SAP Controlling (CO) is another important SAP module offered to an organization. It supports coordination, monitoring, and optimization of all the processes in an organization. SAP CO involves recording both the consumption of production factors and the services provided by an organization.
SAP CO includes managing and configuring master data that covers cost and profit centers, internal orders, and other cost elements and functional areas.
The main purpose of SAP controlling module is planning. It enables you to determine variances by comparing actual data with plan data and thus enables you to control business flows in your organization.
SAP CO Integration with Financial Accounting
Both SAP CO and SAP FI modules are independent components in a SAP system. The data flow between these components takes place on a regular basis.
Data flows relevant to cost flows to Controlling from Financial Accounting. At the same time, the system assigns the costs and revenues to different CO account assignment objects, such as cost centers, business processes, projects or orders.
The key submodules of SAP controlling system are listed below −
- Cost Element Accounting − Cost and Revenue Element Accounting provides you with an overview of the costs and revenues that occur in an organization. Most of the values are moved automatically from Financial Accounting to Controlling. Cost and Revenue Element Accounting only calculates costs which either do not have another expense or only one expense in Financial Accounting.
- Cost Center Accounting − Cost Center Accounting is used for controlling purposes within your organization.
- Activity-Based-Accounting − It is used to analyze cross-departmental business processes.
- Internal Orders − Internal orders in SAP CO are used to collect and control according to the job that incurred them. You can assign budgets for these jobs that is system monitored to ensure that they are not exceeded from the set budgets.
- Product Cost Controlling − It calculates the cost for manufacture a product, or to provide a service. It allows you to calculate the price at which you can profitably marketed it.
- Profitability Analysis − It is used to analyze the profit or loss of an organization by individual market segments. Profitability Analysis provides a basis for decisionmaking. For example, it is used to determine price, conditioning, customer, distribution channel, and market segment.
- Profit Center Accounting − It is used to evaluate profit or loss of individual, independent areas within an organization. These areas are responsible for their costs and revenues.
A Cost Center is defined as a component in an organization that adds to the cost and indirectly adds to the profit of the organization. Examples include Marketing and Customer Service.
A company can classify a business unit in three ways −
- Profit center,
- Cost center, or
- Investment center.
The simple and straightforward division in an organization can be classified as cost center because cost is easy to measure.
Cost Center Hierarchy
The hierarchy of a cost center looks as follows −
To create a cost center, use the T-code KS01. It will open the following window.
Enter the Controlling Area in the next screen and click the tick mark.
In the next window, enter the following details and click the Master Data.- New cost center number.
- Validity dates of the new cost center.
You can also create a new cost center with a reference.
Once you click Master Data, a new window will open. Enter the following details in the basic data tab −- Enter the name of the new cost center.
- Enter a description for the new cost center.
- Enter the User and Person Responsible.
- Cost Center Category.
- Hierarchy area.
- Company Code.
- Profit Center.
Next, click the Control tab and select the correct indicator.
At the end, click the save icon at the top.
SAP CO internal order monitors the parts of the costs and in a few cases, it also monitors the revenues of the organization.
You can create an internal order to monitor the costs of a time-restricted job or the costs for the production of activities. Internal orders can also be used for the long-term monitoring of costs.
Investment cost related to fixed assets are monitored using Investment orders.
Period-related accrual calculation between expenses in FI and the costing-based costs debited in Cost Accounting are monitored using Accrual orders.
Costs and revenues incurred for activities for external partners or for internal activities that do not form a part of the core business for your organization are monitored using order with revenues.
How to create an Internal Order in SAP CO?
Use the T-code KO04 or go to Accounting → Controlling → Internal Orders → Master Data → Order Manager.
In the next screen, input the controlling area as shown below −
Click the Create button at the top to create a new internal order and enter the order type.
In the next window, enter the following details −- Company Code
- Business area
- Object Class of the Order
- Profit Center
- Cost Center responsible for the internal order
After entering the above details, click the Save button at the top to create the internal order.
An internal order is used as an interim collector of costs and is used for planning, monitoring, and controlling the processes. When the job has been completed, you settle the costs to one or more receivers like cost centers, fixed assets, etc.
How to perform settlement of IO to Cost Centers?
Use the T-code − KO02 or Go to Accounting → Controlling → Internal Orders → Master Data → Special Functions → Change.
A new window will open. Enter the Order number for which settlement is to be done.
Click the Settlement rule button at the top −
Enter the following details −- In Category column, enter ‘CTR’ for the cost center.
- In Settlement receiver Column, enter the Cost Center in which the Order is to be settled.
- Enter the percentage amount which is to be settled.
- In Settlement type, enter ‘PER’ for periodic settlement.
