Subcontracting With Chargeable Components Configuration

Subcontracting with Chargeable
Components Configuration
Applies to:
SAP ECC 5.0 & SAP ECC 6.0. For more information, visit the Enterprise Resource Planning homepage.
Summary:
This document shall help P2P consultants to understand and configure the subcontracting with chargeable
components scenario in SAP. It is prepared to suit for those consultants who are new to this scenario. How
the scenario is to be configured for the business in the system, integration with other module such as SD &
FI has been explained in a simple and understandable way. Any suggestions and improvements towards this
document will be always welcome.
Author: Mohamed Hasan Rifaie.M

Company: Larsen & Toubro Infotech Ltd.,
Created on: 6 November 2009
Author Bio:
An associate of Larsen & Toubro Infotech Ltd., Mohamed Hasan Rifaie.M has total 8 years of
experience, out of which more than 2 years experience in the area of SAP Consulting in
Procure to pay process. He has worked various industries like electromechanical construction,
Automobile, Refrigeration industry as a Procurement Executive. He has secured University
Rank in Engineering degree.
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© 2009 SAP AG 1
Subcontracting with Chargeable Components Configuration
Table of Contents
Subcontracting with Chargeable Components Overview ................................................................................... 3
Subcontracting ................................................................................................................................................ 3
Subcontracting with Chargeable Components ............................................................................................... 3
Subcontracting Vs Subcontracting with Chargeable components .................................................................. 4
Configuration Settings for Subcontracting with Chargeable Components ......................................................... 5
Activation of Subcontracting with Chargeable Components ........................................................................... 5
Valuation of Chargeable Components ............................................................................................................ 9
Create Valuation Classes............................................................................................................................................. 9
Configure Automatic Postings .................................................................................................................................... 12
Invoices for Chargeable Components........................................................................................................... 12
Billing documents ....................................................................................................................................................... 13
Pricing Procedure ...................................................................................................................................................... 20
Automatic Postings .................................................................................................................................................... 28
Deductible Payables ......................................................................................................................................... 35
Alternative Accounts Payable Account ......................................................................................................... 35
Define G/L Account as Alternative Reconciliation Account .......................................................................... 36
Exclude G/L Account from Automatic Payments .......................................................................................... 38
Invoices for Shrinkage in Physical Inventory .................................................................................................... 39
Specify When to Charge Subcontractors for Shrinkage ............................................................................... 40
Make General Settings ..................................................................................................................................... 41
Assign SAPscript Forms to Reports ................................................................................................................. 43
Related Content ................................................................................................................................................ 44
Disclaimer and Liability Notice .......................................................................................................................... 45

© 2009 SAP AG 2
Subcontracting with Chargeable Components Overview

Subcontracting
It is the allocation by one enterprise, assigning their one portion of a production process under agreement to
another enterprise that is having some specialized skills in this process.
Subcontracting is often resorted to by manufacturing companies due to limited in house production
capacities of a part of their Production Processes.
In this scenario, the manufacturer sends Material (Inputs-Raw Material Semi Finished Goods like Spares
components etc) from his Stock to the Subcontractor for Job-Work / Processing.
After the Processing the manufacturer receives back the Material in changed form or in other words a
different Material or assembled condition.
SAP MM subcontracting process involves sending raw components to a vendor for specific manufacturing
processes and receiving the value-added finished material back into inventory.
The subcontractor sends the invoice for the job work performed.
Subcontracting with Chargeable Components

The Subcontracting with chargeable components solution allows you to record all transactions with
subcontractors so that they meet the requirements arising from the act.
In this process, you will provide a subcontractor with the components on chargeable basis, they need to
assemble a product. You will invoice the subcontractor for the chargeable components provided from your
end. On the other end, once the subcontractor has performed the assembly and delivered the same, it
invoices you for the components that it has consumed in the assembly of the product. The components are
thus known as “chargeable components.” In the traditional Subcontracting, neither party makes any charge
for any components and all the components will be issued at free of cost.
SAP offers two ways of handling the invoices for the chargeable components. In one of these methods, the
invoices only serve as documentary evidence of the sale of the components and are not actually paid. This
document used to keep track of components issued to the subcontractor.
Other method called percentage-based offsetting, you deduct the invoices from the subcontractor from a
certain percentage of the invoices that you have sent it, and the subcontractor pays the difference.
According to Subcontracting act, you are required to keep records of all the transactions taken place with
subcontractors and file reports relating to these.

