Integrating PSM with Procurement and Inventory Management

Activating the Public Sector Management Cloud solution means that PSM account assignments are available in the sourcing and procurement business transactions, and that these business transactions are updated in Public Sector Management as commitment and actuals consuming budget.

The following sourcing and procurement business transactions are supported for Public Sector Management:

• Procurement: Contract, purchase requisition, purchase order, service entry sheets
• Inventory Management: Goods receipt, goods issue, transfer
• Invoice Management: Supplier invoice verification

When updating assigned contracts, purchase orders, and purchase requisitions, you must include a complete PSM account assignment. You either populate the PSM account assignments manually or according to the settings in your account assignment derivation. Commonly-used account assignment categories for consumption are K for Cost Centers, P for Projects, and A for Assets.

You can enter multiple account assignments for each line item of assigned procurement documents, meaning that you have the option of distributing the amounts - for example, for a purchase order item to more than one combination of account assignments. The functionality of Automatic Account Assignment Distribution exists for purchase requisitions and orders.

Account assignments are inherited through the procurement document chain.

During commitment updating, purchase orders and purchase requisitions are reduced-quantity based. This means that the open amount is calculated by considering the open quantity first. This mechanism avoids open amounts in the case of price decreases - for example, between requisition and order or order and goods receipts.

Purchase requisition: 10 x $10 = $100 (open commitment)

Reduced by purchase order (lower price): 10 x $9 = $90 (open commitment)

In this case, the purchase requisition is completely reduced because there are no quantities open to be ordered.

All unit of measures in SAP S/4HANA Cloud are quantity-based.

The corresponding budget consumption documents for purchase requisitions/orders are persisted in ACDOCA and can be seen from the corresponding transactions using the Display Commitments button.

The fields to be displayed can be selected using settings and stored as view.

You can enter and derive PSM account assignments in contracts, which are transferred to the purchase requisition or order that references the contract.

The contract does not currently reserve budgets using commitments.

The following applies to purchase requisitions:

• Purchase requisitions for assets, materials, or services can consume budgets in line with the "updating of commitments" logic (see Unit 4, Lesson 1, Recording Commitments and Actuals). Updating and account assignment derivation rules fully apply to purchase requisitions.
• Purchase requisitions and the correspondent budget consumptions are reduced by purchase orders. They can also be set to completed manually or by the year-end processing (see Unit 6, Lesson 2, Describing Commitment Adjustments).
• In PSM, budget management purchase requisitions are always reduced by quantity.
• Purchase requisitions can refer to/reduce a funds reservation (earmarked funds document).

Purchase orders can consume budgets in line with the update of commitments. You also need to be aware of the following in relation to purchase orders:

• Updating and account assignment derivation rules apply fully to these purchase orders.
• Purchase orders and the correspondent budget consumption are reduced either by a valuated goods receipt or by supplier invoices if the goods receipt is non-valuated, or delivery is not expected.
• The purchase orders can also be set to completed manually or by the year-end processing (see "Closing Operations").
• Down payments reduce the purchase orders separately (using a specific budget consumption amount type). This specific reduction is reversed whenever the down payment is cleared.
• Purchase orders for which the return item indicator is set are not updated in PSM budget management.
• Purchase orders can refer to/reduce a funds reservation (earmarked funds document)

Goods receipts inherit the account assignments from the purchase order, and cannot be changed. You also need to be aware of the following in relation to goods receipts:

• Only valuated goods receipts consume budgets and reduce the commitment from the purchase orders.
• For non-valuated goods receipt, there is no financial impact.
• In the event of partial delivery, you need to set the Delivery Complete indicator if the complete commitment is to be reduced because there is no further delivery expected.
• Goods receipts are generated from service entry sheets when they are approved.

Note the following for service entry sheets (SES):

• Service entry sheets can be created against purchase orders using service material.
• Service entry sheets update the budget consumption using their corresponding goods receipts once they are approved.
• Unlike normal valuated goods receipts, it is possible to change the account assignments in the service entry sheet.

Note the following for a supplier invoice with a purchase order reference:

• The account assignments are transferred from the purchase order to the corresponding lines of the supplier invoice.
• If the goods receipt was non-valuated or no delivery was expected, the supplier invoice reduces the commitment of the purchase order. In this case, it is possible to change the proposed account assignments for the purchase order in the supplier invoice.
• If an invoice is partial, but then final, the Final Invoice indicator needs to be selected to completely reduce the commitment from the purchase order.
• If the goods receipt was valuated, budget is only influenced if price/quantity changes are posted during invoice processing. The account assignments from the purchase orders cannot be changed in this case.
• In case of price and quantity difference between the invoice and goods receipts, additional postings are generated using the GR/IR clearing program.

Step 1: Creation of a purchase order PO1 with purchase order date 01.01.2022; amount 10 x $ 10 = 100 against fund F1

Step 2: Good receipt GR1 against PO1 on 15.01.2022; amount 10 x 10$

Step 3: Supplier invoice INV1 against PO1 on 25.01.2022; amount 10 x 11$ = 110 with additional G/L line of $5 against fund F2 (no reference to a purchase order)

The following figure provides you with an overview of warehouse postings for a goods receipt and goods issue.

Unlike direct consumption postings (with account assignment category K/P/A), special rules apply to warehouse/stock postings (with account assignment category space):

• PSM account assignments that are required can only be derived for purchase requisition/order.
• PSM account assignments can be derived using a configuration for each plant/material type combination. The PSM account assignments are used in all stock-relevant postings (purchase requisitions/orders, goods receipt/issues).
• The field status for account assignments for stock line items is always configured as display only.
• Whether postings to stock (balance sheet) accounts can consume the budget may be controlled by adjusting the budget-relevant setting in the G/L account. As a default, the stock lines are not budget-relevant.
• If the stock lines are budget-relevant, your warehouse account assignments need to own the budget, which is consumed when stock is purchased. The budget is returned once the goods are issued from stock.

The following figure provides you the configuration for the derivation of Material Stock Postings.

A goods issue usually transfers goods from warehouse stock to consumption (cost center or project). In this case, the stock/balance sheet account lines of these postings follows the warehouse concept (described above). The consumption part of the goods issue usually consumes budget against the account assignments specified in the expense lines.