PO Freight Conditions

8/12/2019 PO Freight Conditions

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SAP Module (i.e. Materials Management (MM) Module) City of Portland

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Freight Conditions on the Purchase Order

Overview:

When buying goods, you can account for the cost of shipping in the purchase order by adding aline for freight to the overall PO, or by using Freight Conditions.

Freight Conditions have the advantage of being invisible to the Goods Receiver while beingvisible to the AP Processor. Freight conditions can apply to the overall PO, or be different foreach line, and can be entered as a fixed amount or as a percentage of the order value.

Transaction:

ME21N Create Purchase Order

Hints / Tips:

Procedure: Including freight conditions in the purchase order headerStep 1: Open ME21N Create Purchase Order, and complete your purchase order as usual.Before saving, open the Conditions tab in the header and select the first available blank line inthe Pricing Elements area:



Module/Role Transaction/Description

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Step 2: Use the drop-down box and select FRA1 for Freight percentage or FRB1 for Freight

value, then click the green checkmark

FRA1 applies a percentage of the total value of the PO as freight. FRB1 applies a specific dollarvalue for freight to the whole PO.

Step 3: Enter the percentage (10 for 10%, 5 for 5%, etc.) or the dollar value in the Amount field.Here, we are expecting to pay 1.5% of the value of the purchase order in freight.




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Enter. The freight condition line may move up in the list automatically. This is okay. Save thepurchase order. Freight conditions (that is, the cost of freight) will be applied automatically atinvoicing.

Procedure: Including freight conditions at the purchase line item level

There are some cases where it makes more sense to apply freight conditions at the line level. Inthis example, we have a multi-line PO where one line is for a piece of equipment with freightcharges, and the other is for the installation service, not subject to shipping.

In this case, we apply freight conditions to the first line, but not the second.

Step 1: Complete the purchase order as usual. In the Item Detail area, on the line for theequipment, select the Conditions tab. Scroll down and select the first blank row.

Step 2: As in the header, use the dropdown to select either FRA1 for freight percentage, orFRB1 for freight amount. Here, we’ll use FRB1. Enter or click the green checkmark:




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Step 3: Enter the agreed dollar value of freight, as quoted by the vendor, and enter. The systemcompletes the entry with USD and moves it up in the list:

Save the purchase order. $150 for freight will be allowed at the time of invoicing.

To remove freight conditions from the purchase order (header or line item), open the Conditionstab, select the FRA1 or FRB1 row, and then click on Delete:




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What happens next? Goods receiving:

When the Goods Receiver enters a purchase order with freight conditions, they see only thequantity ordered, and are responsible only to record the quantity delivered. The cost of freight,even if it’s mentioned on a combined shipping/invoice document, is not the Goods Receiver’sconcern.

NOTE: If you use freight conditions on your purchase orders, do NOT add a separate line forfreight. It’s not necessary and will make accurate accounting very difficult.

Here, we’re receiving against the purchase order with percentage freight conditions at theheader. We’ve received a quantity 8 out of the 10 on the purchase order.

This means that whatever the invoice price per item (which may differ from the PO price if thevendor has offered a discount or rebate, for instance), 1.5% of that will be allowed for freight.




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Once the Goods Receipt is posted, we see that the cost of the goods, 8 at $100 each PLUS1.5% for freight, or $12.00, has been applied to the vendor.

When we receive the other two items, worth $200, an additional $2.50 will be added and can beinvoiced.

Meanwhile, back at the purchase order

After goods receiving, you can return to ME23N and see the effect by looking at the PurchaseOrder History tab:

Freight conditions are coded as DVGR. Note that there is no QUANTITY associated with thisline (that is, there was nothing to receive).

Your AP processor will have a view in MIRO called Goods/services items + planned delivery:




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This will break out the freight condition in a separate line and payment of goods plus shippingwill be allowed. The actual cost of the goods will be maintained as a separate entry from thecost of shipping.

A quick return to the Purchase Order History tab after the invoice has been entered now showsthat $12.00 has been recorded as item type DLIV:

PO Freight Conditions

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