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Purpose & Net Value of Return PO - For Damaged or Recycled Material or both

Former Member
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Dear all

As far as I know about the Return PO, they are summarized as follows:

Examples for returns for purchase order:

. You procure filters from a vendor. You return the dirty filters to the vendor for recycling.

. You have agreed with your cable vendors that you can return cable remnants to them. You then receive a credit memo for the value of the copper contained in the cables.

This is always happen after we have posted Invoice Verification (MIRO) in the system and make the Outgoing Payment (F-53).

Question 01:

Does return PO cover both scenario such as

(a)Return the damaged material to vendor which we discover its defect after invoice verification or post outgoing payment has been made?

(b) Return the recycle material to vendor after invoice verification or post outgoing payment has been made?

Question 02:

We are using Info Record for the material.

(a) In the case of Return the damaged material to vendor, the return PO will have the net value suggested from info record

and it makes sense since we want our AP (account payable) to be reduced.

(b) In the case of Return the recycle material to vendor, the return PO will have the net value suggested from info record but

iit makes no sense as vendor will not agree to have the recycle material same price as the first purchase price.

Please advise.

Thanks.

Edited by: Daimos on Oct 12, 2009 3:28 PM

Accepted Solutions (1)

Accepted Solutions (1)

Former Member
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Hi,

I correct myself that return purchase order can be used for the for damaged material discovered after payment done tot the vendor. But I would suggest that preferebly we shuold go for free purchase order .

We can discuss the same with vendor and create new purchase order, with reference to the purchase order for which damaged material has been discovered after the payment to the vendor. With this you can track the replacement made against , the damaged material, by clciking the free delivery indicator in the item overview.

With this you can get clear view of maintaining two different procedures for recycle material and damaged material

Regards,

Tushar Patankar

Answers (4)

Answers (4)

former_member197616
Active Contributor
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removal and change of the net price defaulted from the info record for the return item in the PO with the new copper price and postings ( miro credit memeo will take this price) can be a solution?

Former Member
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Dear raghavendra sai

I did think of this solution but we have the limitation that purchaser should not change the price of the material, thus it is a limitation to us in the case of return PO.

I am thinking, should there be an user exit when it is return PO, the PO Net value can be changed?

Former Member
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Hi,

It is individual company's decision, I am really surprised as how you using return P.O. to return damaged material, for which payment is already made. Becuase to use retrun Purchase order facility , it should be done , when the purchase order was created. The only thing here can be done , is that you return damage material in the name of recycled or used material .

But still, it makes no sense as you need pay to vendor for damaged material in the name of recycled material.

If your vendor and you agree that material is damaged after payment, you can create a new purchase order and m,ark the free delivery indicator in the item overview of the purchase order, so that you will get the replacement for your damaged material and your account will be balanced as you get free replacement.

former_member197616
Active Contributor
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Hi,

If my understanding with your question is correct, you are going to return either the unused cable or damaged cable not the copper--correct?

Are you going to return the cable after some usage or due to its damage afrer its use after the purchase is made?

Regards,

Former Member
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Dear raghavendra sai

If my understanding with your question is correct, you are going to return either the unused cable or damaged cable not the copper--correct?

Yes, return the unused / damaged cable but not copper. Copper is just the example I got it from SAP MM certification material.

Are you going to return the cable after some usage or due to its damage afrer its use after the purchase is made?

I am going to return the cable after some usage due to the fact it can be recycle

AND

also Damage is found only after the payment has been made after the 1st purchase is made.

Former Member
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Hi,

Q-1

a) Return the damaged material to vendor which we discover its defect after invoice verification or post outgoing payment has been made?

For damaged returns, you need to cancel the Gr Posted , movement type 102 and thenreturn it to vendor using movement type 122. So return P.o. function is not applicable here.

b) Return the recycle material to vendor after invoice verification or post outgoing payment has been made?

Yes , for recycled material as stated by you it is applicable.

We use return purchase order, when purchase order is made. Here we tick the Returns indicator in the item overview of purchase order screen.Movement type for return indicaort is 161.

Also would like to add a example here;

Q-2) In the case of Return the recycle material to vendor, the return PO will have the net value suggested from info record but

iit makes no sense as vendor will not agree to have the recycle material same price as the first purchase price.

Supopose you order a printer cartridges from your vendor for which you are creating retun P.O. then you must define top two material number one with full printer cartridges, for which you pay vendor and other material number for empty cartridges for which you create a credit memo when you return them..

So when here you can create a Purchasing info record for empty cartridges with a price agreed with your vendor, and can create a credit memo.

So now you have two info records one for full filed cartridges and other one for empty cartridges . So price issue will ntoa rise.