Click the save button at the top to save the settlement rule and come back to the main screen.Enter the T-code KO88 and input the following details −
- Order for which the settlement rule is maintained.
- Period for settlement.
- Fiscal Year.
- Uncheck the Test Run.
- Click on the Execute Button to run the settlement.
A new window will open with a Settlement display message. Click the Continue button to complete the processing.SAP CO Profit Center is used for managing internal controlling. When you divide your company into profit centers, it allows you to delegate responsibility to decentralized units and treat them as separate companies in a company. It also allows you to calculate key figures in cost accounting like ROI, Cash flow, etc.
Profit Center is a part of Enterprise Controlling module and is integrated with a new General Ledger Accounting.
Key Features of SAP CO Profit Center
Profit Center Accounting is used to determine profit for internal areas of responsibility. It lets you determine profits and losses using either period accounting or the cost-of-sales approach.
It allows you to analyze fixed assets by profit center, thus using them as investment centers. It allows to expand profit centers to investment centers.
Why Do We Create Profit Center?
The main aim of creating a Profit Center in SAP CO is to analyze the cost of a product line or a business unit.
You can also generate P&L accounts according to a Profit Center and also generate balance sheets, however a Profit Center should only be used for internal reporting purpose.
The key components of a profit center include – name of the profit center, the controlling area under which it is assigned, time period, person responsible for the profit center, standard hierarchy, etc.
How to Create a Profit Center?
Use the T-code KE51 or go to Accounting → Controlling → Profit Center Accounting → Master Data → Profit Center → Individual Processing → Create.
In the next screen, enter the controlling area in which the profit center is to be created and click the tick mark.
In the next screen, enter the unique profit center ID and click Master Data.
A new window will open where you need to input the following details −
- Profit center name and a short description of the profit center.
- Person responsible for the profit center.
- Profit center group for which the profit center belongs to.
Click the Save icon at the top to create the profit center in inactive mode. To activate the profit center, click the icon as shown in the following screenshot.
How to Create a Profit Center Group?
Use the T-code KCH1 or go to Accounting → Controlling → Profit Center Accounting → Master Data → Profit Center Group → Create.
Enter the Controlling Area in which the Profit Center is to be created.
Enter the Unique Profit Center Group Id as shown below and press Enter.
Enter the short description for the profit center group and click the Save icon at the top.
To post to a Profit Center, use the T-code FB50. It will take you to the following window.
Enter the Document date and the Company code. Thereafter, provide input data in the fields as shown in the following screenshot.
After entering the line items, select the debit line item and click the button Detail Item button. Refer the following screenshot.
A new window will open. Enter the Profit Center and click the Save icon at the top.SAP CO Profit Center standard hierarchy, known as tree structure, that contains all the profit centers in a controlling area.
If you want to create/change the structure of a standard hierarchy, it can be done at two places −
- In the Profit Center Accounting
- In Customizing for Profit Center Accounting
How to Create Profit Center Standard Hierarchy?
Use the T-code KCH1 or go to Accounting → Controlling → Profit Center Accounting → Master Data → Standard Hierarchy → Create.
In the next screen, enter the Controlling Area for which you want to create a Standard hierarchy.
Enter the Profit Center Group and click Hierarchy at the top and enter the sub-nodes of the Profit Center Standard Hierarchy.
Click the Lower level button to create a hierarchy. Click the Profit center to assign a Profit Center group.
Click the Save button at the top and you will get a confirmation message.
Go to SPRO → SAP Reference IMG → Controlling → Profit Center Accounting → Assignments of Account Assignment objects to Profit Center → Assign Cost Centers → Execute.
Enter the Cost center to be assigned to the Profit center.
In the next screen, enter the profit center to which the cost center is assigned and click the Save icon at the top.
Go to SPRO → SAP Reference IMG → Controlling → Profit Center Accounting → Assignments of Account Assignment objects to Profit Center → Material → Assign Material Masters → Execute.
A new window will open. Enter the material Id for which the profit center is to be assigned and press Enter.
Select the view of the material master.
