, the delivery, or the A/R invoice. Also, a sales order does not necessarily have to be followed by a delivery. You also can create an A/R invoice directly from a sales quotation or a sales order.
Further processing of documents
Table 6.1 contains an overview of the options for “pushing forward” and “pulling forward” elements to the individual document levels of the sales document chain. It also describes the specific features of individual levels.
|Document Level||Copy From (Base Document)||Copy To (Target Document)||Specific Features|
|Sales quotation||–||Order, delivery, reserve invoice, A/R invoice||Quotation can be modified after being added|
|Sales order||Sales quotation||Delivery, reserve invoice, A/R invoice||Purchase order can be automatically created and can be modified after being added|
|Delivery||Sales quotation, sales order, returns, reserve invoice||Returns, A/R invoice||Document cannot be modified after being added|
|Returns||Delivery||Goods receipt||Document cannot be modified after being added|
|A/R invoice||Sales quotation, sales order, delivery||Credit memo||Document cannot be modified after being added; instant payment possible, reference to document with subsequent document number|
|Credit memo||A/R invoice||–||Document cannot be modified after being added|
|Incoming payment||A/R invoice||–||Document cannot be modified after being added|
Like Purchasing, Sales is closely linked to the Inventory and Financials modules. Which of the latter two modules is more involved with Sales depends on whether the items used in the document levels are inventory items or non-inventory items. This is determined by whether the Inventory Items checkbox in the Item Master Data window is checked. Table 6.3 explains the effect of each individual document level on inventory quantity and accounting.
|Document Level||Effect on Inventory Management (Quantity)||Effect on Accounting (Value)|
|Sales quotation||No inventory movement and no reservation||None|
|Sales order||No inventory movement, increase in confirmed quantity, leading to reduction in available quantity (see Item Master Data window, Inventory Data tab, Section 4.6)||None|
|Delivery||Reduction in inventory quantity||Automatic cost of goods sold posting|
|Returns||Increased inventory quantity||Retroactive posting of cost of goods sold posting|
|A/R invoice||No inventory movement if preceded by goods receipt, otherwise reduction in inventory quantity||Posting of receivables on customer’s side, revenue posting, and automatic cost of goods sold posting if not preceded by goods receipt|
|Credit memo||Increase in inventory quantity if not preceded by returns||Retroactive posting of receivable, revenue correction, and retroactive posting of cost of goods sold posting (if not preceded by returns)|
|Incoming payment||No inventory movement||Clearing of receivable on customer’s side; increase in cash|
The sales order leads only to a reduction in the available quantity; it does not modify the inventory quantity. In other words, it reserves the quantity, but does not post it. Thus, nor is there any journal entry for sales orders. With a delivery, the actual inventory quantity is posted, and the value-based goods usage reposting is posted in Accounting to the goods-usage account and the inventory account.
The Returns document level is simply the reverse of this process. If no delivery is created and the sales order is processed directly in the A/R invoice, the inventory quantity reduction and the automatic goods usage reposting do not take place until the A/R invoice document stage. On the A/R invoice level, the delivery is created in advance, and all that remains to be done is the value-based posting of the receivable on the customer’s side. With credit memos, both the delivery process and the A/R invoice are (partially) reversed. In other words, the receivable on the customer’s side is cleared, the inventory quantity is increased again, and the goods-usage reposting is retroactively posted. The incoming payment clears the customer receivable; it has no effect on value-based and quantity-based inventory management. Section 9.2 provides an overview of the automatic journal entries in the sales chain.
Table 6.3 shows the effects on accounting of the individual sales documents that contain only non-inventory items.
|Document Level||Effect on Accounting|
|A/R invoice||Posting of receivable on customer’s side, revenue posting|
|Credit memo||Retroactive posting of receivable on customer’s side, revenue posting|
|Outgoing payment||Clearing of receivable on customer’s side, increase in cash|
There are no value-based and quantity-based inventory movements for non-inventory items. Thus, the delivery document level is skipped in its entirety. Accordingly, the posting of the receivable for the remaining document levels (except for quotation and sales order) is started automatically.
