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Why does costing-based Profitability Analysis (CO-PA) get so much interest in the midst of all the robust reporting tools that have emerged over the the last decade?
The reason is that even though the other tools are able to replicate CO-PA functionality, they do not have the same integration with the source data in SAP. There are many data warehousing tools that perform the same function as CO-PA, collating all of the data from the system and providing analytical capabilities based on different dimensions commonly referred to as “slice and dice” capability.
However, these tools exist outside of SAP and data needs to be extracted and uploaded between systems using interfaces or other connectors. Neither of these options are ideal, particularly when you are dealing with financial information which needs to be real-time and integrated to ensure accuracy and timeliness.
I have some clients who do not want to hear the term even being used in relation to reporting. Anytime I hear this, the reason is they do not trust the numbers. This obviously seems strange for an integrated system like SAP. It would be understandable if CO-PA was an application that was not embedded in SAP, such as Business Warehouse, Business Objects, Strategic Enterprise Management, etc. However, that is not the case. Costing-Based CO-PA is part of the Controlling module within SAP and hence, is fully integrated with the Financials module thereby reducing any reconciliation issues. Unfortunately, the module is not as seamlessly integrated with the Financials module as you would hope.
SAP has made several attempts to try and resolve this reconciliation issue. For example, you cannot post a billing document to financial accounting if a CO-PA value field has not been mapped to a condition. Also, Transaction KEAT makes strides towards reconciliation by displaying the differences between FI, SD and CO-PA. And of course, you have account-based CO-PA which can help you produce CO-PA reports using accounts and not value fields allowing you make a comparison with costing-based CO-PA reports. However, none of these options is a complete reconciliation solution.
I have presented sessions on this issue at conferences around the world and have written blogs about it, but I am never really able to go into great detail about how to resolve some of the reconciliation issues. I am definitely able to discuss the solution at a high level in these forums, however presentations and blog posts do not lend themselves to the level of detail necessary. I believe that by writing a book on this topic, I'm able to provide a full solution to the reconciliation issues between CO-PA and the general ledger.
The book is for consultants, end-users, and support teams that work in the SAP Controlling module. It is useful in companies where CO-PA has already been implemented, and is also valuable to those considering implementing SAP CO-PA.
SAP Costing-Based CO-PA enables an organization to evaluate their profitability by strategic business units by capturing the details of costs and revenues and giving the organization the ability to analyze the trends & make better decisions. This book demonstrates how to reconcile the values in the CO-PA module with the general ledger so that consumers of the information from CO-PA reports can have the confidence and assurance that the numbers are verifiable.
SAP Margin Analysis based on the S/4HANA Universal Journal is the latest SAP answer to the CO-PA reconciliation issues.
Excerpt from: Reconciling SAP COPA to the General Ledger by Paul Ovigele
Conditions are stipulations agreed upon with vendors such as prices, discounts, surcharges, freight, duty, and insurance. You maintain purchasing conditions in quotations, purchasing info records, outline agreements, and purchase orders.
A condition type is a key that identifies a condition. The condition type indicates, for example, whether the system applies a price, a discount, a surcharge, or some other pricing, such as freight costs and sales taxes.
This type of Profitability Analysis is designed to let you analyze profit quickly for the purpose of sales management. Its main features are, the use of value fields to group cost and revenue elements, and, secondly, automatic calculation of anticipated or accrual data (valuation). The advantage of this method is that data is always up‑to‑date and therefore provides an effective instrument for controlling sales.
Margin Analysis is the refined version of account-based COPA. The Universal Journal combines financial and managerial accounting and directly records all dimensions including custom fields. Margin Analysis provides consistent financial information without any reconciliation needs along with a financial audit trail. All innovations developed for the Universal Journal are immediately available within Margin Analysis. A consistent approach ensures common usage of ledgers, currencies, valuations, predictions, and simulations, as well as their availability in planning and reporting.
All revenue and cost of goods sold postings are automatically assigned to the relevant dimensions at the time of posting. Also in further scenarios, including e. g. project sales, the new approach assigns profitability dimensions immediately. Together with real-time processing of former period-end procedures, this approach provides real-time visibility into margins during the period.
The Special Procurement Type field found immediately below the procurement type in the MRP 2 view is used to more closely define the procurement type. For example, it may indicate if the item is produced in another plant and transferred to the plant you are analyzing. Special procurement type 30 indicates the material is procured by subcontracting.
You supply component parts to an external vendor who manufactures the complete assembly. The vendor has previously supplied a quotation, which is entered in a purchasing info record with a category of subcontracting.
Profitability Analysis (CO-PA) enables you to evaluate market segments, which you can classify according to products, customers, orders (or any combination of these), or strategic business units, such as sales organizations or business areas, with respect to your company’s profit or contribution margin.
This eliminates the need for transaction tables in several different modules, and instead combines them into one line item table: ACDOCA. All financial reports read from the one table eliminating the need for reconciliation and table locks.
The valuation variant is a costing variant component that allows different search strategies for materials, activity types, subcontracting, and external processing. For example, the search strategy for purchased and raw materials typically searches first for a price from the purchasing info record and then Planned Price 1.
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