Controlling Overview SAP - icmai-wirc.in · domain knowledge in Controlling by learning SAP FICO....

CMA Jayesh P Desaiwww.jayeshdesai.com

Webinar Oct 10, 2020

SAPfor

F inanceTransformation

ControllingOverview

ICAI-WIRC

www.jayeshdesai.com 1

Disclaimer

“SAP” is a trademark of SAP AG, Neurottstrasse 16, 69190 Walldorf, Germany.

SAP AG is not the publisher of this material and is not responsible for any inaccuracy.

This presentation is made in my personal capacity and I do not represent SAP or any of its subsidiaries.

www.jayeshdesai.com 210-10-2020

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Jayesh P Desai & Co.Cost Accountants

www.jayeshdesai.com

Profile

www.jayeshdesai.com10-10-2020

• Practicing Professional (Since 2017)• Business Valuation• Data Analytics – Product Costing, Pricing & Profitability

Analysis• SAP Consulting & Training

• Key Accomplishments• Developed Financial Model for Start-up in areas such as

Blockchain, AI, Data Analytics, Gaming, Online Education, E-commerce, Electric Vehicle

• Valuation of early and funded start-up, matured companies, CIRP under Companies Act, FEMA, IBBI and other needs

• Data Analytics for manufacturing companies in power, Consumer Durables, Injection Molding, Textiles

• SAP trainer for Institute of Cost Accountants of India. Conducted 2 sessions of 60 hours each with 150 participants

• Conducted several Webinars on SAP for Finance Professionals for over 200 participants

Jayesh P Desai & [email protected]

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FCMA, CFA, CISA

CIA, PMP, UCLA (PGPX)

Registered Valuer (IBBI)

CMA Jayesh P Desai

Practicing Cost Accountant

DesaijayeshP


http://www.jayeshdesai.com/mailto:[email protected]://www.linkedin.com/in/desaijayeshp/

• Corporate Professional (1991-2016)• Financial Accounting, Product Costing, Profitability Analysis,

Internal/ System Audit, Corporate Restructuring• SAP Implementation, Data Analytics, Project & Delivery

Management• Building Global Teams & Leadership, Leading Innovation

• Key Accomplishments• Worked with General Mills, IBM, Colgate, Bayer, Shaw

Wallace, General Motors• Over 20 years SAP experience as delivery manager,

consultant and power user • Implemented 4 SAP FICO projects with integration• Domain experience in Finance & Controlling in SAP

environment• Specialised in SAP Controlling (CCA, PC, COPA, PCA)• Lead & Delivered global SAP & Data Analytics projects.

Managed Global Teams in India, US, UK• Lead Innovation and Data Analytics initiatives across various

functions and countries

5

FCMA, CFA, CISA

CIA, PMP, UCLA (PGPX)

Registered Valuer (IBBI)

Jayesh P Desai & [email protected]

CMA Jayesh P Desai

DesaijayeshP


http://www.jayeshdesai.com/mailto:[email protected]://www.linkedin.com/in/desaijayeshp/

Refresher from 9/10

• CMA & Technology: CMA can take the best advantage of their domain knowledge in Controlling by learning SAP FICO. This is a great Value-Add to CMA experience

• HANA has transformed ERP space with in-memory computing, columnar database and simplified data model

• SAP design is similar to Lego blocks, you can build variety of houses using the same blocks

• Enterprise Structure, Configuration, Modules, Business Processes, Master Data, Transactions all together make a robust, integrated SAP system


General Ledger

P2P

O2C

P2Pro

AP AR

AA

CO

Management Reporting

COPA – PCA

Legal Reporting P&L, BS

Record to Report (R2R)


1

2

3

4

5

6

Business Processes FICO Integration

10-10-2020

Content in the Series

Overview of SAP

• Design of SAP

• Enterprise Structure

• Modules & Business Processes

• SAP Live, Q & A

PC & CO-PA

• Product Costing

• Material Ledger

• Profitability Analysis

• SAP Live Q & A

9th

Oct

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SAP Controlling Overview

• CO Enterprise Structure

• Controlling Master Data

• Cost Control

• SAP Live, Q & A


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Content

Decision Making


• MNC Scenario

• Your Organisation

• CCA, CEA

1 2

SAP in Action

• Controlling Area

• Standard Hierarchy

• Transaction Data

• Reports

Controlling Concepts

• Controlling Design

• Why Controlling?

