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Permanent Contractor Hrs in Order vs Their Invoice

Logistics : PM and its sub-modules & SM

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Permanent Contractor Hrs in Order vs Their Invoice

Postby Shahnawaz » Mon Apr 28, 2014 7:33 am

All,

My appologies using someone 2008 message to include mine.

I have question related to following topic.

We have Maintenance with mixed crew. For example:

Mechanical/Electrical/Instrumentation: Each team consists of group of people including internal staff as well as permanent contractor staff. So far we have one rate defined in work center (not considered contractor rates at all).

Since the contractor is on site permanently and needs to be paid every month regardless of work on not. Contractor invoice monthly based on their agreed rate and our contract advisor creates separate PR/PO against contractor cost center and finance pays to contractor.

My questions is:
• We haven’t started using SAP work order, but contractors are being paid as mentioned above. Once we start using PM work orders, the question is how their cost will be captured considering (1 maintenace team and plannig can't decide who would perform work during planning phase)

One option is ; to have 2 different Activity types (one of internal staff and other for contractor) for single work center. During order confirmtion senior Tech could confirm who performed the job. If we do this, follow-up question comes in mind. Would this cause any issues/conflict such as duplication of cost either after order settlement or the process Finance currently uses to pay contractor relates to any duplication of cost.

Appreciate if people could share their experience for cost of Permanent contractor MIXED with internal work force.

Regards,
Shahnawaz
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby PJA » Tue Apr 29, 2014 7:26 am

Shahnawaz

This is quite a common scenario.

If the staff/contractors use the same work centre, then you will need 2 activity types with the different rates. As you suggest - this doesn't really help with planning operations where there's a mix of staff/contract labour (other than having multiple operations..)

As for the contractor actual costs - it can be handled in a number of ways e.g.
- Contractor uses he confirmations/activity types as normal. But you need to ensure that the PO costs aren't posted to the order or you'll have double-costs.
- Contractor uses he confirmations, but deletes the activity type thus no actual costs are posted. The PO costs are then posted to the order
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby Shahnawaz » Fri May 09, 2014 11:04 am

Pete, Thanks for your reply.

As you have mentioned
"- Contractor uses confirmations/activity types as normal. But you need to ensure that the PO costs aren't posted to the order or you'll have double-costs."

Contractor will continue invoicing without work Order details, hence no PO cost posted to work order.

Having said that, to me above option could meet our needs, but just to make sure if I get that right. After individual order confirmation by contractor, we would get defined cost (activity type) at work orders. Would that confirmed order cost by any chance will be required to match against contractor provided invoice? I presume this option will serve to capture contractor cost against work order and on other hande contractor will be paid regardless of they confirm order or not.

Appreciate if you could confirm if I get that right.

Regards,
Shahnawaz
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby knowledgeWorx » Sat May 10, 2014 12:41 am

You could do that if you generated the PO from an order via a PR. However, since you probably have an independent PO (since you wouldn't want to create a separate PO for every work order), as far as I know you can't have a direct connection between the two. You can certainly post service entry sheets against many different orders, but that's rather tedious to do and also doesn't ensure that the costs match the posted hours.
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby PJA » Sun May 11, 2014 3:32 am

Shahnawaz,

I agree with knowledgeWorx in that there's no standard way to link the unplanned PR/PO/IR/IV cost values with the work order activity type values.

There is some SAP documentation somewhere that suggest you should add a class to the work centre, and in this class enter the PO/Contract number. Then you can create a customer-specific report to perform the reconciliation. But this only works if you have one PO/Contract open at one time...

You would also need to ensure that your Finance Team are aware that the costs are duplicated in the system e.g.
- The PO primary costs
- The activity type secondary costs
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby Shahnawaz » Thu May 15, 2014 12:53 am

Gents

Thanks for your input. I will touch base with Finance team with some suportive information that I got now!

Shahnawaz
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby psquare » Thu May 15, 2014 6:10 am

What about using a different workcenter for the contractors with it's own cost center only to be used during IW41. You can use the same activity types since the rate in KP26 is done on cost center/activity type combination.

The only problem you have is that planned costs differ from actual's. But this problem also arises when you use different activitytypes.

Regards, psquare
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby PJA » Thu May 15, 2014 7:00 am

psquare

But you still end up with double actual cost postings (confirmation and PO).
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby psquare » Fri May 16, 2014 4:52 am

Hi Pete,

Well in my example you should use the contracter workcenter as an internal workcenter.

I think the following scenario should work:
Have a contract assigned to a cost center, the monthly invoice would go to that cost center.
If you use that cost center in the workcenter and you use that workcenter to post IW41 on the operation with controlkey PM01 you only have one actual cost posting on the order.

It's like building cost first on cost center with invoice like salary cost for the internal people.

Or do you think I am missing something?

Regards, Psquare
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby PJA » Mon May 19, 2014 1:52 am

Psquare,

Yes - you are missing the Purchase Order invoicing costs from the contractor/vendor.

This would mean that the costs are posted twice (IW41 confirmation, and IR/IV)
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby psquare » Mon May 19, 2014 6:18 am

Hi Pete,

That I don't get.

You create a PO directly to account assignement cost center. This cost center will get the monthly cost by the IR/IV. So this IR/IV is not going to the PM-order at all, only building up value to be used. The purpose of this is to use that cost center as the cost center placed in the workcenter.
By doing IW41 the cost of that cost center (with value of activity type) are transfered to the PM-order.

So in what way would there be double postings of costs? I am transfering the cost from the cost center to the workorder.

So it can be that at the end of the year, the cost center still contains costs if the contractor's workcenter was not used enough for posting hours. But this is also the case if you have internal people assigned to workcenters.

Regards, Psquare
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby Sharpshooter » Mon May 19, 2014 1:35 pm

Psquare,

We do this same thing and I agree with your perspective. Only the labour posting costs are charged to the order and the vendor invoice is offset against the cost centre labour absorption. I was never keen about being able to explain the debit vs credit from an accounting perspective, but I can assure you that in places where I have done this, the bean counters were quite satisfied.

Dave
Good luck!
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby PJA » Tue May 20, 2014 6:52 am

All,

It doesn't matter where they post to, but both the PO and Confirmations make actual postings into the system.

The FICO/Finance Team may choose to ignore the confirmation posting as these are secondary CO postings, however, the PO is a primary FI posting.

Also remember that the costs on the PM/CS order are settled elsewhere, typically a cost centre or WBS. These include the labour costs from the vendor/contractor confirmations.

Now if both the settled order costs orders, and the PO costs are settled to the same place (e.g. cost centre) then you will get actual double-postings..

I would recommend talking to your FICO/Finance Team to see what they recommend.

Here's the SAP Help mentioned above: http://help.sap.com/saphelp_nw04/helpda ... ameset.htm
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Re: Permanent Contractor Hrs in Order vs Their Invoice

Postby psquare » Tue May 20, 2014 8:16 am

Hi Pete,

The link you send is actually exactly what I ment. I only don't agree with your statement of double postings. In the example you describe, the cost center of the PO is exact the same as the one in the settlement rule of the order. In that case, yes it would be double postings but is also a wrong process in my opinion.

But in the defined proces, like stated in the SAP link, this is not the case. It is just like transfering costs from one cost object to the other. So in my opninion this would be the best practice solution.

In fact there is an analogy with the salary administration of the internal engineers which are devided over the different cost centers. These are also actual postings.
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