The A/R reserve invoice has a special position within the sales document chain. If you issue a reserve invoice to a customer, this alters the usual sales-document chain. Figure 6.10 illustrates this modified document chain.
Figure 6.10 Sales Document Chain with Reserve Invoice
The difference to the normal sales document chain is that the reserve invoice is issued directly after the sales order. This is then followed by the delivery from the warehouse and the goods issue. The reserve invoice can be regarded as the reverse of the credit memo. The sales process is completed by the delivery and the incoming payment; that is, the payment of the reserve invoice. In practice, it is very common for the delivery to be made to the customer only when the incoming payment has been made and received. However, the variant shown in Figure 6.10, in which the incoming payment is made only after the delivery, is also possible.
A reserve invoice only can be created using the document type Item, because only in this case does it make sense to reverse the document chain. In the case of service documents, there is no delivery, and so it is sufficient to create an A/R invoice.
This section describes other sales-specific features besides the standard functions of the sales document chain. These include A/R invoice + payment, document date check, the Document Generation Wizard, consolidation of sales documents, and drop shipment.
A/R invoice and payment
A/R invoice and payment is another document type used differently than in the classic sales document chain. This document type is usually used only for casual customers; that is, customers not part of your company’s regular customer base. Therefore, the A/R invoice and payment document type does not require you to create a customer in the Business Partner Master Data window. All you need is a dummy customer, which you have to create in the business partner master data. This customer functions as a “normal” customer. Once you have created the dummy customer, you have to define it as such in the Default Customer for A/R Invoice + Payment field under Administration N Setup N Accounting N G/L Account Determination • Sales / General tab (see Figure 6.11, left-hand window).
Use the Tab key to open the Business Partner Selection List and select your dummy customer from this list. This customer is automatically inserted into the Customer and Name fields when the A/R Invoice and Payment window is opened. You can now change the Name field and enter the actual name of the customer, so that the actual name is also shown on the printout. Naturally, this name is not written back to the business partner master data. Other than these steps, you handle the A/R Invoice and Payment window as you would in the classic A/R invoice scenario.
Figure 6.11 Defining Dummy Customer and Using It in A/R Invoice and Payment Window
The only exception arises after you add the A/R invoice: The A/R invoice in this case is paid directly after it is added. The Payment Means window is opened automatically when you select the payment method and the amount, as shown in Figure 6.12.
With casual customers, payments are usually made in cash, and so we will now look briefly at the Cash payment means. Section 10.2 deals in detail with the topic of incoming payments.
Figure 6.12 Cash Payment Means: A/R Invoice and Payment
The Payment Means window is automatically opened after the A/R invoice is added. Then, proceed as follows:
|1.||Select the tab for the required payment means, which in our case is Cash.|
|2.||Position the cursor in the Total field.|
|3.||Using the key combination Ctrl + B, copy the total amount of the invoice to this field.|
|4.||Confirm your entries by clicking the OK button. The Payment Means window is then closed and you are taken back to the A/R invoice window.|
|5.||Click on the button Add in the A/R Invoice window to create the A/R invoice.|
When the invoice is added, the postings for the A/R invoice and the incoming payment are sent in the background (see Tables 6.2 and 6.3).
Documents with later posting date
If you want to add an A/R invoice or a delivery note, but there are already documents in existence with later days and lower document numbers, the system outputs the message shown in Figure 6.13.
Figure 6.13 System Message Output When Document with Earlier Posting Date is Created
Legal requirements dictate that document numbers be sequential, without gaps, in increasing order, and chronological; in other words, each date has to be later than the previous one.
Document Generation Wizard
The Document Generation Wizard (Sales N Document Generation Wizard) is a tool for automatically creating target documents from existing, open base documents. The wizard supports you in this process by taking you through the steps involved in creating a document and selecting a range of parameters.
Once a month, you want to create a single A/R invoice for all delivery notes created in that month that are still open. Alternatively, you want to create a collective delivery for a specific customer from all open sales orders for this customer.