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Subcontracting Vs Subcontracting with Chargeable Components
Subcontracting Subcontracting with Chargeable Components
Subcontractor will be treated as a Subcontractor will be treated as a Vendor & Customer

Vendor
Vendor master is sufficient Vendor master and customer master mandatory
Subcontracting process is simple Subcontracting process is complicated
Suitable for complicated tax structure Suitable for simple tax structure countries
countries
Subcontracting goods will be issued at Subcontracting goods will be issued on Chargeable

free of cost basis
Customer not required to raise any Customer required to raise the invoice on the
invoice on the subcontractor subcontractor for the chargeable components
depends on the scenario.
Material accounting is tedious work Material accounting is simple
Vendor will raise the invoice for only the Vendor will raise the invoice for the component also
job work
Vendor will be paid based on the job Vendor will be paid on the difference between the
work done supplied components and the invoiced items
This document explains how the configuration settings are to be carried in SAP system for doing
subcontracting with chargeable components process.

© 2009 SAP AG 4
Configuration Settings for Subcontracting with Chargeable Components

Activation of Subcontracting with Chargeable Components
In this step, you need to activate the subcontracting with chargeable components in the system. Here there
are two ways to activate subcontracting with chargeable components in the system.
- Client level activation
- Valuation area level activation
Please note that, Client level activation is taking high priority in this case. So, we need to activate
subcontracting with chargeable components at Client level first prior than valuation area level. Subsequently,
we need to activate the same at valuation area level.
In doing so, you are activating a number of functions used in the solution. For example, it allows you to
create purchasing info records for chargeable components and vendor master for subcontracting supplement
Since it is a client based setting, the system does not transport the entries that you make in this. You must
carry out this activity manually in each client.
Menu path:
IMGMaterials Management Inventory Management and Physical Inventory
Subcontracting with Chargeable Components  Activation of Subcontracting with Chargeable
components Activate at Client level

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Execute it,
Valuation area level activation

In this, you specify which valuation areas you want to activate the Subcontracting with Chargeable
Components solution in.
Menu path:
IMGMaterials Management Inventory Management and Physical Inventory
Subcontracting with Chargeable Components  Activation of Subcontracting with
Chargeable components Activate at Valuation area level

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Execute it,
By activating subcontracting with chargeable components at Client level as well as valuation area level, we
can see the following changes in the master data level.
Effects on Vendor master:

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Here, we can see “Subcontracting supplement” in the header level tab will appear once the activation
happen.
Effects on Info record:

Here, additionally one chargeable basis info record creation appears in the system.

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Valuation of Chargeable Components

In this section, you need to configure the valuation classes for the chargeable components, if not configured
initially at company code level.
Menu path:
IMGMaterials Management Inventory Management and Physical Inventory Subcontracting
with Chargeable Components  Valuation of Chargeable Components
Create Valuation Classes

Here, you need to create the valuation classes for the chargeable components and the finished product. This
will help
 When the stores person records an issue of chargeable components to a subcontractor, the system
valuates the goods issues
 When the stores person records the receipt of semi finished goods back from the subcontractor, the
system valuates the goods receipts
Menu path:
with Chargeable Components  Valuation of Chargeable Components Create Valuation
Classes

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Execute it,

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Here, you can set up the valuation classes you want to use so that the Valuation Class for Special Stock at
Vendor field appears in the vendor master.

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Configure Automatic Postings

You need to configure the automatic postings for business transactions that involve chargeable components,
for example, goods receipts and goods issues. This can be referred from the standard FI configuration.
Invoices for Chargeable Components

In this section, we can see the configuration required for raising the invoices for the Chargeable components
on subcontractors.
Menu path:
with Chargeable Components  Invoices for Chargeable Components  Billing documents
Under this, we will see the following,
- Billing documents
- Pricing procedure
- Automatic postings
Here, pricing procedure for raising invoice and automatic postings configuration are carried out. Some of the
configuration part can be referred from the general configuration exists in Purchasing and account
assignment.

