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HR/Payroll Integration With FI/CO

Quentin Hurst – Virtuoso, LLC


Mike Timm – Integrated Consulting Group LLC

© Copyright 2003 SAP Professional Journal


What We’ll Cover

Objective: Provide valuable advice on when and how the Payroll


program updates FI/CO and configuration tips to make processing and
reconciliation easier

Understanding How Payroll Updates FI/CO


Configuring the Payment Program
Mapping Payroll Components to FI/CO - Integration Point
Configuration
Enhancing FI/CO Updates and Cash Management

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© Copyright 2003 SAP Professional Journal
What We’ll Cover

Objective: Provide valuable advice on when and how the Payroll


program updates FI/CO and configuration tips to make processing and
reconciliation easier

Understanding How Payroll Updates FI/CO


Configuring the Payment Program
Mapping Payroll Components to FI/CO - Integration Point
Configuration
Enhancing FI/CO Updates and Cash Management

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© Copyright 2003 SAP Professional Journal
How Payroll Updates FI/CO
Most people misunderstand how Payroll updates FI/CO
“Payroll updates FI/CO automatically just like MM and SD automatically
update FI/CO, right?”
WRONG!
Some Payroll-to-FI/CO data must be transferred manually
Payroll and FI/CO have defined integration points through which data is
passed, just like MM/SD
Unlike MM/SD, though, some integration points require human intervention
This causes a lot of confusion between the Payroll and FI/CO teams during
both the implementation and after go-live

GOTCHA!

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© Copyright 2003 SAP Professional Journal
Payroll-FI/CO Integration Points
The integration points between Payroll and FI/CO are
Creating the DME (payments)- automatic (check register only)
Posting to Accounting - manual
Posting third-party Remittance – automatic

We’ll demonstrate each of the Payroll-FI/CO integration points by


1: Running the Payroll – Calculation Steps - to prepare to process payroll
2: Creating the DME – Payments to process a Payroll run
3: Post to accounting to update FI/CO with data from the Payroll run
4: Post Third-party Remittance to generate payment information for vendors
5: Posting with CATS – Cross-Application Time Sheet

I will demo these in R/3 4.6C. The process is similar in other versions

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© Copyright 2003 SAP Professional Journal
1 - Running the Payroll - Calculation Steps
First, we’ll release the payroll
This sets a system parameter that allows the payroll to be run
In this step you select the payroll area and payroll dates you are processing
Next, we’ll select “Start payroll”, enter screen parameters and
launch the payroll process
This will generate wage types and assign cost centers
We’ll check the results by viewing the Remuneration statement
Finally, we’ll select the “Exit payroll” step
This sets payroll process system parameter to “finalized”, so additional
processing may be completed

None of these steps will update FI/CO in any way


Note

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1 - Running the Payroll - Calculation Steps (cont’d)

Demo

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2 - Creating DME - Payments
Next, we’ll create the Data Medium Exchange (DME)
This step prepares the payroll remuneration data for ACH & check printing
You specify one of the following DME types
Payroll Check
ACH Transfer (Direct Deposit)
Wire Transfer

Payroll uses the A/P Payment Program for the ACH and check
printing processes
The check register will be updated
In contrast to A/P payments, the G/L (FI/CO) will not be updated

After doing this, your check register will be out of balance with your
outgoing payments G/L account in FI/CO. FI/CO will also be out of
balance with Payroll because no expense or liability postings will
have been transferred yet.

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© Copyright 2003 SAP Professional Journal
2 - Creating DME - Payments (cont.)

How to Generate the DME


Create Pre-Program DME
Create DME
DME Management
Run payment program to
print/generate DME

Demo

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© Copyright 2003 SAP Professional Journal
2 - Creating DME - Payments (cont.)

The results
Payroll checks and ACH files for the direct deposit were generated
The check register has been updated and reflects the newly printed payroll
checks, but FI/CO has no payroll information!
Conclusions
You can run payroll and generate checks without transferring to FI/CO
In other words: you can successfully run the payroll, cut the payroll checks,
and distribute them to employees without updating FI/CO at all!

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© Copyright 2003 SAP Professional Journal
3 - Post To Accounting
To solve this Payroll-FI/CO discrepancy, we’ll “manually”
execute transaction PCP0
This is an important, separate step after generating payroll and cutting
checks (DME)
PCP0 updates FI/CO – Expenses, Liabilities and Assets
It uses the employee’s home cost center to determine the cost center to
post to
It uses the mapping of wage types to symbolic accounts to G/L accounts to
determine the correct G/L account/cost element to use
I'll explain these elements and relationships in detail later

Hint: When viewing the FI/CO update document, use menu path
Extras>Original Document to jump to the payroll Remuneration
statement (which lists the wage types/employees that make up the
FI/CO posting).

