Landed Costs in SAP Business ByDesign – Changes of the Goods Receipt

This blog post is the entry point of a series of related blog posts highlighting the enhancements to address the handling of the landed costs.

Link to main Blog post.

This blog post explains the impact of potential changes in the inbound delivery items with respect to the landed cost postings. The change in the inbound delivery relates to the quantity change and a potential cancellation.

Due to mistakes in the goods receipt confirmation, the inbound delivery quantity must be updated and, in some cases, the complete inbound delivery might need to be cancelled. This also has an impact on the landed costs portions in inventory or other financial accounts.

It is therefore recommended for users to have a look at the already released allocations and decide if a new distribution based on the changed inbound delivery quantities is necessary, because it could impact not only the inventory value of the material with the quantity change, but also the other materials in the same allocation document.

The following use case is described for a material which has perpetual cost method moving-average, and for the landed cost category being capitalized in financial accounting.

Use case 1: Quantity adjustment in inbound delivery items

When you save a quantity change in the adjustment confirmation related to an inbound delivery item, the planned landed cost component amount is proportionally adjusted in the journal entries – similar as you know it for the material net value.

Based on our basic example:

  • The material LC003 was received with a quantity of 20 ea and a material net value of 4.000 USD + 400 USD of planned freight landed costs
  • With a reduction of ‘-15 ea’ in the adjustment confirmation, the inventory for material LC003 is reduced by 3.300 USD in total – which results in a 5 ea of received quantity. Thereof, 300 USD is related to the landed cost of the planned freight which is posted to the Unbilled Payables Freight account with the adjustment confirmation.

Furthermore, the report Landed Costs – Monitor and Set Clearing Status for Goods Receipt will show the adjusted planned landed cost amounts.

Additionally, such a quantity change can happen at different statuses of the allocation document and clearing. The additional implications are explained below:

  1. For new allocations:
    • Any new allocation document will use the already adjusted quantity, weight, volume, or item net value to distribute the landed cost invoice item amount.
  2. When an allocation document related to the inbound delivery item is in preparation:
    • The allocation items will show the updated inbound delivery quantity, weight, volume and material net value. Also, the landed cost amount is automatically re-distributed to those inbound delivery items in the allocation document where the allocated amount was not previously adjusted manually
  3. When an allocation document related to the inbound delivery item has the status released and the corresponding clearing set is not yet cleared:
    • In our example, the actual freight of 600 USD was initially distributed as follows:
Quantity Material Net Value Allocated Freight
LC005 10 ea 1.000 USD 120 USD
LC003 20 ea 4.000 USD 480 USD
  • In an adjustment confirmation, the quantity for material LC003 got changed from 20 ea to 5 ea.
  • The users can display all the allocations with distributions to inbound delivery items that were changed in the meantime with the query Items to be reviewed in the Landed Costs Invoice Items view of the Supplier Invoicing work center. This allows the user to check and decide which allocation documents might need a subsequent correction.

  • The previous and new quantity is displayed on allocation item level while the distribution remains.

  • If the change has a minor impact on the distribution, for example, if the quantity difference is small (9.990 ea (new) instead of 10.000 ea (previous)), then the change could eventually be ignored by setting the Set to Reviewed button (either on allocation header or allocation item level).
    • By setting the status Reviewed, users can organize their open items. It is not a prerequisite for further processing.
    • Once the clearing set for the inbound deliver item is set to To be Cleared, the next clearing run would consider the existing distribution.
  • If the change has mayor impact on the distribution, for example, if the quantity difference is huge (5 ea (new) instead of 15 ea (previous)) then the allocation should be cancelled and created again with a new distribution.
    • In the following example, the new allocation document distributes the freight of 600 USD by default based on the material net value as follows:
Quantity Material Net Value Allocated Freight
LC005 10 ea 1.000 USD (100 USD /ea) 300 USD
LC003   5 ea 1.000 USD (200 USD /ea) 300 USD

  • Once the clearing set for the inbound delivery item is set to ‘To be Cleared’, the next clearing run would consider all the documents at once, which results in considering the new distribution of the landed costs.
  1. Inbound delivery item clearing set is Cleared:
    • First, with the update of the inbound delivery item, the clearing set status of the inbound delivery item is changed from ‘Cleared’ back to ‘To be Cleared’.
    • Also, the users can display the inbound delivery changes in the list of allocation documents through the query Items to be Reviewed.
      • If the user wants to cancel the allocation and create a new one with an updated distribution, it should preferably be done immediately and before the next scheduled clearing run. This ensures that the update in inventory is immediate and fluctuations in the inventory value are avoided.
      • If the user does not do anything, or sets the allocation to Reviewed, the next scheduled clearing run will clear the unbilled payables freight (-300 USD) and add the planned freight to inventory. This means that the initial full allocated amount will now refer to a reduced quantity. Thus, less quantity will absorb the allocated amount and therefore the unit costs will increase accordingly.
    • With the clearing run, the landed costs are posted to material inventory and unbilled payables of the landed cost category (for the other variants respectively to expenses and differences for purchasing).

Use case 2: Cancellation of an allocated inbound delivery item

If the quantities of the inbound delivery items are all set to zero, and the inbound delivery is cancelled, the quantity change to zero will happen as explained above.

In the following, you find the implications along the process steps:

  1. A cancelled inbound delivery item cannot be allocated.
  2. If a cancelled inbound delivery item is already allocated in an allocation document with the status in preparation, then:
  • The allocation will show the updated inbound delivery quantity as ‘0’ and the allocation cannot be released if the cancelled inbound delivery item is in the items list.
  • If there are only the cancelled inbound delivery items in the allocation items list, the allocation is automatically deleted.
  1. If a cancelled inbound delivery item was already allocated in an allocation document with the status Released (but without being cleared), then:
  • The status of the allocation items is set to To be Reviewed in the Landed Costs Items List
  • The allocation document must be cancelled.
  • A clearing run will run into an error, stating that the clearing is not possible for the cancelled inbound delivery items.
  1. If a cancelled inbound delivery item was already allocated in an allocation document with the status Released and cleared in financials, then:
  • The clearing set status of the inbound delivery item is changed from ‘Cleared’ back to ‘To be Cleared’ .
  • It is shown as To be Reviewed in the Landed Costs Items List.
  • The allocation must be cancelled.
  • A clearing run will run into an error, stating that the clearing is not possible for the cancelled inbound delivery items.

For a material that is standard-cost-managed, instead of the material inventory account, the price differences account is affected for landed costs categories which are to be capitalized.

If the landed cost category is expensed, instead of the material inventory account, the expense account is affected.

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