LESSON 10 Controlling in SAP

Controlling in SAP

Mark Van Hoe

Table of contents

1.Accounting in SAP, the modules.

2.The different results

3.Product costing

4.Reconciliation

5.Additional information

2Controlling in SAP at Ontex

1. Sap & Accounting

• The SAP system mainly consists of three parts:– Accounting– Logistics– Human Resources

• We focus in this paper on the accounting world. We consider again three major parts:– Financial Accounting (FI)– Controlling (CO)– Enterprise Controlling (EC)


Finance (FI)

• In FI we post on balance sheet accounts and on profit and loss accounts.

• The organisational entity in which we work is the juridical company, called a “company code”.

• This module delivers legal, local information.• We distinguish 4 major sub-modules:

– General ledger (GL)– Accounts receivable (AR)– Accounts payable (AP)– Asset accounting (AA)


Controlling (CO)• The information that comes out of FI cannot serve

as management information, the reporting level is too high. In CO we will focus on management reporting.– Each P&L posting in FI can come into CO. An account in

FI will be a primary cost element in CO. In CO there is additional information needed on each cost element in order to gather management information. That additional information is a “cost object”. We post the cost element on the cost object.

– In CO we can further allocate between cost objects. This is done with secondary cost elements which are invisible in FI.


The different cost objects in CO

• We distinguish following commonly used cost objects:– Cost centres (CC) in cost centre accounting (CCA)– Internal orders (IO) in internal order accounting (IO)– Production orders (PO) in cost object controlling (COC)– Profitability segments (PSG) in profitability analysis

(COPA)

• Dependent of the nature of the cost/profit and the responsibility of the cost/profit the correct cost object will be triggered.


Cost centres

• Posting on a cost centre is done in order to:– Collect costs for further allocations within CO– Collecting costs on a responsibility area

• Cost centres gather primarily overhead costs– As direct production costs are post on a production order

and direct sales costs are post on a profitability segment, just the remaining overhead is gathered on cost centres.

– Also some direct costs are first collected on cost centres and then allocated to the PO or PSG.

• A cost centre is a stable organisational entity. It has no life cycle but remains in the system.


Cost centres

• Example of postings on a cost centre:– Report plan – actual – variance on cost centre

• Machine in Mayen 103101303 in feb

– Report actual plan in two currencies• Machine in Tsjechie 107001303 in feb• Easy download into excel

– A lot of other reports on CC possible.


Internal orders• An internal order is a cost object with a life cycle:

– it is created, released, post, completed and deleted.

• An internal order is a temporary cost collector:– Mainly used to follow up projects, marketing costs,

investments, personnel specific costs, …

• An internal order can be real or statistical– A real internal order gathers the cost elements. There is

no other cost object. At period end the costs are settled (allocated) to another cost object (cost centre or profitability segment).

– A statistical order is detail of a cost centre: you post on the order AND on the linked cost centre. The real posting is on the cost centre, but the orders give statistical details.


Internal orders

• Reports on internal orders– Quite similar to the cost centre reports

• Actual plan variance on group 0410 • Budget actual commitments on 0350invest


The production order as cost object• A production order starts in logistics (PP) but is also

an important cost object in CO.– It gathers the costs of production: material consumption,

labour hours, production overhead.– It has also a revenue: what is produced will be a credit

posting on the order (the produced quantity at standard price).

– As the debit side is actual and the credit side is standard, we will see the profit and loss of the PO.

– One PO will not often be analysed, we will summarise the PO’s on different characteristics and report on these (material, machine, production line, product group, plant, company, …)


The production order as cost object

• Typical report on a production order: – Target – actual comparison on an order

• Order 1113265 in P350


The profitability segment• In the module COPA we find the fourth cost object,

a profitability segment (PSG).– A PSG is a combination of characteristic values.– A characteristic is something ON which we report: a

customer, a country, a brand, a product(group), …– A characteristic value is the exact value of a

characteristic. • The values for country: Belgium, France, US, UK, Germany, …• The values for a currency: EUR, GBP, USD, …

– The combination of these values form a PSG:• PSG 1: Belgium, EUR, February, Retail, Baby products.• PSG 2: France, EUR, March, Retail, Sterile products.• PSG 3: customer Carrefour, Belgium.

– There are millions of possible PSG’s.13Controlling in SAP at Ontex

The profitability segment

• Typical reports in COPA :– COPA-700-06: Tsjechie P&L in feb– COPA-0410-11: 12 months– Heavy in SAP, better in BW -> same figures !


The complete CO layer

OverheadCost

Cost ObjectControlling

ProfitabilityAnalysis

Productionorder

Profitabilitysegment

CostCenters

InternalOrders


Analysis versus reporting

• In FI there is no management information, but in CO there could be an overload of reports.– We can report on CC, IO, PO and PSG. The sum of all

these reports should give the same result as in FI (reconciliation).

– However for reporting purposes we need another tool that gathers again the CO information into 1 cost object. We can then reports on that unique cost object and do the analysis on all the cost objects of CO.

– The reporting layer is called the third layer and the cost object is there a profit centre.


Three layers in accounting

Overhead cost controlling

Product cost controlling

Profitability Analysis

Profit center Accounting

Cost Center

Overhead order

Process order

ProfitabilitySegment

FI


The three layers• The three layers must generate the same result:

– FI has the total on company level– CO has split the P&L postings on different cost objects

and has allocated the postings between cost objects. Detailed analysis and variance calculation is possible.

– PCA, profit centre accounting, aggregates again in order to be able to report the different results.