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3 - Post To Accounting (cont.)

Demo

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3 - Post To Accounting (cont.)

Demo

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3 - Post To Accounting (cont.)

Demo

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© Copyright 2003 SAP Professional Journal
3 - Post To Accounting (cont.)

Demo

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© Copyright 2003 SAP Professional Journal
4 – Third-Party Remittances
R/3 allows you to automatically create payables to different
vendors as a result of HR/Payroll. Examples include:
Garnishment Processors
Taxing Authorities
Benefit Providers
This is a separate step done after payroll and the update of
payroll results to FI/CO
Posting third-party Remittances isn’t required to run the next payroll
Good
Employee withholdings such as garnishments can NOT be passed to the
Thing A/P vendor if the third-party Remittance Posting Run is not executed
In this step the Integration Is Automatic. Once you post your third-party
Remittances, the proper A/P vendors accounts are updated so that you can
process them like any other liability through the A/P payment program

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© Copyright 2003 SAP Professional Journal
4 – Third-Party Remittances (cont.)

Demo

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© Copyright 2003 SAP Professional Journal
5 - Posting With CATS
CATS = Cross-Application Timesheet
Time Capture and Data Transfer Tool
Is an additional piece of functionality that can be used for Payroll and FI/CO
CATS can be used as the time transfer tool to update HR/Payroll
with hours worked by employee
CATS can be used to enter one-time earnings/deductions for
employees
Using CATS you can capture an employee’s time across
different cost centers (projects, etc.)
Update HR, CO or both with time worked by employee by activity

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© Copyright 2003 SAP Professional Journal
5 - Posting With CATS (cont.)

CATS updates HR/Payroll


CATS feeds the payroll system with the actual hours worked and one-time
earnings/deductions for a pay period
CATS is very helpful for hourly paid employees
CATS updates CO
Updates CO with the hours actually worked by cost center for an employee
The payroll expense posting for an employee is sent to the employee’s
home cost center in the Payroll to FI/CO Update
Using CATS you can create an activity allocation to credit the home cost
center for hours not worked by the employee and debit the cost centers
where the employee actually worked

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© Copyright 2003 SAP Professional Journal
5 - Posting With CATS (cont.)

An Example
Employee John works 80 hours over a two-week pay period
John is an hourly employee who makes $15/hour and is assigned to cost-
center 123-A as his home cost center
John’s company uses CATS as a time entry/capture tool
Over the two-week period John worked 40 hours in cost-center 345-B, 30
hours in cost-center 678-A, and 10 hours in his home cost-center 123-A
His gross pay for the period is 80hours*15/hr = $1200

cont. >

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© Copyright 2003 SAP Professional Journal
5 - Posting With CATS (cont.)

An Example (cont.)
From the Payroll to FI/CO transfer – John’s home cost-center 123-A is
debited $1200 (the entire 80 hours that he worked)
The CATS interface will credit John’s home cost-center 123-A 70 hours --
(times a pre-defined activity rate - $15/hr) $1050 – via an internal activity
allocation. This will leave a net debit of $150 (10hrs * 15/hr) on John’s home
center
The other side of the CATS interface activity allocation will debit cost-center
345-B 40 hours for a total of $600, and debit cost-center 678-A 30 hours for
a total of $450

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© Copyright 2003 SAP Professional Journal
5 - Posting With CATS (cont’d)
Conclusions
CATS is a great tool to use when you have hourly employees, especially
when these employees can do work over several projects or cost-centers
CATS even allows you to “charge” the worked cost-centers for different
activity rates depending on the type of work/project the employee is working
on
CATS allows you to spread costs over the cost-centers actually worked,
instead of the employee’s home cost-center which is the SAP default when
posting from Payroll to FI/CO

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© Copyright 2003 SAP Professional Journal
What We’ll Cover

Objective: Provide valuable advice on when and how the Payroll


program updates FI/CO and configuration tips to make processing and
reconciliation easier

Understanding How Payroll Updates FI/CO


Configuring the Payment Program
Mapping Payroll Components to FI/CO – Integration Point
Configuration
Enhancing FI/CO Updates and Cash Management

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© Copyright 2003 SAP Professional Journal
Configuring the Payment Program
As was shown in the previous section, Payroll uses the A/P
payment program to generate checks and ACH payments (DME)
You use the same configuration techniques that you use for A/P
Create House Bank and Accounts
Create Payment Methods
Assign to Accounts
Create RFFOUS_C and RFFOUS_T variants

