Modules for Accounts Payable
There are two modules in the SAP for processing payments. One is FI-AP and another is MM-AP.
The FI-AP module is generally used for payments to vendors other than those of material and services. For example, payments towards utility bills, payments to commission agents, payments of bank interest, etc. The FI-AP module allows booking of invoice towards expenses without any prior conditions or processes. The supporting documents towards the payments are usually the bills for the expenses. This mode of payment involves greater risks due to inadequate number of checks and controls. Hence, it is appropriate only for the nature of payments mentioned above. Any payment in relation of goods or services shall not be made through this module.
The MM-AP module involves a three-way matching process of Vendor Invoice, Goods Receipt or Service Entry, and Purchase Order. Payment in the MM-AP module cannot be processed without adequacy and matching of these three documents. This enables a greater level of control over payments and reduces risk of excess payments.
It is ideal to define in each Vendor Master entry whether the payment to that vendor be made through a GR (Goods Receipt) based IR (Invoice Receipt) entry. This will prevent the user from making payments to material or service vendors using the FI-AP module.
Transaction Blocks in SAP for Accounts Payable
SAP's transaction blocks acts as system controls and prevent the processing of transactions that do not meet certain predefined criteria. There are four types of transaction blocks in SAP:
1. Audit Block
An audit block is used within the invoice approval process. E.g. SAP can be configured to place an audit block on invoices that are entered directly in the FI-AP module without a corresponding Goods Receipt or a Purchase Order. The block requires invoices to be reviewed and released by someone other than the employee who created it, thus satisfying the typical audit requirements for a payables review by an independent employee.
2. Receiving Block
The receiving block handles system generated discrepancies arising in the MM-AP during the invoice verification process, i.e. any variations produced in the three-way match among the Purchase Order, Goods Receipt and Invoice would trigger a receiving block.
3. Vendor Block
A vendor block is used for manual flagging of new vendors created in System to prevent processing of payments to the vendor without a thorough review by an independent person. It provides a means of ensuring that all newly created vendor master files are audited before any disbursements are made to the vendor.
4. Manual Block
A manual block is typically used to prevent payments while an outstanding issue in relation to that vendor, its service or its goods is being resolved. This block can be applied either during invoice entry or afterward, and it can be removed by the employee who initially blocked the transaction.
An auditor needs to note that there are three kinds of risks associated with transaction blocks. First, the system may not have been configured to use the functionality of transaction block. Secondly, the authorization for removal of blocks may not be appropriately restricted, allowing the unauthorized users to release blocked payables transactions for further processing. Finally, blocks can lead to delayed payments which may adversely affect company's credit ratings among vendors.
There are two modules in the SAP for processing payments. One is FI-AP and another is MM-AP.
The FI-AP module is generally used for payments to vendors other than those of material and services. For example, payments towards utility bills, payments to commission agents, payments of bank interest, etc. The FI-AP module allows booking of invoice towards expenses without any prior conditions or processes. The supporting documents towards the payments are usually the bills for the expenses. This mode of payment involves greater risks due to inadequate number of checks and controls. Hence, it is appropriate only for the nature of payments mentioned above. Any payment in relation of goods or services shall not be made through this module.
The MM-AP module involves a three-way matching process of Vendor Invoice, Goods Receipt or Service Entry, and Purchase Order. Payment in the MM-AP module cannot be processed without adequacy and matching of these three documents. This enables a greater level of control over payments and reduces risk of excess payments.
It is ideal to define in each Vendor Master entry whether the payment to that vendor be made through a GR (Goods Receipt) based IR (Invoice Receipt) entry. This will prevent the user from making payments to material or service vendors using the FI-AP module.
Transaction Blocks in SAP for Accounts Payable
SAP's transaction blocks acts as system controls and prevent the processing of transactions that do not meet certain predefined criteria. There are four types of transaction blocks in SAP:
1. Audit Block
An audit block is used within the invoice approval process. E.g. SAP can be configured to place an audit block on invoices that are entered directly in the FI-AP module without a corresponding Goods Receipt or a Purchase Order. The block requires invoices to be reviewed and released by someone other than the employee who created it, thus satisfying the typical audit requirements for a payables review by an independent employee.
2. Receiving Block
The receiving block handles system generated discrepancies arising in the MM-AP during the invoice verification process, i.e. any variations produced in the three-way match among the Purchase Order, Goods Receipt and Invoice would trigger a receiving block.
3. Vendor Block
A vendor block is used for manual flagging of new vendors created in System to prevent processing of payments to the vendor without a thorough review by an independent person. It provides a means of ensuring that all newly created vendor master files are audited before any disbursements are made to the vendor.
4. Manual Block
A manual block is typically used to prevent payments while an outstanding issue in relation to that vendor, its service or its goods is being resolved. This block can be applied either during invoice entry or afterward, and it can be removed by the employee who initially blocked the transaction.
An auditor needs to note that there are three kinds of risks associated with transaction blocks. First, the system may not have been configured to use the functionality of transaction block. Secondly, the authorization for removal of blocks may not be appropriately restricted, allowing the unauthorized users to release blocked payables transactions for further processing. Finally, blocks can lead to delayed payments which may adversely affect company's credit ratings among vendors.
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