The documents are automatically created in the following eight steps:
|1.||Step 1 of 8 — document creation options: Choose one of the options New Parameter Set or Existing Parameter Set (see Figure 6.14). The parameters from all steps in the Document Generation Wizard are saved once you have used the wizard for the first time (with the New Parameter Set option). From the second use onwards, you can then choose either option; that is, start a new parameter set or call an existing one. The latter option enables you to reuse an existing selection.|
- For the New Parameter Set option (Figure 6.14, first option), create a suitable Name and an explanatory Description, and click on Next. For Existing Parameter Set (Figure 6.14, second option), select the existing parameter set from the table, and click on Next as before.
Figure 6.14 Document Generation Wizard Step 1: Two Document Generation Options
- The Next and Back buttons take you a step forward or back in the process, respectively, or you can close the wizard at any time by clicking on Cancel.
|2.||Step 2 of 8 — target document: Select a range of options to do with the target document:|
|3.||Step 3 of 8 — base documents: In this step, select all parameters that are relevant to the base document. On the left-hand side of the screen, check the base documents that you want to use as a basis for new target documents. On the right-hand side of the screen, you can restrict the selection of base documents by posting date, delivery date, document number series, and so on.|
|4.||Step 4 of 8 — consolidation options: If you select the No Consolidation option, one target document is created per base document. Select the Consolidate By: option to summarize the target documents by the criteria underneath them. By default, the System Defaults option is checked automatically. This option consolidates the target documents by base document type, customer, and item type or service type. You can also select other consolidation options such as recipient name, payment terms, payment means, and extended consolidation options such as sales employee, among others.|
|5.||Step 5 of 8 — customers: Select the customers for whom you want to create target documents. To do this, click on the Add Customers button, as shown in Figure 6.15.|
Figure 6.15 Document Generation Wizard, Step 5: Select Customers
- The Business Partners — Selection Criteria window opens. Here, use the Tab key in the Code From and To fields to select the business partners for which you want to create target documents. You can also restrict your selection by Customer Group and even Properties. Confirm your selection by clicking on OK. The selected customers are then entered into the table. You can now continue by selecting or deselecting customers, if required.
|6.||Step 6 of 8 — messages and alerts: Select how you want to handle missing data and its effect on accounting and inventory management. The default option here, which is pre-set, is Go to Next Document. This option is the recommended one. Alternatively, you can go to the next customer automatically or request a confirmation from the user if an error occurs.|
|7.||Step 7 of 8 — save and execute options: At this point, you can run the wizard, save and execute the parameter sets, or save and close the parameter sets (you may execute them at a later stage).|
- Before the last step, SAP Business One notifies the user by means of a system message — shown in Figure 6.16 — that he or she should back up the database at this point. This data backup should be made by a key user or with the support of a consultant or database administrator. Click on the Yes button to start generating the target documents.
Figure 6.16 Document Generation Wizard: Message About Database Backup
|8.||Step 8 of 8 — summary report: After the target documents are generated, a summary report like the one in Figure 6.17 is displayed.|
The result of our sample scenario — as shown in Figure 6.18 — is that delivery 120 (target document) is created on the basis of sales orders 14, 15, and 16 (base documents).
Figure 6.17 Document Generation Wizard Step 8: Summary Report
Consolidating sales documents
Non-standard business partners can be assigned in the Consolidating BP field in the Accounting — General tab in the Business Partner Master Data window. These business partners can then handle A/R invoices or payments if a delivery consolidation or payment consolidation process in the sales chain is carried out. For a detailed overview of how to define business partners, see the treatment of business partners in Section 4.3, particularly in Tables 4.5 and 4.6.