• Components

3


General Ledger

P2P

O2C

P2Pro

AP AR

AA

COManagement

ReportingCOPA – PCA

Legal Reporting P&L, BS

Controlling as part of Overall Design


Business Processes FI Module CO Module

Other

CC ReportsVariance ReportsIncome StatementSBU/ PC ReportsSegment Reporting

Note: Looking at this diagram, you may think that data flow is linear and happens by stages. Data flow is real time (except for certain month-end steps)

10-10-2020

Why you need Controlling?

• Controlling provides with information for management decision-making, showing where costs have been incurred by which organisation unit and for what purpose

• Provides the basis for associating the cost of sales with the revenue earned

• The main task of controlling is planning. Variances are determined by comparing actual data with plan data which enable control over business flows

• Income statements to analyse profitability by Product, Channel, Customer, Region, SBU etc.


Why FI module cannot serve these purposes?

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Components for Cost Control

Cost Element Accounting (CO-OM-CEL)• Provides with an overview of the costs and revenues that occur in an

organization.

Cost Center Accounting (CO-OM-CCA)• Useful for a source-related assignment of overhead costs to the location in

which they occurred.

Internal Orders (CO-OM-OPA)• Internal orders are used to collect and control according to the job that

incurred them

Product Cost Controlling (CO-PC)• Product Cost Controlling calculates the costs that occur during

manufacture of a product, or provision of a service


Components for Cost Control

Profitability Analysis (CO-PA)• Profitability Analysis analyzes the profit or loss by individual market

segments and provides a basis for decision-making, for example, for price determination, customer selection, etc.

Profit Center Accounting (EC-PCA)• Profit Center Accounting evaluates the profit or loss of individual,

independent areas within an organization. These areas are responsible for their costs and revenues.


Understanding your business strategy, management decision making requirement and the extent to which you want to exercise “Control” is key for building a robust controlling system

10-10-2020

10-10-2020 www.jayeshdesai.com 15

Content

Decision Making


• MNC Scenario


• CCA, CEA

1 2

SAP in Action




• Reports




• Components

3



• Organisation Structure

• Modules/ Sub-modules Implemented

• Master Data

• Business Processes

• Transactions

• Reports

Understand SAP to take better Decisions

Note: In this session, I am focusing on CO-CCA & CO-CEA to make the best use of available time and avoid overload of information on participants.


Controlling Area• An organizational unit within a company, used to represent a closed system

for cost accounting purposes.

• A controlling area may include single or multiple company codes that may use different currencies.

• These company codes must use the same operative chart of accounts and fiscal year variants

CO Enterprise Structure


Enterprise Structure


Holding Company

CC 1CC 2CC 3/

CO AreaCC 5CC 4

COA INT

COA EUR

Group COA

FY Var 1

Mfg

S&M

Proc

Adm

Mgt.

Plants

Zones

FinanceITHR

Departments are responsible for planning & control of cost

• Organisation is divided into logical responsible units/ departments for better planning & control of costs

• Each of these departments can be created as a Cost Centre

• Cost center structure can reflect the structure of your organization. It generally remains constant over long periods.

• Number of Cost Centres depends on the controlling needs of organisation

Understanding your Organisation


Cost Center Accounting provide transparency into the relative performance of different parts/ departments of your organization

Dividing an organization into cost centres allows organisation to follow several goals.

• Determine where costs are incurred within the organization.

• Check cost efficiency at the point where costs are incurred using CC planning

• Valuate semi-finished and finished products in Product Cost Controlling (CO-PC), and to

calculate contribution margins in Profitability Analysis (CO-PA).

Operational Cost Centres

Service Cost Centres

ProductionServicesMaintenance

ManagementFinanceIT, HR, Admin, etc

Cost absorbed in product

CO-PA

Cost Centre Accounting


It is important to note:

- CC is created with reference to a time period- For a Controlling Area and Company Code- Attached to a Standard Hierarchy- Has Business Area and Profit Centre Assigned

Cost Centre Master (KS01/03)


• A tree structure used during master data maintenance for organizing, from a controlling standpoint, the business processes and cost centers belonging to a controlling area.

• This is created while creating a Controlling Area. If this hierarchy is not present during controlling area maintenance, the system automatically creates the highest node there.

• The direct assignment to the controlling area guarantees that all cost centers of a controlling area are collected together.

• While number of CC groups can be created, there is only on Standard Hierarchy

Standard Hierarchy (OKENN)


• Connect FI with Controlling, moving cost and revenue items that may be needed in CO for further analysis

• Not all GL accounts are created as cost element

• When a GL is created as Cost Element, it becomes mandatory to enter a Cost Object – Cost Centre, Settlement Internal Order or Profitability Segment

• In S/4 HANA, CE are created along with GL accounts.