Solution

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© Copyright 2003 SAP Professional Journal
Configuring the Payment Program (cont’d)
Even if you don’t use different bank accounts for A/P payments
and payroll payments you should create a new payment method
for payroll check and ACH transfers
Enables easier reconciliation of checks, accounts, and check register to G/L
Allows you to have a greater degree of authorization to view/create/change
payroll checks

Tip

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© Copyright 2003 SAP Professional Journal
What We’ll Cover

Objective: Provide valuable advice on when and how the Payroll


program updates FI/CO and configuration tips to make processing and
reconciliation easier

Understanding How Payroll Updates FI/CO


Configuring the Payment Program
Mapping Payroll Components to FI/CO – Integration Point
Configuration
Enhancing FI/CO Updates and Cash Management

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© Copyright 2003 SAP Professional Journal
Mapping Payroll Components to FI/CO
In this section we’ll show the configuration behind the Payroll –
FI/CO integration points
1 - Defining Wage Types (Gross to Net)
2 - Defining Symbolic Accounts
3 - Mapping Wage Types to Symbolic Accounts
4 – Mapping Symbolic Accounts to the G/L
5 - HR Payee Payees to Vendor Accounts (for Garnishments and third-party
Remittances)

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© Copyright 2003 SAP Professional Journal
Step 1 - Defining Wage Types
Wage Types are elements used in the payroll schema to
represent different types of payroll activities (e.g., wages,
deductions, taxes)
Wage types for gross wages, net wages, and taxes are delivered standard
and ready to use
Employee deductions and earning codes are delivered as examples
Wage types are created or modified by the Payroll team
The payroll schema uses wage types to calculate Net Payroll
from Gross Payroll
Similar to SD condition types and pricing procedures
The wage types used in payroll are what will ultimately drive our G/L
postings and accounts used in FI/CO

Building Block
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© Copyright 2003 SAP Professional Journal
Step 2 - Defining Symbolic Accounts
Symbolic Accounts are names used in HR/Payroll instead of G/L
account numbers
They’re similar to account keys in SD
You can think of symbolic accounts as an intermediate step to determining
the proper G/L account
The types of symbolic accounts are
Financial – Balance Sheet
Cost – Income Statement
Vendor – Vendors
Customer – Customers

Building Block

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© Copyright 2003 SAP Professional Journal
Step 2 - Defining Symbolic Accounts (cont.)

Symbolic accounts have an employee grouping key, which


allows the symbolic account to be associated with different G/L
accounts
Employee groupings are done with the payroll schema during payroll
processing
Hourly employees may post to a different G/L account than salaried
How to Add/Maintain Symbolic Accounts
Use IMG Payroll>Payroll:USA>Posting to Financial Accounting>Activities in
the HR System>Employee Grouping and Symbolic Accounts>Define
Symbolic Accounts

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© Copyright 2003 SAP Professional Journal
Step 2 - Defining Symbolic Accounts (cont’d)
IMG Payroll>Payroll:USA>Posting to Financial Accounting>Activities in
the HR System>Employee Grouping and Symbolic Accounts>Define
Symbolic Accounts

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© Copyright 2003 SAP Professional Journal
Step 3 - Mapping Wage Types
Next, Wage Types need to be mapped to symbolic accounts so
R/3 can determine which G/L accounts to update
Use IMG path: Payroll>Payroll:USA>Posting to Financial
Accounting>Activities in the HR System>Wage Type Maintenance>Define
Wage Type Posting Attributes
There are no debits and credits in
the bizzaro world of Payroll. Use a
+ like a debit and a – like a credit.

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© Copyright 2003 SAP Professional Journal
Step 3 - Mapping Wage Types (cont.)

Important Tips and Gotchas!


Know what each wage type is used for before maintaining them
Know how each wage type relates to financial transactions
Make sure your payroll and FI/CO teams communicate
When in doubt create a new symbolic account
Sometimes the intended use of the wage type is not completely understood
or may change over time. Often, when it comes time to change how the wage
type is posting in the G/L, people will take a short cut and change the
Warning mapping of the symbolic account that is assigned to that wage type. If that
symbolic account is assigned to other wage types that are posting correctly,
you can break more than you are fixing
There are no debits and credits in the bizzaro world of Payroll. You have to
choose between a “+” or a “-”

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© Copyright 2003 SAP Professional Journal
Step 4 - Mapping Symbolic Accounts to G/L Accts

Next, you need to map symbolic accounts to G/L accounts


Technically, the task resides in the FI module
The mapping is an Automatic Account Assignment T030 – just like any
other FI automatic account assignment
Very Straightforward
Use Transaction code OG00 (shown below)

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© Copyright 2003 SAP Professional Journal
Step 4 - Mapping Symbolic Accounts to G/L Accts (cont.)

