How do Settlement Rules, Profiles and Allocation Structures Work?
By Tanya Duncan
This question was posed specifically about project systems, but this applies to all cost objects in SAP that require settlement: Production orders, process orders, sales orders, and internal orders.
Settlement occurs at month end so the remaining balance on cost objects can be offset and the variance can post to a final resting place on the financial statement. During settlement, the difference between the debit and credit of the order is transferred to the cost center based on the finished good material’s profit center. Each cost object in Controlling has a settlement rule to determine where and how the remaining costs should settle. The settlement rule is generated based on the settlement profile assigned to that order type.
The settlement profile configuration determines if the order is settled in full, can be settled, or not, what receivers are valid, what allocation structure is relevant, along with many other settings. This is the key piece of settlement configuration that links together other elements like the allocation structure. A different settlement rule is generally required for each cost object.
The allocation structure determines what source cost elements are posted to what settlement cost centers. For example, you can group together material costs to see them separately from labor costs and service costs. You can also settle those costs to different settlement cost elements to have more visibility to that level of detail during settlement.
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Glossary
Allocation Structure
An allocation structure allocates the costs incurred on a sender by cost element or cost element group, and it is used for settlement and assessment. An assignment maps a cost element or cost element group to a settlement or assessment cost element. Each allocation structure contains a number of such assignments.
Process Order
A process order is a manufacturing order that is used in process industries. A master recipe and materials list are copied from master data to the order. A process order contains operations that that are divided into phases. A phase is a self-contained work-step that defines the detail of one part of the production process using a primary resource.
In process manufacturing, only phases are costed, not operations. A phase is assigned to a subordinate operation and contains standard values for activities, which are used to determine dates, capacity requirements, and costs.
Production Order
A production order is used for discrete manufacturing. A BOM and routing are copied from master data to the order. A sequence of operations is supplied by the routing, which describes how to carry out work-steps.
Sales Order
A sales order is a customer request for delivery of goods or services at a certain time. A sales order line item can be a real cost object if you are using nonvaluated inventory.
Settlement Profile
A settlement profile contains the parameters necessary to create a settlement rule for manufacturing orders and product cost collectors and is contained in the order type.