• Cost Elements are classified either as Primary or Secondary depending on its origin

Cost Element Master


Primary Cost or Revenue Elements (KA01)Primary cost or revenue elements are G/L accounts of the G/L account type Primary Costs or Revenue. Primary cost elements reflect operating expenses such as payroll, selling expenses, or administration costs. Examples of primary cost elements:

• Material costs• Personnel costs• Energy costs

Secondary Cost Elements (KA06)Secondary cost elements are G/L accounts of the G/L account type Secondary Costs. Secondary cost elements represent costs resulting from value flows within the organization, such as internal activity cost allocations, overhead allocations, and settlement transactions. Examples of secondary cost elements:

• Overhead allocation• Internal activity allocation• Order settlement

Primary & Secondary CE


Allocation cycles in SAP CO is used to transfer cost from one cost object to another cost object or group of cost objects.For example, transfer of cost from Service Cost Center to Production Cost Center. There are three types of allocation cycles that are used for this purpose

Distribution (KSV5)Receiving Cost Center retains the primary cost element. For example, sending CC may send “telephone” cost (primary cost) which will appear as “telephone” cost in receiving CC

Assessment (KSU5)Receiving CC does not retain primary cost element of the sending cost center. For example, ‘cafeteria’ (secondary cost) may assess cost to receiving cost center where it can be seen as ‘cafeteria’ cost. The primary cost posted on cafeteria will not appear in the receiver.

Indirect Activity Allocation (KSC5)Sending cost center can charge based on activity price to the receiving cost centre

Allocations Cycle


1 Fixed Assets

2 Current Assets

3 Net worth

4 Other Liabilities

5 Revenue

6 Material Cons.

7 Primary Cost

8 Other Expenses

9 Secondary Cost

Service Cost Centre

Production Cost Centre

A B

A – Primary Cost ElementB – Secondary Cost Element, usually posted using one of the allocations cycle at the month-end.

CE 759010 CE 900200

Primary & Secondary CE


• Activity types classify the activities produced in the cost centers within a controlling area and are measured in units of time or quantity

• Typical examples of activity types for cost centers are machine hours, administrator hours, CPU minutes or units produced

Activity Types (KL01/03)


1 Fixed Assets

2 Current Assets

3 Net worth

4 Other Liabilities

5 Revenue

6 Material Cons.

7 Primary Cost

8 Other Expenses

9 Secondary Cost

Service Cost Centre

Production Cost Centre

A B

A – Primary Cost ElementB – Secondary Cost ElementC – Activity – Machine Hour

CE 759010 CE 900200

C

Machine

You can assign one activity type, multiple activity types,

or no activity types to a cost center.

Activity Types


Statistical key figures represent activities or statistics in a cost center, profit center, or order. They are measured in units of time or quantity.

You create statistical key figures with

maintenance transactions and post both

plan and actual values to cost centers and

orders.

Statistical key figures may be used for

distribution, assessment, or creation of

other statistical key figures.

Unlike activity types, statistical key figures

cannot be used to allocate internal activity.

An example of a statistical key figure is the number of employees in a cost center. Once you have

created the statistical key figure EMPLOY, you can enter the plan and actual values on each cost

center. These values can then be used for assessing cafeteria costs on all the other cost centers.

Statistical Key Figures (KK01/03)


KSH1 - Cost Centre GroupKAH1 - Cost Element GroupKLH1 - Activity GroupKBH1 - SKF Group

Groups


Content

Decision Making


• MNC Scenario


• CCA, CEA

1 2

SAP in Action




• Reports




• Components

3


SAP in Action

• SAP GUI• SAP Quick Navigation




• Reports


During the session, we briefly touched on New GL/ ML. You can know more from below link:

Read more from my article in WIRC Bulletin Link10-10-2020

https://www.linkedin.com/posts/desaijayeshp_sap-icai-cma-activity-6701525146886299649-IOwH

Key Data

• Company Code 1000• Best Run, Frankfurt, DE, EUR, INT, K4

• CO Area 1000• CO Europe, EUR, INT, K4• 45 company codes assigned


Thanks!

www.jayeshdesai.com

[email protected]

SAP4Me

DesaijayeshP


Link to Recorded SAP

Webinar

10-10-2020
http://www.jayeshdesai.com/mailto:[email protected]://www.linkedin.com/in/desaijayeshp/https://www.facebook.com/groups/SAP4Me/https://www.jayeshdesai.com/msme

Controlling Overview SAP - icmai-wirc.in · domain knowledge in Controlling by learning SAP FICO....

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