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The following illustrates billing documents configuration.
Billing Documents
Under this we can see the configuration required for Billing types and copying control.
You need to set up the billing types and the copying control for invoices for chargeable components. For that, we
need to set up document type for invoice and credit control memo.
Menu path:
with Chargeable Components  Invoices for Chargeable Components  Billing documents
Create Billing types

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Execute it,
For billing types and credit memo configuration, standard document types can be referred for better result.

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Go to the detail,
Here, you remove the cancel billing type and leave the field as blank. Then save it. Thus you have created
billing type for the chargeable components.
Credit memo type creation:

Here, we are creating credit memo document type for chargeable components.

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Go to the detail,
Here, you remove the cancel billing type and leave the field as blank. Then save it. Thus you have created
credit memo document type for the chargeable components.
Define Copying Control:

You define the copying control from the sales order to the billing document type for invoices and credit memos for
chargeable components.
Menu path:
with Chargeable Components  Invoices for Chargeable Components  Billing documents
Define Copying Control

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Execute it,
Here you need to verify the copying control has taken place correctly. Please note that, the copying control
will be successful, if you are referring standard invoice and credit memo document type provided by SAP. It
means you need to copy your required document type from the standard one.
Here, you need to verify the following,

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Copying control: Sales document to billing document, billing document to billing document & Delivery
document to billing document

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You can check the customizing settings for copying control also,
Enter the billing type and execute it,
From this, you can find the error free in customizing for copying control.

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Pricing Procedure
Menu path:
with Chargeable Components  Invoices for Chargeable Components  Pricing procedure
Under pricing procedure, we can see define condition types, define and assign pricing procedures.
Define Condition types:

Here, you can customize the system so that when a billing clerk creates an invoice for chargeable
components, the system automatically determines the appropriate pricing procedure and thus can price the
components.
In this activity, you create a new condition type. The condition type is for the price of the chargeable
components.
To create the condition type, create a copy of the standard condition type provided by SAP. Give the new
condition type a name of your own, and delete the access sequence.
Menu path:
Define Condition types

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Execute it,
Define and Assign Pricing Procedures:

Here, you can create a pricing procedure for invoices for chargeable components. You then customize the
pricing procedure determination.
Create a new document pricing procedure.
Assign Document Pricing Procedures to Billing Types
Assign the document pricing procedure to the billing types that you created in the IMG activity Create Billing
Types.
Define Pricing Procedure Determination
Assign the pricing procedure and the condition type that you created to the appropriate sales organization
and the document pricing procedure.
Menu path:
Define and assign pricing procedures

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Execute it,

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Here, we need to maintain the following,

Maintain pricing procedures, Define customer pricing procedure, Define document pricing procedure, Assign
document pricing procedures to order types, Assign document pricing procedures to billing types, Define
Pricing Procedure Determination, Check Settings for Pricing Procedures
Maintain pricing procedures
Here, you maintain the pricing procedure for the chargeable components invoice.

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And go to the control data,
Define customer pricing procedure

Here, you define the customer pricing procedure,

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Define document pricing procedure

Here, you define the document pricing procedure,
Assign document pricing procedures to order types:

Here, you assign the document pricing procedure to the order types as per below,

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Assign document pricing procedures to billing types

Here, you assign the document pricing procedure to the billing types as per below,
Define Pricing Procedure Determination

Here, you assign the pricing procedure with the following sales organization combination,

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Automatic Postings
Menu path:
with Chargeable Components  Invoices for Chargeable Components  Automatic postings 
Here under automatic postings, we can see the following,
Create Account Key & Assign G/L Accounts to Account Key
Create Account Key

Here, you need to customize the system so that when you create an invoice for chargeable components, it
automatically makes the correct accounting postings for chargeable components. When you create an invoice for
chargeable components, the system generates an accounting document that debits the Subcontractor A/R -
Pending account and credits the Clearing Account for Chargeable Components.

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Menu path:
with Chargeable Components  Invoices for Chargeable Components  Automatic postings 
Create account keys
Execute it,

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Define account key:
In this step, you need to assign the account key to the condition type and the corresponding sales
organization for the chargeable components.
Assign G/L Accounts to Account Key

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Here, you specify which G/L accounts the account key posts to. Customize the correct account key so that it
posts to the Clearing Account for Chargeable Components (for debit and credit postings).
Menu path:
with Chargeable Components  Invoices for Chargeable Components  Automatic postings
Assign G/L accounts to account key
Execute it.