Regards,

Tushar Patankar

Edited by: Tushar Patankar on Oct 13, 2009 11:47 AM

Former Member
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Dear Tushar Patankar

Thanks for your explanation.

I would like to rectify for your comment on Q1, I believe that once the outgoing payment has been made OR the invoice cannot be reversed due to cross month issue, I do not think we can cancel the GR posted using MVT 102 and then return to vendor using 122.

That is why we have the return PO which is mainly used for invoice cannot be reversed and/OR Outgoing payment has been made. You can test out in the system that we cannot perform Return Delivery due to payment already done or Invoice already done.

For your comment on Q2, are you suggesting that I create another material code for empty catridge? I do not know how can we have 2 different info record (with Type: Standard) for the same combination of materialPurchasing orgPlant+Vendor.

Thanks

Former Member
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Hi,

I agree that once the invoice is done you cannot reverse the Gr.

Return Purchase order cannot be used to return damaged material to the vendor. Basically they are used, as you said to return the the recycled material, dirty filters and or empty cartridges whcih can be again reused after processing at vendors end.

In this you and your vendor agree, as you are returning him the material which can be reused, refilled or recycled and can be delivered again. So you agree with him on the price of the used material which you will debit from his account.

Return Purchase order have nothing to do with returning damaged purchase order. Also as your both filled cartridges and empty cartridges differ in properties so you have to use different material number /code for the material you are going to retrurn through return purchase order.

You can create a Purchasing info record for a vendor material combination (new material as material number is different) . So the price to be debited will be different than you actaul purchase price which you maintained for your filled printer cartridges.

Thanks

Former Member
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Dear Tushar Patankar

The reason I use Return PO for Damaged/Defective Material discovered after payment made is that I cannot perform 122 return delivery.

And I have been using Return PO for Defective Material discovered after payment done for years, and only this time I encountered the recycle material which catches my attention.

I think your comment about creating different material code for emtpy cartridge does make sense and I am quite surprised that SAP material never mention it before.

I am thinking for Recyclable Material, must we create Mat Code, and change the net value suggested from the info record to a lower value to save this return PO?

What will be the impact from financial point of view.

Thanks

Former Member
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Hi,

When you create a different material code for empty cartridges, while assigning G/L accounts use the same account which you use for filled cartridges, so that when you create return the material you account will get credited with actual purchase order price which you should pay to vendor and at the a same time it will get debited with the return price as agreed with vendor for used material. recycled material. So that you only need to pay the difference as the vendor account will show thw difference between them.

Also I would like too add that for return of damaged material to the vendor for which payment / Invoice has already been done. you can discuss with your vendor and go for free delivery for the same material as a replacement with movement type 511.

This can be done in consultation with your vendor if he agrees to make the replacement.

Thanks.

Former Member
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Dear Tushar Patankar

Thanks again for the quick reply.

What you said about Damaged material discovered after Payment is done makes a lot of sense to me.

However, we do not allow GR without PO here as a practice. That is why it leaves me no choice but to use Return PO. Do you feel that is a good practice under my situation?

Former Member
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Hi,

It is individual company's decision, I am really surprised as how you using return P.O. to return damaged material, for which payment is already made. Becuase to use retrun Purchase order facility , it should be done , when the purchase order was created. The only thing here can be done , is that you return damage material in the name of recycled or used material .

But still, it makes no sense as you need pay to vendor for damaged material in the name of recycled material.

If your vendor and you agree that material is damaged after payment, you can create a new purchase order and m,ark the free delivery indicator in the item overview of the purchase order, so that you will get the replacement for your damaged material and your account will be balanced as you get free replacement.

Thanks

Former Member
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Dear Tushar Patankar

Yes, I understand that we can use Free item PO to receive replacement but if we use return PO, we cannot make it as free item due to the Credit Memo created in the return PO.

Here is how it work from my experience:

1. Create PO for Mat ABC->GR done->Invoice Verification in the following month->Post Outgoing Payment using F-53 in the following month. This PO has been closed from both finance and MM.

2. Production discovers defective material. We perform GI to Prod Over MVT 262 to return the damaged material to Warehouse.

3. Since Invoice Verification and outgoing payment have been made, we will use Return PO

4. Create return PO, put the 2PC of defective quantity with the SAME Unit Price Net Value from Info Record, tick RETURN

5. GR reference Return PO, MVT 161, quantity of 2pc reduced due to return.

6. Credit Memo reference this PO.

If we want the vendor to send replacement, we will have to create another PO but cannot put as free item, since I have returned the 2pc with the credit memo of this 2pc.

7. Create PO of 2pc->GR->invoice verification

That is how the current process.

Please comment.

