Avoid a Disconnect Between Your MM and FI Period Closes

  • by Rohana Gunawardena, SAP Practice Director, Exium Inc.
  • April 15, 2005
Your cutoff for transactions at close may be affected if you don't understand the relationship between the Materials Management (MM) period close and the FI period close. You can configure your R/3 system to ensure a clean cutoff for MM transactions at period close.
Key Concept
The posting of MM balances to an MM period is dependent on the fixed time of the MM period roll, while the posting of a FI document to a FI period is dependent on the posting date, which is derived from a user's default time zone.

A key period-end activity is determining stock balances and ensuring a clean cutoff for transactions posted in the old period and the new period. Stock balances are primarily controlled in the Materials Management (MM) module, but have a significant impact on the FI balance sheet. Often I am asked what the link is between the MM period close and the FI period close, how they impact each other, and what to do to ensure a clean cutoff of MM transactions at month-end.

Companies with plants in multiple time zones have extra considerations for a clean cutoff. Under US Generally Accepted Accounting Principles (GAAP), the cutoff for transactions at any location is midnight local time, not midnight of the SAP system time. For a clean cutoff, you need to prevent posting of MM documents to the closed period after the cutoff. Many people are unaware that this is possible in R/3. I will show how to prevent this and give an example in which using MM and Warehouse Management (WM) can add to the problem.

I will explain the inter-relationship between the MM and FI period close, what the MM period close does, and, more important, what the MM period close does not do. Finally, I will show you a scenario in which the MM period close can cause problems when you try to reconcile prior period MM balances to the FI balance sheet. Understanding this is critical if you have to reconcile MM period balances to the FI balance sheet.

Rohana Gunawardena

Rohana Gunawardena heads the SAP practice division at Exium Inc. Exium is a leading business and technology consulting firm that enables companies to achieve their strategic business goals. Exium specializes in delivering superior IT solutions using ERP systems, with a special focus on SAP products. Rohana has been working with SAP since 1992. During his career he has assisted multiple clients on detailed system correction projects, such as correcting inventory balances, controlling area reorganizations, retrospectively activating group currency, and optimizing inter-company accounting transactions. He has spoken at many SAP conferences and has published more than 20 articles in Financials Expert, SCM Expert, and SAPtips on various aspects of SAP. His presentations have focused on Financials module selection, the order-to-cash process, global rollouts, business segment reporting, cross-module integration, and the financial impact of SCM transactions. Rohana is widely acknowledged as a leading SAP expert. Rohana is a Fellow of the Institute of Chartered Accountants in England & Wales. Previously Rohana has worked with the consulting practices of Accenture, Deloitte, and PwC.

Rohana will be presenting at the upcoming SAPinsider Financials 2018 conference October 16-18 in Prague. For information on the event, click here.

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