ERPCorp SAP FICO Blog

I'm writing a book on SAP Product Cost Planning and in the process getting a better understanding of the importance of cost component views in product cost estimates.

The cost component split and cost component views provide valuable insight into a cost estimate. Setting up cost components correctly in a cost component structure leads you to a multi-faceted understanding of a product cost within a single cost estimate. At the beginning of the implementation our priority was to develop standard costs and we ignored additional information we could have obtained with a better understanding of cost component views.

Many SAP installations experience long run-times during Material Ledger close. This Blog explains a function that can help expedite Material Ledger close.

Knowing how much a product costs is essential to determining actual profitability. Yet most decisions are based on the standard cost of the product, given that it is not always easy to get an accurate picture of the actual cost. Actual costing functionality provided by the Material Ledger component of SAP Controlling bridges this gap. It provides the ability to capture actual costs by tracking variances at the material (product) level. This section provides an overview of actual costing in SAP Material Ledger.

Writing an effective S/4HANA business case is both a science and an art. As a business and digital transformation specialist, this continues to be my most important takeaway.

The science part is easier to handle. SAP provides you with tools and you probably have your own that you devise and use such as metrics and KPIs which assist you determine the quantitative aspects of what you want out of S/4HANA.

Art is the more difficult aspect since no two customers are alike. You can't use a one size fits all approach. I approach each business case discussion with a minimum set of success factors or criteria. Here are a few of the key components:

• Business drivers: Don't forget the word business in ‘business transformation’. You need to derive your business case for implementing/converting to S/4HANA from your enterprise corporate strategy & KPIs

• Pain points: Most organizations hate this cliché but there's no escaping it. You can rephrase it to challenges or maybe improvements needed. This aspect is related to business drivers but whereas business drivers are strategic, pain points are tactical and emanate from the business user community

• Key success factors (KSFs): Qualitative key factors such as better user experience, opportunities for innovation and real-time analytics

• Stakeholder analysis: Even the most air-tight business case will not succeed if you do not have the right level of stakeholder engagement and support. So, it is important that you analyze and ensure that you maximize stakeholder buy-in

• Organizational readiness: Some organizations do not consider an assessment of their organizational readiness before embarking on a business transformation journey. There needs to be an organic appetite for change

Let's me move to the science aspect of an S/4HANA business case. SAP provides customers with many tools to help quantify their case for S/4HANA. Among the tools we employ are SAP Transformation Navigator and Business Scenario Recommendations (BSR). Some customers use their own tools, techniques snd calculations. Popular financial KPI's include Net Present Value (NPV) and Internal Rate of Return (IRR). KPIs can be leveraged in every functional/business process area the business transformation is covers.

Building a powerful business case for your S/4HANA journey requires extensive planning and execution. If you would like to learn more on this important topic, please attend my session How to Build a Business Case for S/4HANA  during SAP Controlling Conference in San Diego, CA, October 7-10.

GR/IR is the SAP process to perform the three-way match – purchase order, material receipt, and vendor invoice.  You use a clearing account to record the offset of the goods receipt (GR) and invoice receipt (IR) postings.  Once fully processed, the postings in the clearing account balance.

Clearing is performed at the purchase order (PO) line item level based on quantity entered. Price variance and exchange rate variance are calculated.  You can write off small differences using transaction MR1.

Purchase Price Variance
This discussion assumes you are using standard price control (S)  for purchased materials. The quantity and amount on the GR and IR postings are important. You must have posted GR to record purchase price variance (PPV). There is no PPV posting for just IR. There can be additional variance postings on IR after GR is posted for differences between PO price and actual price paid.

When posting GR, the price variance is based on the PO price, unless IR has already been posted, then it is based on actual price paid. If IR has already been posted, the GR will be based on the IR up to the quantity of the IR, after that is will use the PO price again.

After all postings to a PO line item, the net PPV posted will be the difference between the actual price paid and the standard cost of the material.

My company is in the early stages of moving from ECC 6.0 to S/4HANA. I thought it would be interesting to give you my initial impressions of what I found out about Controlling in S/4HANA. Since we started out with ECC 6.0, we don’t have the baggage of things like classic G/L versus new G/L.

We first got access to an S/4HANA sandbox for a test drive of the system. This is an important step in the transition and has helped me get a much better understanding of how the new system works rather than reading documentation and watching training videos. What follows are my initial impressions. Hopefully, this will be useful if you are making the move, or contemplating it. 

I often get asked about difference between a Production Order and Process Order. When is it beneficial to use one over another?
As such, from controlling point of view, both objects have similar features. It is mainly on the Production Planning and Shop Floor Execution side where we see a difference. The main advantage of using Process Order is use of Process Instruction Sheet, or PI Sheet for day-to-day shop-floor activities. Whereas both the scenarios use Material Masters and Bills of Materials; Production Orders use Work Center (Machine) and Routing (sequence of operations) – Process Orders use Resource (Machine) and Recipe (sequence of operations and which component is issued during which operation). The decision on whether to go with Production Orders or Process Order would depend upon type of industry and fitment and is largely driven by the Production Planning team.

While we are on this topic of Production Orders and Process Orders, it might be beneficial to speak about other Cost Objects that are offered in Controlling.

Through my careers as a cost accountant, accounting manager, project manager, and an education
consultant I’ve attended countless conferences on SAP FI-CO. My first experience with this particular
conference was in 2014. I was quite impressed with the roster of speakers, the breadth of the topics,
and the size of the event. It is just large enough to draw a diverse cross section of SAP CO users and
consultants and just small enough for you to be able to connect with individuals. Where else could
you chat over lunch with the legendary Janet Salmon?

If you use Material Ledger’s Actual Costing, then you would know that the Post Closing Step creates accounting documents depending on how the variances for the Material have been distributed. For example, a material with a price (or exchange rate) difference of $100 could be sold, scrapped, used in a production order that is complete, used in a production order that is not complete, transferred to another plant, or left in inventory. And this only refers to the differences that are created on the material itself (single-level), and not the differences that are transferred from other materials (multilevel) which have their own slew of Material Ledger postings.

 Because of this, it is easy to be overwhelmed by the volume of postings that are created by the Material Ledger’s closing entry and what they mean. Some companies choose to label the General ledger accounts appropriately to indicate what the posting is for, but if you do not understand the posting, it is easy to incorrectly label the General Ledger account. Also, you may not need a separate general ledger account for each scenario as that may lead to more General Ledger accounts than you need, and may create even more confusion.

We recently upgraded a test system from S/4 1610 to S/4 1709 and one of the interesting things that we found was that SAP is recommending that the switch for activating profit center accounting in Controlling should be activated. This was a bit of a surprise because I found no mention of this in the Simplification document for 1709 or in any on-line searches.

Ever since release ECC 5.0 clients using the new general ledger with the profit center or segment scenarios active were warned against activation of classic PCA. With the new GL scenarios profit center functionality was incorporated in the GL and the old profit center ledger 8A was not activated. In this case the classic reports in the information system for PCA would not return any results if they were executed.

Dive into this list of the top FAQ's on SAP S/4HANA Finance.

 Is merging of actuals & plan into ACDOCA versus ACDOCP? Is the planning data going to go to ACDOCA or ACDOCP?  If we copy actual to plan for each monthly forecast version, will the P table end up with 12 times the records of the A table?

Planning data will update to ACDOCP. In your copy function you would have to decide at what aggregation you updated ACDOCP (1:1 or roll-up e.g. production orders to not have quite so much data in your forecast).