I hope you can provide me more information on how to use RETURN PO in the proper way that best serves its purpose. Thanks

Former Member
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Hi,

During purchase creation have you marked returns indicator for the item in the item overview of the purchase order ??

Again I would like to add that return purchase order are only used for recycled materials and not for returning damaged material.

As per step number 4 from your are create a new purchase order and marking return indicator, becuase if you have done the payments then the purchase order which was originally created against which material was delivered cannot be edited.

You have mark returns indicator when the purchase order was created and use it only for recycled materials.

For damaged material , you must use free delivery indicator in the item overview, agreed with your vendor and get the replacement done.

Return purchase order cannot be used for the damaged materials.

Thanks.

Former Member
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Dear Tushar Patankar

Thanks for your patience for following up this issue.

Yes, I put a tick on the checkbox: Return for the new Return PO creation at each item in the Item Overview level.

For the damaged material in which full payment has been made, I usually create a RETURN PO->GR MVT 161->Credit Memo. And this Credit Memo will go for FICO Credit Memo processing to receive the $ from vendor.

I understand your point that instead of creating return PO, we can create another new PO and mark it as free item and as such the defective amount $ we paid in the 1st PO will be balance out here in the Vendor account and stock account.

Another thing I would like to point out is that I also use Return PO for defective materials where I decide no more future purchase from this vendor. That is why there won't be any PO with Free Item in the future.

Question 01:

From the accounting point of view, will both return PO and free PO item hit the same G/L account to meet the purpose?

Question 02:

For the usage you suggested for return PO for recyclable material, do you actually create 2 material codes, 1 for the full cartridge and another one for the empty cartridge, where the 1st PO will buy the Full cartridge and the 2nd Return PO will use the material code of empty cartridge? If like this, we will have 2 different Stock value & quantity and I still wonder if it will complicate the matter or it is a normal practice out there.

Thanks again.

Former Member
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Hi,

For vendor from which you are getting defective material and you do not want to make purchase order in his name again then you can block him in source list. Source list blocking is recommended when , you have to block a particular material from a vendor. If you want to vendor as a whole (If he i supplying you some other material also) trhen block him in vendor master record using T code XK05..

So this will not make affect if you go with creating another purchase order with free indicator marked.

Q-1 )

From the accounting point of view, will both return PO and free PO item hit the same G/L account to meet the purpose?

When you create a free purchase order in that case G/l account will not get hit as no accounting document will get created.

So no question of mis balance. Because in that case you are getting replacement for the material for which you have already made payments.

Q-2 ) Question 02:

For the usage you suggested for return PO for recyclable material, do you actually create 2 material codes, 1 for the full cartridge and another one for the empty cartridge, where the 1st PO will buy the Full cartridge and the 2nd Return PO will use the material code of empty cartridge? If like this, we will have 2 different Stock value & quantity and I still wonder if it will complicate the matter or it is a normal practice out there.

The only reason behind creating two material code is that two different prices one at which you procure the material and other one which you agreed with your vendor , as you are returning him his materioal which can be reused and reprocessed.

It will not complicate the issue but it a SAP Requirement.

Thanks

Former Member
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Dear Tushar Patankar

Based on your analysis that Return PO is only used for Recycle Material, how do we handle the Damage Materials that are only discovered as defective after payment has been made?

I still think we can use Return PO to handle this as it serves well the purpose.

Please enlighten me why you do not agree us to use return PO for damage material and what would you suggest us to handle it once the payment has been made?

former_member197616
Active Contributor
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Hi,

The return process generally two types.

1.Return the goods permanently (as you may do not require) for this you can create a return PO and post the return to the vendor with moment type 166.

(Even though if you posted MIRO and cleared the document , with return PO you can post the credit memo.)

2.Return to vendor using moment type 122 wiith quality reasons ,and post again for the subsequent received material

this can be done even the MIRO posted and cleared.

Q2:

You are going to create the PO for the cables , and if there exists return vendor is going to return the copper amount ?is it not?

Regards,

Former Member
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Dear Raghavendra Sai

I think for your point 2 " Return to vendor using moment type 122 wiith quality reasons ,and post again for the subsequent received material this can be done even the MIRO posted and cleared.", once the invoice has been done but irreversable due to cross month, or the payment has been made, we should then choose to use Return PO.

Alternatively, we can use OMBZ to allow a return to vendor, although a I.V. is already done but this will go against the purpose of auditing.

My concern is that for the recycleable material, should we handle it using Return PO? And if such, we will need to alter the info record price suggested to be a smaller amount since it is recycleable.

1. The net value in the Return PO for recycle material = depreciated value

2. The net value in the Return PO for Damange Material = Same with Purchase Price.

Are the above 2 statements correct?

(Yes, vendor will pays me back the value of Copper inside cable.)

THanks