• That means that each cost object must have a link to one profit centre.– As this link is ascertained the posting sis PCA come in

• Automatically• On line• In parallel


2. The different results in CO/PCA

• In FI we have a complete integrated result on company level. In PCA we want to report a split of results, each with its responsibility. We distinguish:– Sales result– Production result– Purchase result– Non operational result– Group result– Other operational result– Revaluation result– Result of idle capacity


The sales result• The sales result in CO is visible in COPA. There

you can report on each PSG: – on customer, product, product group, country, sales

organization, …– The postings are coming from FI (revenue, cogs) or are

internally post in CO.• The sales overhead was first collected on cost centres and then

allocated (assessed) to PSG’s.• The customer specific costs are first collected on internal orders

and then allocated (settled) to PSG’s.

– The sales result is analysed in COPA.

• The sales result is reported on the sales profit centre


The production result

• The production result is the setoff of production costs and production revenue. – The production revenue is the quantity that has been

produced, valorised at it’s standard cost• as the materials are being put in stock at standard price • This is the credit side of all production orders.

– The production costs will be visible at the debit side of all orders.

• Material consumption via FI• Labour costs via the routing: labour allocated from the machine

CC to the PO (credit CC, debit PO via secondary cost element)• Overhead via a costing sheet: credit the PRG cc , debit the PO

via secondary cost element.


The production result– If we summarise the order in an order hierarchy we see

the total.– Some production costs will remain on cost centre as they

cannot all be allocated to the PO’s • For instance subcontracting

• All the PO’s and some production CC will be linked to the production profit centre. The production result will be fully visible there. – In CO it will be the combination of production cc and the

PO’s that generates the production result.


The purchase result

• The complete flow in CO, from production to sales is at standard price. – The actual price is split at purchase. The purchase is

post at actual but the material is put is stock at standard. – The difference is the purchase price variance (PPV).– This variance is post on cost centres that are linked to

the purchase result profit centre. Also some other cost centres are linked to it (purchasing costs, transport, customs, discounts, …)


Relevancy of costs• Why the split between commercial, production and

purchase result?– This is primarily a matter of relevancy of costs. A

purchase price variance may not influence the sales performance, nor the production result.

– The production result may only be influenced by efficiency, because there is no price power.

– The production efficiency , on the other hand , is not at all relevant for sales performance.

– If we would integrate all results in one result we would see the same as in FI: no management information, no relevant information. We would only see data and figures, without being able to take correct decisions.


Further results

• There are other costs that are not relevant for sales, production or purchase.– So we leave them out of these results and make an own

result for each of them.– Non operational result: post on specific cost centres that

are linked with the non operational profit centre.– Group result: again specific group relevant costs are

collected on specific cost centres that are linked with the group result profit centre.

– Other operational result: specific operational result but not production, sales or purchase relevant: specific cost centres linked to one profit centre.


Further results– Revaluation result: when the standard price of a material

is changed, the stock is re-valued. The P&L effect comes on specific cost centres linked to one profit centre. In that way it doesn’t influence the other results.

– Result of idle capacity: The cost of overcapacity is left outside the production result.

• When we invest 100 euro in a machine to make 1000 ton, but we make only 200 ton, then only 20 euro may be absorbed in the standard price. The remaining 80 euro is not the production responsibility and is reported separately as the result of over-investment.


Reporting the results in PCA

• Sales result• 0500, account group 590000

• Production result• PCP500, account group 500000

• Others– Total company result in 0500

• To be reconciled with FI


3. Product costing

• Product costing is a separate module in CO where the standard prices and other cost prices are calculated: – PPC1: standard cost estimate– GPC1: group standard cost estimate– ZFIF: FIFO based cost for balance valuation– Other local tax based cost estimates

• The module is not part of the CO closing and reporting flow but stands alone.

• The Ontex way of working in product costing is conceptually quite heavy.


Product costing• The key for standard price calculation is the procurement

type from the MRP view:– E: EIGEN, meaning the plant produces the material.– F: FREMD, meaning the plant purchases the material or

transfers it from another plant.• For EIGEN materials the system will explode BOM and

ROUTING to obtain the standard production cost.• For FREMD materials the material will take the current

moving average (which is in fact the purchase price) as the standard.

• The standard PPC1 is calculated on material level per plant.


Product costing: PPC1• The sources of costs in the standard for

procurement E are:– BOM: the material components

• Raw mate & packaging

– The routing: labour• The activities pack, oper, qual

– The costing sheet for:• Energy• Maintenance• Overhead• Depreciation

• For procurement F, it is only a figure without structure.


Product costing: PPC1

• Example in the system:– In Tsjechie

• Mat 23009 in P700


Product costing: the GPC1

• In profitability analysis the COGS is always a standard price. – But the PPC1 gives for externally procured materials

no cost roll up of BOM and routing. Moreover it includes a transfer margin.

• That is why a second standard price is introduced: the GPC1. – It takes the PPC1 of the producing plant and

compares with the PPC1 of its own plant. The difference is put in the cost component “interco profit”.

• The PPC1 is in total in a plant always equal to the GPC1 !!!


Product costing: the GPC1• Example: material 153403 produced in P401, purchased in

P001


6. Reconciliation FI – CO - PCA

• The FI result in statement ONGR, chart off accounts ONTX should equal the total PCA result.

• The FI result gives an overview on cost nature base• The PCA result gives the same result but on a

responsibility base.

• Example Spain in feb


7. Further documentation

• The detailed work instructions for each transaction can be found on the intranet (document browser)

• http://homer:8000/sapdoc/

• Questions via helpdesk tickets– Always mention the company code and / or plant

you are working in, as well as the transaction or the report concerned.


LESSON 10 Controlling in SAP

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