Calculating and Settling Transportation Cost

After completing this lesson, you will be able to:

After completing this lesson, you will be able to:

  • Process and settle freight charges
  • Confirm freight costs for accrual posting
  • Settle freight charges
  • Distribute costs and bill customers

Freight Settlement Process

Freight costs calculated for the freight documents (freight orders and freight bookings) are to be posted in financial accounting to record such costs in accounting as accruals and to pay the carriers or freight forwarders. Once the freight documents are in a status in which the transportation has been initiated or completed, the freight costs can be posted to financial accounting. A user with role Transportation Buyer is responsible for this process from a transportation perspective. On the financial side, a user with role Accounts Payable Accountant concludes the process.

The freight settlement process (scope item 6W4) consists of four process steps.

In the first process step, the transportation buyer is responsible to confirm the freight document (freight order or freight booking) for accounting. They afterwards monitor the freight documents for any posting errors. The accounts payable accountant is responsible for the remaining two steps, that is the carrier settlement and the posting of the invoice.

Confirmation of Freight Costs for Accrual Posting

Process Overview

When the transportation process has been physically executed, the financial part of the process needs to be triggered. In the Monitor Execution – Freight Orders app, you have checked out freight orders, which is a prerequisite for financial processing. After you have checked out the last or only pickup stop of the freight order, the system gives the freight order a posting status of Ready for Confirmation. When your freight orders are in this posting status, you can verify that the planned (calculated) costs are correct, and you can confirm the transportation cost for posting to Financial Accounting. Likewise the Ready for Confirmation status is set for ocean freight bookings based on status Shipped-On-Board and for air freight bookings with status Uplift Confirmed.

Confirm Freight Documents

The transportation buyer is responsible to post the freight document, but he can also cancel posting of accruals which returns the freight document to the pasting status Ready for Confirmation.

After confirming the freight order for accruals posting, the Purchase Order and Service Entry Sheet are created automatically. These documents are the basis for invoice verification. Two scenarios are possible after choosing Confirm for Posting and they are as follows:

  • The freight order is confirmed for posting successfully.
  • The posting result is an error. In this case, the message Posting of Freight Order <Freight Order Number> has failed appears. You can find the freight order, which failed to be posted in the Errors list. The Freight Order was failed to confirm dialog box appears and you can review the detailed page with the error page header. You can check the error messages by choosing Show Errors on the overview page or on the detailed page.

Freight Cost Settlement

Monitor Accrual Postings

Using the Monitor Accrual Postings - Freight Documents app, you can monitor your freight orders and freight bookings to post accruals. You can confirm a freight order / booking to post the transportation cost to Financial Accounting for accruals. You can monitor your freight documents in case there are errors during the posting process. To post the transportation costs to Financial Accounting, you must confirm that the charges for a freight document are a correct reflection of the planned costs to be paid to the carrier. When you confirm a freight document for posting, the system posts the transportation costs to Financial Accounting. You can also identify freight documents for which you have successfully posted the transportation costs.

The system sets the posting status to Posted when the posting is successful or to Posting Failed if it encounters errors during posting. In the Errors view, you can show the list of freight documents that have a posting status of Posting Failed. In the Posted view, you can see the list of freight documents that have a posting status of Posted.

The Monitor Accrual Postings - Freight Documents app allows you to perform the following tasks:

  • Confirm transportation costs for posting to financial accounting for accruals

  • View freight documents that are successfully posted to financial accounting

  • Cancel postings for freight documents that are successfully posted to financial accounting

  • Monitor freight documents that have errors when you post them to financial accounting

  • Display the errors that the system encountered when it posted your freight documents

  • Post or cancel posting for freight documents for which the system encountered errors during posting

In a freight order or freight booking, charge calculation results are stored in a hierarchical table on the Charges tab. The charge items and charge lines in the hierarchical table correspond to the level at which the system determines the freight agreement and calculation sheets. The system specifies various attributes corresponding to the charge lines and thereby allows you to analyze which and how charges have been calculated.