We will now look at the effects of the example created from the sources mentioned above. For the purposes of this example, we will use customer 20000 (Norm Thompson), and the consolidation partner that is entered for this customer: C40003 (Stoneware Systems). We will also use the delivery consolidation function, and the delivery note, A/R invoice, and incoming payment documents. Take a look at Figure 6.19 to remind yourself how to define a business partner.06_18.eps
Figure 6.18 Result of Document Generation Wizard: Delivery 12006_19.tif
Figure 6.19 Delivery Consolidation for Customer C20000: Norm Thompson
The Consolidating BP field shows the business partner for which the A/R invoice can be additionally created in the delivery consolidation process. The Delivery Consolidation option is selected.
Figure 6.20 shows the delivery note created for customer C20000: Norm Thompson.
Figure 6.20 Delivery for Customer C20000
If an A/R invoice is subsequently created on the basis of the delivery note shown in Figure 6.20, the original business partner C20000 (Norm Thompson) and the consolidation partner entered as C40003 (Stoneware Systems) can be used in the delivery consolidation process.
Your customer, C20000 (Norm Thompson), commissions you to deliver printers. However, the invoice and payment are handled by the parent company of C20000, customer C40003 (Stoneware Systems).
Figure 6.21 clearly shows that both the original business partner from the delivery note (C20000, Norm Thompson, left-hand window) and the consolidation partner (C40003, Stoneware Systems) can further process the delivery note.06_21.eps
Figure 6.21 Consolidation Based on A/R Invoice
The List of Deliveries window in Figure 6.21 opens after you click on the Copy From button. This window shows that delivery note 121 from Figure 6.20 can be copied to the A/R invoice for each business partner. The final incoming payment in each case can then be made only by the business partner named in the A/R invoice as the business partner.
A drop shipment is a transaction in which your company acts as the agent and executor of the transaction, but never stores the goods itself.
If the document is “pushed” (Copy To button in Delivery window), the original business partner is used. Only when the document is “pulled” (Copy From in A/R Invoice window) can the user choose between the original business partner and the consolidation business partner. What is more, the consolidation function works only if the sales document chain remains “closed.” In other words, you cannot select a non-standard business partner in the A/R invoice if no delivery note has been created.
In practice, this means that you accept a sales order and, at the same time, place a purchase order with your vendor for the same goods. Unlike a conventional transaction, your vendor does not deliver the goods to your warehouse; instead, the goods go straight to your customer’s warehouse. For this reason, no inventory movement is triggered in SAP Business One; only a value-based posting is made; that is, a payable to the vendor or a receivable to the customer.
A prerequisite for a drop shipment in SAP Business One is that a warehouse first has to be defined as the warehouse for the transaction. To do this, check the Drop Ship checkbox for the relevant warehouse, as shown in Figure 6.22.
Figure 6.22 Defining Warehouse for Drop Shipment
The warehouse for the drop shipment is not actually used; it functions merely as a dummy warehouse for the sales order, the purchase order, the delivery, and the A/R invoice.
The drop-shipment process comprises the following general steps:
|1.||Create a sales order with the required items, and use the drop shipment warehouse for the item rows.|
|2.||After you add the sales order, the Order Confirmation window opens. Transfer all item rows to the Order table, and add the purchase order.|
|3.||The delivery is made directly from the vendor to the customer without any involvement of your warehouse. As soon as the delivery is completed, create the A/R invoice for your customer on the basis of the sales order. The drop-shipment warehouse is retained up to the A/R invoice stage.|
|4.||As soon as the incoming invoice is received and paid, and your customer pays the A/R invoice, the drop-shipment process is completed.|
Useful information about gross profit
In the sales area, it is essential to have an indicator that provides information about the degree of success of a sales transaction, and the degree to which success or failure has contributed to the company’s overall results. In SAP Business One, just such an indicator of sales success is gross profit.
Gross profit, or gross revenue, is a measurable indicator of success at the lowest level of the enterprise. This is because the minimum contribution that each individual sales transaction can make to the enterprise is to cover its costs. If possible, it should also make a profit.