Tips & Gotchas


Work closely with Payroll team to coordinate how the symbolic accounts
are being used
Be careful about changing the mapping. Make sure that the symbolic
Warning
account you want to change isn’t assigned to another wage type that needs
to post where the symbolic account is currently set to post!

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© Copyright 2003 SAP Professional Journal
Step 5 - Mapping HR Payees to a Vendor Acct

I described a “third-party remittances” feature earlier


During payroll you can also accrue liabilities for, and pay,
Benefit Providers
Tax Authorities
Garnishment Vendor Processors
Other deduction vendors
Garnishment Processors and the other types of vendors are posted to AP
during the third-party Remittance process
Garnishment Processors are directly connected to an AP Vendor
When creating a garnishment document for an employee, the user selects
an AP Vendor directly
All other types of vendors go through the third-party mapping process
The key integration point is mapping/linking the HR payee to an
A/P Vendor account

Building Block
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© Copyright 2003 SAP Professional Journal
5 - Mapping HR Payees to a Vendor Acct (cont.)

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© Copyright 2003 SAP Professional Journal
What We’ll Cover

Objective: Provide valuable advice on when and how the Payroll


program updates FI/CO and configuration tips to make processing and
reconciliation easier

Understanding How Payroll Updates FI/CO


Configuring the Payment Program
Mapping Payroll Components to FI/CO – Integration Point
Configuration
Enhancing FI/CO Updates and Cash Management

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© Copyright 2003 SAP Professional Journal
Std. R/3 Lacks an Automatic Payroll-FICO Link

As was shown earlier there is no “automatic” integration link


between Payroll and FI/CO
The integration between in the two is manual and somewhat “forced”
A vanilla implementation of Payroll with FI/CO (which SAP
assumes and allows for in standard functionality) is as follows:
Step 1: Map net payroll results (outgoing cash) to your bank clearing
account or another clearing account
This is done when you map symbolic accounts to G/L accounts
Step 2: Manually journal from the clearing account to the bank clearing
account
Done via a manual journal entry, either FB01 or FB50

Issue
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© Copyright 2003 SAP Professional Journal
Std. R/3 Lacks an Automatic Payroll-FICO Link (cont.)

Going with this standard approach has disadvantages


It’s cumbersome!
Especially for corporations that use one company code to make payments
for other company codes
It’s error prone – manual processing always allows more room for error
There is no financial link between the general ledger line items in the bank
clearing account and the check register

Issue
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© Copyright 2003 SAP Professional Journal
SAP Has Released a Solution!

Using the enhanced functionality provided in OSS Note 90320


you can automate your clearing journal entries and link your G/L
line items to the check register!
OSS Note 90320 allows you to create program RFPYHR00 in your SAP
system – available from Release 3.0a

Program RFPYHR00 requires the payroll result to be posted to a


clearing account
Pick a single clearing account for each company code and map it to the
proper symbolic accounts
Automatically journals out of the clearing account and into the proper bank
clearing account and company code-based off of the DME run in the
payment program
Best
Practice This program is a must-have in a cross-company code payroll scenario!!!

Solution
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© Copyright 2003 SAP Professional Journal
SAP Has Released a Solution! (cont.)

Program
RFPYHR00

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© Copyright 2003 SAP Professional Journal
Important Steps When Using RFPYHR00
It’s important to do things in the following order or your updates
could get out of order or you could lose your linking of checks
in the check register to line items in the G/L
1. Transfer payroll to FI/CO
2. Create DME
3. Print DME
4. Run RFPYHR00

If you run RFPYHR00 after creating the DME but before you print
the DME your payroll checks in the check register won’t be linked
Warning
to an accounting document

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© Copyright 2003 SAP Professional Journal
7 Key Points to Take Home!

In standard R/3 you must manually transfer payroll results to


FI/CO. There is no automatic integration posting like in other
parts of SAP
You can automate payroll-to-FI/CO payment postings, however,
by applying OSS note 90320
This creates program RFPYHR00 in your system
RFPYHR00 is a must-have for cross-company code payroll payments
The Payroll Payment Program doesn’t update FI/CO like it does
in A/P, it only updates the check register
Payroll-to-FI/CO integration is supported by configuration
Wage types are mapped to symbolic accounts
Symbolic Accounts are mapped to G/L Accounts

cont.>
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© Copyright 2003 SAP Professional Journal
7 Key Points to Take Home! (cont.)

Mapping Payroll Payees to A/P Vendors is the key integration


step for third-party Remittances/Garnishments
CATS can be used to spread labor costs over different cost
centers
Create new payment types in the A/P payment program for
payroll payments

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© Copyright 2003 SAP Professional Journal
Your Turn! (to launch Q&A)

Questions?

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© Copyright 2003 SAP Professional Journal