In the posting process the system creates a service purchase order (PO) and service entry sheet (SES) in MM for carrier settlement and at the same time the system also posts the freight cost to material valuation for an inbound process or expense for an outbound process.

If you receive invoices with unplanned costs associated with freight orders, you can capture the same in the invoice document for the business user to be able to review the invoice and be able to do the further processing associated with the invoice (i.e. review the unplanned costs in the invoice, approve or reject the invoice or perform invoice reduction and post the invoice to financial). However, you cannot change or delete an existing invoiced charge.


Watch the simulation Settle Freight Order to learn more about the system-related activities.

Carrier Settlement

For the carrier settlement, the invoice received from the carrier is finally verified against the costs calculated in the freight document, or for the carriers, that agreed to the automated invoice settlement - you can use the Evaluated Receipt Settlement (ERS) scenario. A credit memo can be issued for the carrier in this scenario:

  • Invoice verification:

    As soon as the carrier invoice is received, the accounts payable accountant can post it with reference to the freight order. The expected transportation costs calculated in the freight order are compared with the amounts of the carrier invoice. Blocked invoices (due to discrepancies) can be released by the purchase manager using a workflow.

    In the invoice verification process, the verification is done against the following references:

    • Reference document category: Freight Order
    • Freight order: <Freight Order Number>

    Another option to locate the freight order is to use the search help and enter the carrier.

    When the carrier invoice is created, the posting status in the freight order changes from Posted to Invoice Verified.

  • Evaluated receipt settlement (ERS):

    For carriers that have agreed to the automated invoice settlement, the ERS scenario is used where a credit memo is issued.

Configuration of Transportation Cost Settlement

In the area of transportation cost settlement there are two configuration activities:

Cost Distribution and Customer Billing

Cost Distribution

Transportation Management (TM) in SAP S/4HANA Cloud, public edition supports transportation planning, execution and its financial settlement. Typically, freight to several customers is consolidated in a freight order. This leads to the question of how to allocate the freight costs invoiced by the carrier for the freight order to the delivery items that have been transported with the freight order.

In an outbound process thereafter, only the relevant part of the freight cost needs to be billed to the customer for each of his or her delivery items. For this purpose, you need to break down the aggregated freight cost of the freight order to the level of a delivery item. The system posts the costs to a material valuation in an inbound process, and to an expense account (general ledger) in an outbound process.

Costs can be distributed in a freight order when the following criteria are met:

  • Freight units in a freight order originate from an order or a delivery

  • Charges are calculated with no calculation errors

Distribution Logic

The following example illustrates the cost distribution logic.

The cost distribution status of a freight order is either Not Performed, if any of the prerequisites have not been met for the freight order or Successful. You can review the relevant freight cost allocation document in the Manage Freight Cost Allocation Documents app. The system automatically releases the freight cost allocation document to accounting.

Customer Billing

Transportation costs may need to be part of the billing document and can be invoiced to the customer. You can check details in the Pricing Elements section while creating the billing document. Locate the condition type, which lists the freight costs. The amount shown there should be equal to the respective amount in the freight order under Cost DistributionDistribution Items. For transportation management scenarios that are initiated from a sales document, the freight cost of the freight order can be taken into account when the corresponding billing document is created. This requires an integration to be set up between the transportation management, pricing, and billing processes, so that the freight costs can be added to the final amount due.

A typical use case for this scenario is when you want to charge the buyer back for the freight cost incurred for you as the seller. In effect, this allows the costs for a delivery that are initially paid by the seller to be passed on to the buyer by adding them to the invoice for the sales transaction.

The following prerequisites need to be met for this process:

  • The Order-Based Transportation Consolidation (3EP) scope item needs to be activated (please check the setup instruction guide) and charges need to be calculated in the freight order.

  • To enable the integration on the sales billing side, a key user must make settings in the Define Copying Control for Delivery Document to Billing Document configuration step within the Copying Control for Billing Documents configuration item.

    In this configuration step, the setting for price source for the relevant document types must be set to the valueI (order / freight order).

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