Gross profit is calculated as revenue minus the (directly attributable) material costs of a sales transaction. If the gross profit is positive, it contributes to covering other costs in the enterprise. If it is negative, this is an alarm signal that the material costs of this sales transaction have exceeded any profit made. In a retail enterprise, this would mean that the sales price of the sold goods would be less than the cost price (which equals the purchase price plus purchase costs), In other words, you would buy the goods at a higher price than that at which you sell them on to your customers. In normal business operations, this should occur in exceptional cases only; for example, if the sale in question is a particularly prestigious one that will enhance your company’s reputation, or will open up the possibility of further sales, or help to ward off competitors.
Naturally, the actual sales revenues calculated from the gross profit are determined by the sales price. The sales price, for its part, is set in negotiations with your customer, or in periodically-issued price lists, and is usually based on the market price built around the interaction of supply and demand. The material costs depend on the nature of your company’s business.
- Retail companies In retail companies, the material costs are the cost prices (or item costs) of the purchased goods. The cost price of a good is calculated on the basis of its purchase price plus purchase costs. Purchase costs are all the costs that are incurred in obtaining a good for your company, such as transport, insurance, customs, and charges. Because these costs are incurred specifically to purchase this good, they are included in the calculation of the value of the good at goods receipt, and are not classified as another operating cost of the enterprise. This approach also makes sense because the costs incurred by the retail good must also be recouped in the sale price of this good. It seems logical that a good with the same purchasing price costs more when it is purchased from Tokyo than from Detroit, because the purchasing costs of goods from Tokyo are considerably more than those from Detroit. SAP Business One takes this situation into account in its calculation of item costs in the purchasing area, based on the purchasing price and the additional outlays (purchasing costs).
- Service companies In service companies, there are usually no material costs that can be directly attributed to the sales transaction. The exception is external services, which are regarded as inventory items when they are defined, purchased, stored, and withdrawn from storage for sale. The classic direct costs of a service provider are the man-hours required for a project (sales transaction). These hours are usually attributed to the sales transaction by means of a planned/actual hourly charge calculation for partial or full costs. However, this calculation is not available in this form in SAP Business One. Instead, the planned service hours can be entered manually — for example, in a table calculation program — as the base price for gross profit calculation.
- Production companies In production companies, the material costs of the sales transaction arise from the costs of the produced good. Assigning a value to production items in the production process is part of the Production module and is an advanced topic beyond the scope of this introductory book.
Gross profit in SAP Business One
In this section, we will use a comprehensive example to illustrate the process involved in calculating gross profit, from purchasing the good to the sales order to delivery of the good.
Initial situation: OEC Computers has introduced a new product to its range, the Nokia N800 Organizer, which has a purchasing price of USD 200.00 and a standard sales price of USD 350.00. Twenty items of this good are purchased at the USD 200.00 price by means of an A/P invoice (see Figure 6.23).
Based on the A/P invoice (with automatic goods receipt), the inventory situation of the good is as follows: in stock: 20 items; ordered: 0 items; committed: 0 items; available quantity: 20 items; item cost: USD 200.00, valued at the moving average price as the purchasing price is the same (no purchasing costs!).
Figure 6.23 Purchasing Goods By Means of an A/P Invoice
After the purchase has been made, a customer commissions the purchase of a single Nokia device at a price of USD 350.00. The sales order for this purchase is shown in Figure 6.24.
Figure 6.24 Sales Order for One Item
Besides the quantity (1 item) and the item price (USD 350.00), the sales order in Figure 6.24 also shows the Gross Profit Base Price (USD 200.00 = item cost). This lets us calculate the actual gross profit from the information in the two right-hand columns: USD 150.00 (item price of USD 350.00 minus item cost of USD 200.00 ). These two columns are hidden by default. To display them, click on the button (Form Settings), then select the Table Format tab.
To view the gross profit calculation for the entire document, open the Gross Profit of Order window by clicking on the button (Gross Profit...) in the toolbar (see Figure 6.25).
