This blog post outlines the high-level business process flowchart and details every step needed to perform the internal settlement process in embedded TM in an SAP S/4HANA system.
My aim in this post is to educate, assisting SAP FICO experts in resolving errors that occur during the process, and explaining financial records created along the way. Understanding this process can help everyone involved in the value chain.
What Is the Business Case?
Transportation is the backbone of supply chain management, and it requires effective and efficient service to remain agile in fulfilling critical business functions like sales, procurement, and manufacturing. Let’s explore the scenario of transportation services provided to internal departments and companies/subsidiaries of the group. Company A needs to transport goods from its plant location to the location of the customer for fulfillment. Company B of the same group provides transportation services to all the subsidiary companies of the group. Company A, in this case, is the recipient of the service provided by Company B. To achieve maximum efficiency in this process, it is highly recommended to use the internal settlement functionality provided by the TM module.
Deployment Options
In order to understand the deployment options in SAP TM, you need to comprehend the business information flow. SAP offers two versions of TM functionality for those using their solutions.
Embedded SAP TM
In this option, SAP TM is integrated directly within one SAP ERP or SAP S/4HANA system instance. This approach offers a tighter integration with core areas like sales and distribution (SD), materials management (MM), finance (FI), and controlling (CO).
Standalone SAP TM
In this option, SAP TM is deployed as a separate system instance, which can be connected to one or more SAP systems as well as non-SAP systems. This deployment offers flexibility, especially for companies with complex transportation networks. There is a layer to communicate information between the systems to accomplish the process. SAP TM and the ERP system communicate via SOA-based web services using SAP XML messages.
The following process diagram depicts the end-to-end process of internal settlement into the SAP TM Module using option B, the standalone system. You can read it from left to right, top to bottom, for the most part. The only exception is the step where it indicates that Company A can post the PGI (post goods issue for the delivery) after the internal settlement is created by Company B.
Please note that XML is used only in the case of separate TM box/instances.
Business Process Details
In SAP TM, several source documents can trigger the creation of transportation requirements and initiate the transportation planning process. These include sales orders, customer returns, purchase orders, stock transport orders, scheduling agreements (both sales and materials management), and both inbound and outbound deliveries. We will discuss the process beginning with delivery, which is called the delivery-based transport requirement (DTR). The properties to be understood from a financial perspective do not change. Understanding one process will be adequate enough to comprehend the flow of financial values in other processes.
Let’s dive into the individual steps.
1 Create Outbound Delivery for the Sales Order
Depending on the number and combination of parameters set to make the delivery relevant to shipping, the transport requirement in SAP TM is created. Incoterms play a significant role here. In this case, incoterms ZF5 will only trigger the transport requirement in SAP TM. All other incoterms are not relevant to integrate in this case.
2 Create the Document Flow of the Delivery in the SAP S/4HANA System
As seen in the figure below, the DTR is created, leading to the creation of the freight unit along with freight order. This freight order is now required to be worked on within SAP TM.
Below shows the document flow of the DTR when the entire process is complete. The internal settlement is created after the freight order is executed to the completed status. The internal settlement document is critical for FICO users to have in understanding the flow thoroughly. Internal settlement triggers the billing document creation in SAP S/4HANA.
The invoice is posted in both the service providing company’s recognized revenue and customer receivables.
As shown below, the charge item calculation page can provide answers to any questions about the amount anywhere in the accounting documents.
This sales invoice will have an IDoc as a result of configuration/settings in the output determination function.
Click on the output icon as shown in the figure below. This will direct you to the output section of the invoice. Select the RD04 output and click on the processing log button to view the IDoc number.
This IDoc is a source document used to create two sets of accounting documents automatically in the service receiving company’s company code. The first set of documents is for the expense (transport cost) for the services received. The second set is to recognize the account payable (vendor invoice). This is designed to enable real-time matching of the intercompany accounting by eliminating the need to manually book financial records for these services.
Program RBDAPP01 uses the IDoc created in this process to post a cost distribution document, which in turn creates an expense document and vendor invoice in SAP S/4HANA. This program is generally scheduled to run as a job. Below, you can see the results of processing IDoc 35832031.
The cost distribution document shows the shipping cost allocated to the materials for accurate reporting in profitability analysis. The cost distribution is driven by the rules set when configured.
Below shows the two accounting documents posted automatically into the service receiving company’s company code. The value in the reference field is the sales invoice number of the service provider company code. This is used to help in reconciliation.
Conclusion
By understanding and implementing the internal settlement process in SAP S/4HANA, organizations can streamline intercompany transportation activities, ensure accurate financial postings, and improve transparency across business units. For FICO users, this process not only reduces manual intervention and errors but also provides real-time visibility into transportation costs and revenue flows. Ultimately, mastering this integration strengthens both operational efficiency and financial accuracy, helping businesses remain agile, compliant, and aligned in today’s complex supply chain landscape.
Comments