In the next window, enter the following details −
In the next window, enter the Profit Center and click the Save icon at the top.Important Tables in SAP CO AUSP Characteristic Values MANDT / OBJEK / ATINN / ATZHL / MAFID / KLART / ADZHL CO-KBAS Overhead Cost Controlling A132 Price per Cost Center MANDT / KAPPL / KSCHL / KOKRS / VERSN / RESRC / KOSTL / DATBI A136 Price per Controlling Area MANDT / KAPPL / KSCHL / KOKRS / VERSN / RESRC / DATBI A137 Price per Country / Region MANDT / KAPPL / KSCHL / KOKRS / VERSN / RESRC / LAND1 / REGIO / DATBI COSC CO Objects: Assignment of Original Costing Sheets MANDT / OBJNR / SCTYP / VERSN / GJAHR CSSK Cost Center / Cost Element MANDT / VERSN / KOKRS / GJAHR / KOSTL / KSTAR CSSL Cost Center / Activity Type MANDT / KOKRS / KOSTL / LSTAR / GJAHR KAPS CO Period Locks MANDT / KOKRS / GJAHR / VERSN / VRGNG / PERBL COKBASCORE Overhead Cost Controlling: General Services CSKA Cost Elements (Data Dependent on Chart of Accounts) MANDT / KTOPL / KSTAR CSKB Cost Elements (Data Dependent on Controlling Area) MANDT / KOKRS / KSTAR / DATBI CSKS Cost Center Master Data MANDT / KOKRS / KOSTL / DATBI CSLA Activity Master MANDT / KOKRS / LSTAR / DATBI CO-OM (KACC) Overhead Cost Controlling COBK CO Object: Document Header MANDT / KOKRS / BELNR COEJ CO Object: Line Items (by Fiscal Year) MANDT / KOKRS / BELNR / BUZEI / PERBL COEJL CO Object: Line Items for Activity Types (by Fiscal Yr) MANDT / KOKRS / BELNR / BUZEI / PERBL COEJR CO Object: Line Items for SKF (by Fiscal Year) MANDT / KOKRS / BELNR / BUZEI / PERBL COEJT CO Object: Line Items for Prices (by Fiscal Year) MANDT / KOKRS / BELNR / BUZEI / PERBL COEP CO Object: Line Items (by Period) MANDT / KOKRS / BELNR / BUZEI COEPL CO Object: Line Items for Activity Types (by Period) MANDT / KOKRS / BELNR / BUZEI COEPR CO Object: Line Items for SKF (by Period) MANDT / KOKRS / BELNR / BUZEI COEPT CO Object: Line Items for Prices (by Period) MANDT / KOKRS / BELNR / BUZEI COKA CO Object: Control Data for Cost Elements MANDT / OBJNR / GJAHR / KSTAR / HRKFT COKL CO Object: Control Data for Activity Types MANDT / LEDNR / OBJNR / GJAHR / VERSN COKP CO Object: Control Data for Primary Planning MANDT / LEDNR / OBJNR / GJAHR / WRTTP / VERSN / KSTAR / HRKFT / VRGNG / VBUND / PARGB / BEKNZ / TWAER COKR CO Object: Control Data for Statistical Key Figures MANDT / LEDNR / OBJNR / GJAHR / WRTTP / VERSN / STAGR / HRKFT / VRGNG COKS CO Object: Control Data for Secondary Planning MANDT / LEDNR / OBJNR / GJAHR / WRTTP / VERSN / KSTAR / HRKFT / VRGNG / PAROB / USPOB / BEKNZ / TWAER CO-OM-CEL (KKAL) Cost Element Accounting (Reconciliation Ledger) COFI01 Object Table for Reconciliation Ledger COFIT MANDT / OBJNR COFI02 Transaction Dependent Fields for Reconciliation Ledger MANDT / OBJNR COFIP Single Plan Items for Reconciliation Ledger RCLNT / GL_SIRID COFIS Actual Line Items for Reconciliation Ledger RCLNT / GL_SIRID CO-OM-CCA Cost Center Accounting (Cost Accounting Planning) A138 Price per Company Code MANDT / KAPPL / KSCHL / KOKRS / VERSN / RESRC / BUKRS / GSBER / DATBI A139 Price per Profit Center MANDT / KAPPL / KSCHL / KOKRS / VERSN / RESRC / PRCTR / DATBI CO-OMOPA(KABR) Overhead Orders: Application Development R/3 Cost Accounting Settlement AUAA Settlement Document: Receiver Segment MANDT / BELNR / LFDNR AUAB Settlement Document: Distribution Rules MANDT / BELNR / BUREG / LFDNR AUAI Settlement Rules per Depreciation Area MANDT / BELNR / LFDNR / AFABE AUAK Document Header for Settlement MANDT / BELNR AUAO Document Segment: CO Objects to be Settled MANDT / BELNR / LFDNR AUAV Document Segment: Transactions MANDT / BELNR / LFDNR COBRA Settlement Rule for Order Settlement MANDT / OBJNR COBRB Distribution Rules Settlement Rule Order Settlement MANDT / OBJNR / BUREG / LFDNR CO-OM-OPA (KAUF) Overhead Orders: Cost Accounting Orders AUFK Order Master Data MANDT / AUFNR AUFLAY0 Entity Table: Order Layouts MANDT / LAYOUT EC-PCA (KE1) Profit Center Accounting CEPC Profit Center Master Data Table MANDT / PRCTR / DATBI / KOKRS CEPCT Texts for Profit Center Master Data MANDT / SPRAS / PRCTR / DATBI / KOKRS CEPC_BUKRS Assignment of Profit Center to a Company Code MANDT / KOKRS / PRCTR / BUKRS GLPCA EC-PCA: Actual Line Items RCLNT / GL_SIRID GLPCC EC-PCA: Transaction Attributes MANDT / OBJNR GLPCO EC-PCA: Object Table for Account Assignment Element MANDT / OBJNR GLPCP EC-PCA: Plan Line Items RCLNT / GL_SIRID EC-PCA BS (KE1C) PCA Basic Settings: Customizing for Profit Center Accounting A141 Dependent on Material and Receiver Profit Center MANDT / KAPPL / KSCHL / KOKRS / WERKS / MATNR / PPRCTR / DATBI A142 Dependent on Material MANDT / KAPPL / KSCHL / WERKS / MATNR / DATBI A143 Dependent on Material Group MANDT / KAPPL / KSCHL / WERKS / MATKL / DATBI SAP CO Product Costing module is used to find the value of internal cost of products. It is also used for profitability and management accounting for production.
