Ensuring that revenues and associated costs align within the same accounting period is crucial for accurate financial reporting and compliance with the matching principle. In SAP S/4HANA, this alignment can sometimes drift due to timing differences between goods issue and invoicing. The built-in functionality, “Goods in Transit with Proof of Delivery (PoD),” presents a practical solution. In this post, I’ll guide you through its configuration and demonstrate its application.
Sure, you also have purpose build solutions in SAP like revenue recognition to solve this. However, there are customer scenarios were revenue recognition is just overkill to implement. The other side of the spectrum are quick work-around solutions like modifying your account determination to post COGS during invoicing. The latter I won’t advise in most cases. There are implications with the COGS split posting functionality and returns processes.
Overview of Goods in Transit with PoD Functionality:
When activated, instead of directly posting to COGS, the system will post goods in transit upon goods issue. These remain as a balance sheet item until the proof of delivery is confirmed. Upon confirmation, the cost is then shifted from the balance sheet to the P&L account, ensuring alignment with invoicing.
Configuration Steps for PoD in SAP S/4HANA:
- Activate business function LOG_MM_SIT
- Create new delivery type (NCUU)
- Create new sales order type
- Assign new delivery type to new sales order type
- Create new item category
- Assign item category to schedule line categories
- Define delivery item category
- Switch on PoD relevancy on BP master data (shipping tab)
- Define valuation class for stock in transit
- Assign valuation class in material master accounting 1 tab
- Create G/L Account for stock in transit
- Assing this account to account determination
- Assign stock in transit valuation class to material master
Sample Posting Flow with PoD:
- Sales Order
3. Goods Issue: Upon goods issue, an entry is made debiting the Goods in Transit account (Balance Sheet) and crediting Inventory:
4. Proof of Delivery Confirmation: On confirming the delivery, the Goods in Transit account is credited, and the COGS (P&L account) is debited.
Differentiating Sales Processes with/without PoD:
The need for PoD typically correlates with the point when the economic ownership of the goods transfers. You can smartly differentiate between these scenarios using a combination of:
– Sales Document Types:** Create distinct sales document types for PoD-relevant processes.
– Item Category Determination:** Based on the sales document type, determine the relevant item category (with PoD activated).
However, if you don’t want your user to select the right sales document types you could use a user exit to determine the schedule line category based on the maintained incoterms in the order. The incoterms are determining the shift of ownership/responsibility of the goods to the customer. So you can use that to determine the PoD relevancy.
SAP’s Goods in Transit with PoD function bridges the gap between revenue recognition and work-around solutions like cost posting during billing, ensuring compliance with the matching principle. With the above configuration, organizations can maintain both flexibility and accuracy in their financial reporting.