How often do existing standard prices fail to reflect reality and present the company with a profit situation that has long since been overtaken by reality?
This is due to the SAP system: In addition to the moving average price, there is also the standard price, which purchasing is supposed to use to control procurement prices.
If a material has a standard price (S), the value of the material is always calculated based on this price. If goods movements or incoming invoices with a price that differs from the standard price occur, the differences are posted to a price difference account; the difference is not taken into account for material valuation.
The price control to which a material is subject is determined from an accounting perspective when the material is created. To do this, enter the following indicators in the Price control field:
- S for standard price
- V for moving average price
Both types of price control differ in the way they handle price differences that can arise from goods receipts or invoice receipts.
According to SAP, valuation using the standard price has four characteristics:
- All inventory postings are made at the standard price.
- Variances are posted to price difference accounts.
- Variances are carried forward.
- Price changes can be monitored.
In our opinion, using the standard price to determine relevant purchasing key figures such as changes in material costs or material prices, or even realistic purchasing volumes, has serious disadvantages:
- The standard price does not take currency effects into account.
- The standard price applies per part and does not reflect any deviation per supplier.
- MTZ and alloy surcharges are not taken into account.
We therefore recommend using the posted invoice values to calculate material costs and changes. This ensures that the actual costs are shown, taking into account returns, credit notes, currencies, ancillary costs, etc. On the other hand, it is useful and even essential to feed the budget prices determined by purchasing back into SAP as realistic standard prices, taking into account the above-mentioned special features, as part of sound purchasing planning.
Would you like to learn more about realistic purchasing metrics? Then get in touch with us! We would be happy to tell you how our purchasing planning can help you optimize your strategic purchasing.