While configuring Product Costing, it involves two areas for setting −
- Product Cost Planning
- Cost Object Controlling
The basics of Product Costing is Cost Center Planning. The goal of cost center planning is to plan total dollars and quantities in each Cost Center in a Plant.
Product Costing – Overview
Use the T-code KP06 and enter the controlling area.
Cost Center dollars are planned by activity Type and cost element. You can also enter the variable and fixed dollar amounts.
You can plan all costs in production cost centers where they will end up through allocations, or you can plan costs where they are incurred and use plan assessments and distributions to allocate.
To define cost center activity quantities, use the T-code KP26. You can also manually enter an activity rate based on last year’s actual values. Note that if you enter an activity rate instead of using the system to calculate a rate, you lose the opportunity to review actual vs. plan and see dollar and unit variances. It is a best practice to plan activity quantities based on practical installed capacity which accounts for downtime. If you plan at full capacity, plan activity rates will be underestimated.Example
Let’s say we are using Product Costing to value our inventory in a cookie baking shop. This will help us value our cookies (finished good), frosting (semi-finished good), and baking items like eggs, milk, and sugar (raw materials). In order to calculate costs, we need to come up with rates for each activity, such as mixing baking items, oven baking, and cookie cooling. Since a rate is a dollar per unit, we can either come up with a rate based on previous year’s actual rates, or enter our total costs and total units.
SAP CO – Profitability Analysis
SAP CO Profitability Analysis is used to analyze the market segments classified as products, customers, sales area, business area, etc.
SAP CO Profitability Analysis (CO-PA) is used for the evaluation of Market segments which is classified according to products, customers, and orders −
- or any combination of these.
- or Strategic business units such as sales organizations.
- or business areas, with reference to company’s profit.
- or contribution margin.
There are two types of Profitability Analysis are supported −
- Costing-based Profitability Analysis − It is used to group the costs and revenues as per the value fields. It is used to ensure that you access at all times to a complete, short-term profitability report.
- Account-based Profitability Analysis − It is used to provide you with a profitability report that is permanently reconciled with financial accounting. It is mainly used for getting information related to sales, marketing, product management and corporate planning departments to support internal accounting and decision-making.
Key Components in SAP CO-PA
The key components in SAP CO-PA are as follows −
- Actual Posting − It allows you to transfer sales orders and billing documents from the Sales and Distribution application component to CO-PA in real time. You can also transfer costs from cost centers, orders and projects, as well as costs and revenues from direct postings or settle costs from CO to profitability segment.
- Information System − It allows you to analyze existing data from a profitability standpoint using drilldown function in the reporting tool. It allows you to navigate through a multidimensional data cube using different functions like drilldown or switching hierarchies. The system displays data in either value fields or accounts, depending on the currently active type of Profitability Analysis and the type to which the report structure is assigned.
- Planning − This allows you to create a sales and profit plan. Whereas both types of Profitability Analysis can receive actual data in parallel, there is no common source of planning data. Consequently, you always plan either in accounts (account-based CO-PA) or in value fields (costing-based CO-PA). The manual planning function allows you to define planning screens for your organization. With this you can display reference data in planning, calculate formulas, create forecasts, and more. You can perform planning at any level of detail.
Example
You can plan at a higher level, and have this data distributed top-down automatically. In automatic planning, you can copy and revaluate actual or planning data for a large number of profitability segments at once.