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How can SAP ERP validate services procurement?

Procured services like building maintenance can be more difficult to define and validate than procured materials. Here's how SAP ERP helps take the guesswork out of managing services procurement.

In addition to procuring materials, companies also need to procure services from vendors, including tasks like...

daily office cleaning or monthly building maintenance. Companies engage specialized service providers for certain fees and pay the providers upon verification of services rendered. When a vendor delivers a material, the recipient can easily verify and record the transaction by looking at the physical material, counting items, and so forth -- but for services that don't involve the delivery of physical materials, the recipient should take additional validation steps in the ERP system to enable the company to pay the vendor.

Take a look at how to handle the business process of services procurement in SAP ERP.

The service procurement process begins when the user who requires services creates a purchase requisition. A purchase requisition contains specific details of required services, and the criteria to validate the services performed. For example, an office maintenance supervisor creates a service request for a paint job for a 3,000-square-foot office space. The criteria that the maintenance supervisor defines in the purchase requisition to validate the paint job is in square feet of completed work. The procurement department of the company invites quotations for paint jobs from relevant service vendors, and when service vendors submit quotations for the paint job, the procurement department maintains the quoted prices and other delivery terms in the system.

A price comparison in the system helps the procurement supervisor evaluate the lowest quoted price. The procurement supervisor proceeds to accept the lowest bid by creating a purchase order (the document that informs the vendor of the company's decision to procure services) with reference to the quoted price, while rejecting other quotations. In the SAP ERP system, it is not possible to create a purchase order for rejected quotations, thus putting a strong check in place to ensure only the approved quotations move forward in the services procurement process.

It is also possible to assign a release strategy to the purchase order. A release strategy is a user-defined purchasing approval mechanism. For example, the purchase manager's approval might be sufficient for all services procurement up to a $5,000 limit, whereas a general manager might need to approve the value of procured services that exceed that limit.

The vendor begins performing the service, which in this example is the office paint job. Based on a delivery timeline agreed upon by the company and the vendor, the maintenance supervisor creates service entry sheets in the system and does so with reference to the purchase order. A service entry sheet confirms and validates that the vendor has performed the agreed-upon services. The maintenance supervisor can check and approve the service entry sheet. Then the vendor can submit the invoice for payment based on the approved service entry sheets.

Next Steps

How to make your SAP ERP implementation a success

SAP Delivery Time can improve procurement process

Choosing an ERP vendor: SAP or Oracle?

This was last published in January 2015

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