Figure 6.25 Gross Profit for Entire Order
You can modify the calculated base price by yourself in the Gross Profit window. If you have more accurate information on the material costs of the sales transaction that would yield a more accurate gross profit figure, manually enter this new base price (material costs) in the Base Price field. You also have the option to modify the basis of the calculation in the Base Price By field. Simply select a suitable basis from the selection list. The default setting for base price (Item Cost; see Figure 6.25) is derived from the General tab in the Document Settings window (Administration N System Initialization N Document Settings). Fill the Calculate Gross Profit checkbox to activate the gross profit calculation function for your company in general. From the selection list, select the calculation basis that — as shown in Figure 6.25 — can be modified in the Gross Profit window of the Sales Order.
By definition, whatever calculation basis you select, can only be an approximation. The actual gross profit can be determined only by means of a thorough final costing of the sales transaction. How much the advance calculation differs from the final costing depends on the type of business. In a retail company with prices that do not fluctuate greatly, the error rate is lower than in a project-based company, where it is extremely difficult to calculate gross profit in advance. Therefore, it is important to select the calculation basis that best approximates the cost structure of your enterprise. SAP Business One provides the following options on which to base your calculation:
- Price lists Any price list can be used as a calculation basis. Purchase price lists are best suited for this purpose. If your company’s purchase prices do not fluctuate greatly, this option is without doubt the most suitable.
- Last purchase price After every purchase is completed, the last purchase price for this item is written to the Last purchase price list. Particularly in cases of fluctuating purchase prices, you can use the latest price listed here as a calculation basis.
- Last evaluated price This inventory valuation report (under Inventory N Inventory Reports N Inventory Valuation Report) enables you to re-evaluate your current inventory during the year, using a variety of evaluation methods. The calculated inventory values of the evaluated items are written to the Last evaluated price list. These newly-evaluated prices can then be used as a calculation basis for the base price.
- Item costs Item costs are stock values that are continuously calculated in accordance with the evaluation methods defined for the items (moving average price method, FIFO method), which are described in detail in Section 7.3. Because you are legally obliged to use one of these methods to evaluate your inventory, this option is usually also very suitable for calculating your base price. This is the variant that we use in our example.
To demonstrate the effects on gross profit in sales orders, we will now create another purchase of the same good, this time at a different price (see Figure 6.26).
Figure 6.26 Another Goods Purchase via A/P Invoice
This time, the 10 Nokia PDAs in Figure 6.26 will be purchased from another vendor at the cheaper price of USD 180.00 (instead of the list price of USD 200.00). Correspondingly, the item master data for the Nokia PDA now reflects the inventory situation shown in Figure 6.27.
Figure 6.27 Inventory Situation After Second Purchase
The inventory situation in Figure 6.27 clearly shows that 30 items (20 items from the first purchase and 10 from the second) are now In Stock. One item in the sales order is Committed, and no further items have been Ordered. However, much more interesting for our purposes is the Item Cost of USD 193.33, because this item was purchased more cheaply this time around. The item cost based on the moving average price is calculated in this case as follows: total item cost (= 20 x USD 200.00 + 10 x USD 180.00 = USD 5,800.00) divided by total quantity in stock (= 30 items). The result is USD 193.33.
The results of this are as follows. The calculation basis in the previously created sales order is not touched, but can be manually changed. If you want to create a delivery note from the sales order, however, the actual item costs are included in the gross profit calculation, as shown in Figure 6.28.
Figure 6.28 clearly shows that the latest item cost of the good, USD 193.33, was used as the base price for the creation of the delivery from the sales order. Correspondingly, if the sales price stays the same, the gross profit increases in relation to the sales order.
Figure 6.28 Goods Delivery: Adaptation of Base Price (Item Cost)
This means that by the delivery-document phase at the latest — or the A/R invoice, if no delivery is created — the gross profit is fixed and can no longer be changed. To view the item costs, click on the (Form Settings) button in the Delivery window to display the Item Costs column. If the delivery is further processed to become an A/R invoice, the base price is not changed, even if the item cost changes in the meantime due to new purchases or new evaluations.
The sales analysis report provides an overview of gross profits achieved in the sales area. See Section 6.3 for detailed information on this subject.