Controlling in SAP

Table of contents
1.Accounting in SAP, the modules.
2.The different results
3.Product costing
4.Reconciliation
5.Additional information

Controlling 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)

Controlling in SAP at Ontex

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)
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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.
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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.
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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.
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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.

Controlling in SAP at Ontex

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.
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Internal orders
Reports on internal orders
Quite similar to the cost centre reports
Actual plan variance on group 0410
Budget actual commitments on 0350invest

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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 POs on different characteristics and report on these
(material, machine, production line, product group, plant,
company, )
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The production order as cost object

Typical report on a production order:
Target actual comparison on an order
Order 1113265 in P350

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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 PSGs.

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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 !

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The complete CO layer

Overhead
Cost

Cost Object
Controlling

Profitability
Analysis

Production
order

Profitability
segment

Cost
Centers

Internal
Orders

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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.
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Three layers in accounting

Overhead cost controlling
Cost Center
Overhead
order

FI

Product cost controlling

Process
order

Profit center
Accounting

Profitability Analysis
Profitability
Segment
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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
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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
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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 PSGs.
The customer specific costs are first collected on internal orders
and then allocated (settled) to PSGs.

The sales result is analysed in COPA.

The sales result is reported on the sales profit

centre
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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 its 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.
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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 POs
For instance subcontracting

All the POs 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
POs that generates the production result.

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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, )

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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.
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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.
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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 doesnt 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 overinvestment.

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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

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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.
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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.
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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.
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Product costing: PPC1

Example in the system:
In Tsjechie
Mat 23009 in P700

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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 !!!
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Product costing: the GPC1

Example: material 153403 produced in P401, purchased in
P001

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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

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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.

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