SAP CONTROLLING AND FINANCE

CONTROLLING:

Controlling CO is an independent module in SAP ERP system. It has its own master data, data tables, configuration, processes, allocations, derivation, assessment, settlements, integration with other modules, and so on. Controlling provides you with information for management decision-making. It facilitates coordination, monitoring and optimization of all processes in an organization. This involves recording of both consumption of production factors and services as well as documenting actual events. The main task of controlling is planning. You can determine variances by comparing actual data with planned data. These variances calulations enable you to control business flows.

Integration:

Controlling (CO) and Finance (FI) being independent components in the SAP system the data flows between the two on a regular basis. Therefore all data relevant to cost and revenues flows automatically to Controlling and Finance. The data from FI Posting are transferred to CO carrying costs and revenue through different CO account assignment objects, such as cost centers, business processes, projects or orders. This is done on a real time basis. The various features of CONTROLLING modules are: 

• COST ELEMENT ACCOUNTING:

It provides an overview of the costs and revenues that occur in an organization. Most of the values flow from Finance.

• COST CENTER ACCOUNTING:

Cost center accounting is for controlling purposes within an organization. It is useful for a source related assignment of overhead cost to the location it has occurred.

• ACTIVITY BASED ACCOUNTING:

Activity based costing analyses cross-departmental business processes the goals of the whole organization and optimization are prioritized.

• INTERNAL ORDERS:

Internal orders are used to collect and control according to the job that incurred them. We can have budgets and monitor that the same is not exceeded.

• PRODUCT COST CONTROLLING:

This is mainly for the cost that is incurred in manufacturing a product or service. It can calculate the minimum price at which a product can be profitable.

• PROFITABILITY ANALYSIS:

This helps analyzing the profit and loss of an organization by individual market segments. The system allocates the corresponding costs to the revenues for each market segment.

• PROFIT CENTER ACCOUNTING:

This evaluates the profit or loss of individual independent areas within an organization. These areas are responsible for their costs and revenues.

Integration of FI-CO

Now as all the major flow or costs and revenues flow in CO through FI through direct or indirect allocation, it is an evident integration between the two modules considering the output we fetch from the same. CO has more of internal usage of the cost incurred to help the organization make decisions and maintain control and have an overview of the details cost and the revenue structure. Now once the cost flows from FI and in CO, CO within the module also has its own allocation and reallocations to put the costs and revenue ultimately where the same belongs. It mostly depends on your organization structure and what areas are to be monitored and are cost and revenue collecting units to see the profitability of the business. You also need to keep in mind the stakeholders and other decision makers to evaluate this scenario. So as we have closing cycles for financial books the same exists in CO as CO closing cycles. CO also helps in calculating actual versus planned Values to keep a check in an organization.

There are various ways through which CO costs and revenues are booked in SAP. To give a minimum overview of the ways values flow from the sender to receiver is based on various processes in each module, which are mentioned below. Each module will have many such processes internally. Given below are some processes, which can be highlighted to understand the same.

Plant And Maintenance: The Plants and Machinery have cost objects defined in their Master data. Where in when the Machineries are used in the production activity the fixed and the variable costs get booked. The efficiency and the utility of the machinery also need to be taken into account.

Sales distribution: The Sales cycle and in the sale order has revenue objects attached to the same to transfer Values from SD to CO.

Material Management: The Material Master data has profit centers attached to the same which helps collecting costs and revenues incurred through the Materials.

Likewise, let's take FI-CO integration processes:

So the major Cost Objects used in SAP FI are:

Cost elements:

There are two kinds of Cost Elements:

• Primary Cost Element:

Primary Cost elements are created to match the General Ledger Accounts of Profit and Loss Statements in FI. These carry expenses and Profits from FI to CO. Each P & L Account will be created as a Primary Cost Element in CO to have a proper reconciliation.

• Secondary Cost Elements:

Secondary cost elements in CO have no relation with General ledger accounts. These are created in CO for internal assignments within the Module. Postings to these secondary cost elements have no impact in the financial statements. It is created to transfer costs with CO without any impact on FI.

Profit Centers and Cost Centers:

Different ways of FI impact through Profit centers:

• Profit centers are mapped to Material Masters and eventually GL entries are triggered in FI when Material are produced, procured, transferred and sold. Profit center masters consist of Cost centers. Indirectly the GL postings lead to CO postings.
• Direct FI entries are posted in SAP, wherein we select profit centers and the cost centers where the costs revenue occur.
• Asset Master records consist of Profit centers and Cost center in Asset Accounting, which post entries in reconciliation to FI and CO. Depreciation, acquisitions, capital investment, Scrapping, Asset Sale, all impact FI GLs and eventually CO as well.

NOTE: Your company’s standard Profit center hierarchy will resemble the cost center hierarchy

Internal Orders:

The major use of internal orders is that when you have a particular job to be done in either short term or long term which need to be tracked down, budgeted and monitored from commencement to its end. An appropriate example here would be of an AUC (Asset under construction). The AUC asset Master record consists of a PC and CC and which accumulates cost to this internal order as a statistical posting, hence not duplicating the cost involved in CO module itself. Mostly internal orders are mapped as statistical in CO.

This will give you a fair idea on How FI CO integration takes place through different processes.

Rahi Shah