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Here G/L account assignment configured based on the following key parameters.
Customer group/Material group/Account Key
Customer group /Account Key
Material group/Account Key
General
Account Key

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Deductible Payables
After the subcontractor manufactures the subcontracting products that you ordered, it invoices you for the
labor and for the cost of the chargeable components that went into the subcontracting product.
You enter the part of the invoice for the chargeable components in the Enter Deductible Payables transaction
as described below.
Menu path:

with Chargeable Components  Deductible payables 
Alternative Accounts Payable Account

Create G/L Account
Here, you need to make the settings for the Alternative Accounts Payable account.
The Alternative Accounts Payable account is a vendor reconciliation account. You use it to record deductible
payables sent you by your vendors: When an accounts clerk enters a deductible payable, the system automatically
records the vendor item on this account.
Here, you create the G/L account that you want to use as the Alternative Accounts Payable account.
Menu path:
with Chargeable Components  Deductible payables  Alternate accounts payable account
Create G/L account
Execute it.
This is the normal G/L account creation method that FI consultant will be creating by using standard FS00
transaction code.

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Define G/L Account as Alternative Reconciliation Account

Here, you specify that the G/L account you have created is allowed as an alternative reconciliation account.
Enter the normal accounts payable reconciliation account, the Alternative Accounts Payable account, and an
ID of your choice. Later, you enter this ID in the Make General Settings configuration.
Menu path:
with Chargeable Components  Deductible payables  Alternate accounts payable account 
Define G/L account as alternative reconciliation account

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Execute it
Enter the chart of accounts for the company code.

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Exclude G/L Account from Automatic Payments

Here, you enter the Alternative Accounts Payable account in the list of accounts that are not to be paid
automatically by the payment program.
Menu path:
with Chargeable Components  Deductible payables Alternate accounts payable account
Exclude G/L account from automatic payments
Execute it and enter the company code.

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Enter the reconciliation account here and save it.
Invoices for Shrinkage in Physical Inventory

If you supply a subcontractor with subcontracting components, during a physical inventory, it turns out that
some of the components have gone missing or are otherwise unusable for that you wish to invoice the
subcontractor for the items.
Menu path:
with Chargeable Components  Invoices for Shrinkage in Physical Inventory

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Specify When to Charge Subcontractors for Shrinkage

You need to specify for which reasons you want to charge subcontractors for shrinkage in the physical
inventory (for example, if the shrinkage is the fault of the subcontractor).
When a user posts an inventory difference and enters the reason for the difference, the reason tells the
system whether you want to invoice the subcontractor. You can later only create invoices for shrinkage in
inventory for these material documents.
Menu path:

with Chargeable Components  Invoices for Shrinkage in Physical Inventory Specify When to
Charge Subcontractors for Shrinkage

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Execute it,
Make General Settings

Here, you make a number of basic settings for Subcontracting with Chargeable Components.
Menu path:

with Chargeable Components  Make General Settings

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Execute it,

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Assign SAPscript Forms to Reports

Here, you can assign SAPscript forms to various reports. When the users print out these reports' output lists,
the lists are printed using the forms that you enter here. The reports are as follows:
Price list of chargeable components
Subcontractor list
Notification of payment terms
Menu path:
with Chargeable Components  Assign SAPscript Forms to Reports
Execute it,

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Related Content
For more information, visit the Enterprise Resource Planning homepage.
http://forumsa.sdn.sap.com/thread.jspa?threadID=1445933&tstart=0

© 2009 SAP AG 44
Disclaimer and Liability Notice

This document may discuss sample coding or other information that does not include SAP official interfaces and therefore is not
supported by SAP. Changes made based on this information are not supported and can be overwritten during an upgrade.
SAP will not be held liable for any damages caused by using or misusing the information, code or methods suggested in this document,
and anyone using these methods does so at his/her own risk.
SAP offers no guarantees and assumes no responsibility or liability of any type with respect to the content of this technical article or
code sample, including any liability resulting from incompatibility between the content within this document and the materials and
services offered by SAP. You agree that you will not hold, or seek to hold, SAP responsible or liable with respect to the content of this
document.

© 2009 SAP AG 45

Subcontracting With Chargeable Components Configuration

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Subcontracting with Chargeable

Author: Mohamed Hasan Rifaie.M

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Subcontracting with Chargeable Components Overview