WIRC SAP Series Part II - Oct 10 - Controlling Overview PDF

ICAI-WIRC
Controlling
Overview
SAP
for Webinar Oct 10, 2020
Finance
Transformation
CMA Jayesh P Desai
www.jayeshdesai.com
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.
10-10-2020 www.jayeshdesai.com 2
Profile
Jayesh P Desai & Co.

Cost Accountants
www.jayeshdesai.com
• Practicing Professional (Since 2017)
• Business Valuation
• Data Analytics – Product Costing, Pricing & Profitability
Analysis
• SAP Consulting & Training
• Key Accomplishments
CMA Jayesh P Desai • Developed Financial Model for Start-up in areas such as
Practicing Cost Accountant Blockchain, AI, Data Analytics, Gaming, Online Education, E-
FCMA, CFA, CISA commerce, Electric Vehicle
CIA, PMP, UCLA (PGPX)
Registered Valuer (IBBI)
• 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
Jayesh P Desai & Co. • SAP trainer for Institute of Cost Accountants of India.
www.jayeshdesai.com Conducted 2 sessions of 60 hours each with 150 participants
Jayesh@jayeshdesai.com • Conducted several Webinars on SAP for Finance Professionals
for over 200 participants
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
CMA Jayesh P Desai
• Key Accomplishments
• Worked with General Mills, IBM, Colgate, Bayer, Shaw
FCMA, CFA, CISA Wallace, General Motors
CIA, PMP, UCLA (PGPX)
Registered Valuer (IBBI)
• 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
Jayesh P Desai & Co. environment
www.jayeshdesai.com • Specialised in SAP Controlling (CCA, PC, COPA, PCA)
Jayesh@jayeshdesai.com • Lead & Delivered global SAP & Data Analytics projects.
Managed Global Teams in India, US, UK
• Lead Innovation and Data Analytics initiatives across various
DesaijayeshP functions and countries
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
Record to Report (R2R)
Business Processes FICO Integration
1
P2P AP AR
2
Management 3
General
CO Reporting 4
O2C Ledger
COPA – PCA 5
Legal 6
AA
P2Pro Reporting
P&L, BS
Content in the Series
Overview of SAP SAP Controlling Overview
• Design of SAP • CO Enterprise Structure
10th October
9th October
• Enterprise Structure • Controlling Master Data

• Modules & Business • Cost Control
Processes • SAP Live, Q & A
• SAP Live, Q & A
PC & CO-PA
• Product Costing
11th October
• Material Ledger
• Profitability
Analysis
• SAP Live Q & A
Content
1 Controlling Concepts 2 Decision Making
• Controlling Design • Enterprise Structure
• Why Controlling? • MNC Scenario
• Components • Your Organisation
• CCA, CEA
3 SAP in Action
• Controlling Area
• Standard Hierarchy
• Transaction Data
• Reports
Controlling as part of Overall Design
Business Processes FI Module CO Module
AP AR
P2P
General Management
O2C CO Reporting
Ledger
COPA – PCA
P2Pro
Legal CC Reports
AA Reporting Variance Reports
Other P&L, BS Income Statement
SBU/ PC Reports
Segment 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)
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
Why FI
• Provides the basis for associating the cost of sales with the module
revenue earned cannot
serve
these
• The main task of controlling is planning. Variances are purposes?
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.
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
Content
1 Controlling Concepts 2
Decision Making
• CCA, CEA
3 SAP in Action
• Reports
Understand SAP to take better Decisions
• Enterprise Structure
• Organisation Structure
• Modules/ Sub-modules Implemented
• Master Data
• Business Processes
• Transactions
• Reports
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.
CO Enterprise Structure
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
Enterprise Structure
Understanding your Organisation
Holding
• Organisation is divided into logical Company
responsible units/ departments for better Group
planning & control of costs COA
• Each of these departments can be created
as a Cost Centre COA FY Var 1 COA
• Cost center structure can reflect the INT EUR
structure of your organization. It generally
remains constant over long periods. CC 3/
• Number of Cost Centres depends on the CC 2 CC 1 CC 4 CC 5
CO Area
controlling needs of organisation
Plants Mfg
Departments S&M
Zones
are responsible Mgt.
for planning & Proc
Finance
control of cost IT Adm
HR
Cost Centre Accounting
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 Service
Cost absorbed Cost Centres Cost Centres
in product
Production Management
Services CO-PA Finance
Maintenance IT, HR, Admin, etc
Cost Centre Master (KS01/03)
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
Standard Hierarchy (OKENN)
• 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
Cost Element Master
• 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 • Cost Elements are classified either as
accounts. Primary or Secondary depending on its
origin
Primary & Secondary CE
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
Allocations Cycle
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
Primary & Secondary CE
1 Fixed Assets
2 Current Assets
3 Net worth A – Primary Cost Element

B – Secondary Cost Element, usually posted using one of
4 Other Liabilities
the allocations cycle at the month-end.
5 Revenue
6 Material Cons.
A B
7 Primary Cost Service Cost Production
CE 759010 Centre CE 900200 Cost Centre
8 Other Expenses
9 Secondary Cost
Activity Types (KL01/03)
• 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
1 Fixed Assets
2 Current Assets
3 Net worth A – Primary Cost Element

B – Secondary Cost Element
4 Other Liabilities
C – Activity – Machine Hour
5 Revenue
6 Material Cons.
A B C
7 Primary Cost Service Cost Production
CE 759010 Centre CE 900200 Cost Centre Machine
8 Other Expenses
9 Secondary Cost You can assign one activity type, multiple activity types,
or no activity types to a cost center.
Statistical Key Figures (KK01/03)
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.
Groups
KSH1 - Cost Centre Group
KAH1 - Cost Element Group
KLH1 - Activity Group
KBH1 - SKF Group
Content
1 Controlling Concepts 2
Decision Making
• CCA, CEA
3
SAP in Action
• Reports
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 Link
Key Data
• Company Code 1000

• Best Run, Frankfurt, DE, EUR, INT, K4
• CO Area 1000
• CO Europe, EUR, INT, K4
• 45 company codes assigned
www.jayeshdesai.com
Jayesh@jayeshdesai.com
DesaijayeshP
Thanks!
Link to
Recorded SAP
SAP4Me
Webinar

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ICAI-WIRC

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

Jayesh P Desai & Co.

• HANA has transformed ERP space with in-memory computing,

• Enterprise Structure, Configuration, Modules, Business Processes,

Business Processes FICO Integration

• Enterprise Structure • Controlling Master Data

• Controlling provides with information for management

• Income statements to analyse profitability by Product,

Cost Element Accounting (CO-OM-CEL)

Profitability Analysis (CO-PA)

Understanding your business strategy, management decision making

- CC is created with reference to a time period

Secondary Cost Elements (KA06)

3 Net worth A – Primary Cost Element

3 Net worth A – Primary Cost Element

You create statistical key figures with

Statistical key figures may be used for

Unlike activity types, statistical key figures

• Company Code 1000

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