SAP CATS for Contractor Labor Payments

Payment of contract labor services is often a cumbersome process in many organizations. The reason being, there are various stakeholders involved such as the managers / supervisors that need to approve timesheets, the purchasing department that needs to manage the PO's, AP paying the vendors, the vendors submitting the invoice and the contractors themselves, that need to keep one or more versions of their timesheets, depending on the client and vendor requirements. It is very common for companies to spend significant dollars to set up something like a vendor portal or time entry portal for contractors to achieve even a semi-automated system. More often than not, even a minor hiccup in the whole process,
such as a contractor entering the wrong number of hours or entering hours on a holiday could cause a lot of communication and trauma to resolve issues.

In SAP, the combination of SAP Cross-Application Timesheets (CATS), Service Entry Sheets (MM-SRV) and MM-Purchasing with a little bit of Human Resources (HR) infotype maintenance provide an easy solution for this problem. CATS is used in SAP for several time entry scenarios including time entry against projects, networks, CO objects, work orders in Plant Maintenance (PM), Payroll time recording, etc… or a combination of these. In addition to these, it could also be used to have a contractor enter time against a service line item on a purchase order. Since it is not feasible for me to provide screenshots, I am going to layout the process here to accomplish this configuration. I will try to update the post with screenshots when time permits me to do so.


HR Set Up
To avail this functionality, it is important to have the HR functionality activated with bear bone HR infotype maintenance to define a personnel record for the contractor, fill out info types 0001 (Actions), info type 0002 (Organizational Assignment) and info type 0035 (Timesheet Defaults). The following information must be filled:

·         Personnel number.

·         Employee group / subgroup (IT: 0001)

·         Personnel area / subarea (IT: 0001)

·         Cost Center (IT: 0002)

·         Vendor Name (IT: 0035)

·         Purchase Order (IT: 0035)

·         Purchase Order Item (IT: 0035)

·         Activity / Service master number (IT: 0035) – this is the service master number used in setting up the PO line for this contract resource).

NOTE: Please note that some of the information maintained in these Info types needs ongoing maintenance by the HR personnel to keep the records up to date, for example, PO/Item number.

CATS Set Up

A data entry profile must be created that allows users to enter time against purchase orders. Depending on the need a release approval should be set up in the data entry profile. Timesheet defaults should be configured such that the purchase order, item and activity number are copied from IT: 0035 from the user’s personnel master record in HR.

MM-SRV Set Up

One or more service master records must be set up in MM-External Service Management component to represent the types of services rendered by the contract labor force.

MM-Purchasing Set Up

Service Order type purchase orders must be set up for the contract labor to represent the organizations issuance of PO’s to the corresponding vendors. A service line item must be set up under each PO corresponding to the service number set up for the personnel master record in HR IT: 0035.

Additionally, if the organization uses ERS (Evaluated Receipt Settlement) with vendors, the corresponding vendor masters could be configured for ERS payment to gain more automation to the payment process.

The following are the process steps from time entry to vendor payment.

·         Employee (contractor) enters time using the appropriate data entry profile using transaction CAT2 (the data entry profile can be assigned to the user’s user profile). User confirms time has been released by going into transaction CADO.

·         Supervisor / manager approves contractors time using transaction CAPS. The supervisor should set up his/her own variants for their responsible employees so that they can review and approve their time on a single screen. NOTE: The system could be configured in such a way that the managers approval is the single point of approval and approval means payment to the vendor for the approved hours.

·         Run transaction CATM to transfer approved hours to the MM component, which automatically creates a Service Entry Sheet (SES) for the approved time against the PO line item set up for the contractor.

·         Purchasing agent runs transaction ML81N to accept the SES. NOTE: If the organization determines that the manager / supervisor approval could be treated as payment approval, a simple ABAP program could be set up to automatically accept SESs created through the CATM transaction.

·         At this point, a GR (Good Receipt) is posted to the PO in SAP.

·         Depending on the invoicing mechanism in place in the organization, an invoice can be generated in the system against the PO, which will be paid by AP (Accounts Payable) based on payment terms from the PO/vendor master record.

NOTE: Any changes to the timesheet or the approval before SES acceptance are automatically updated in the system. Any changes after the SES approval need to be manually corrected in MM-SRV/MM-PUR in coordination with the manager / contractor.

There are additional discussion points such as the account assignment category of the PO, cost accounting for the time entry, etc…, which should be considered when implementing the solution after discussions with the appropriate departments.

Please feel free to provide your comments or suggestions.