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What's the Difference between an Internal Order and Project System in SAP

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What's the Difference between an Internal Order and Project System in SAP

By Kent Bettisworth and Gerald Steele

Kent Bettisworth1



In SAP Project Management, two terms that are often discussed, both on-premises and cloud-based are: Internal Order and Project System Work Breakdown Structure WBS. Both options have advantages.

Understanding the differences is essential in optimizing project outcomes. In this blog, we compare Internal Orders and Project System WBS, exploring their definitions, benefits, features, and practical tips for implementation.



An internal Order is a cost object that allows you to track and control costs associated with activities or projects. It provides a means to allocate costs, monitor budget utilization, and generate reports for financial analysis.

A Work Breakdown Structure (WBS) is a hierarchical representation of project deliverables, tasks, and subtasks. It breaks down the project scope into manageable components, facilitating planning, scheduling, and resource allocation.



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By utilizing Internal Orders, you can gain better control over project costs, ensuring that expenses are allocated accurately and monitored. This enables timely decision-making, cost optimization, and improved financial performance.

WBS provides a structured approach to project cost and revenue, planning and execution. It helps you define project scope including deliverables and dependencies, as well as allocating resources efficiently. WBS also enables enhanced communication and collaboration among project team members, leading to improved project outcomes.


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1. Structure and Hierarchy
- Internal Order: A cost object that does not follow a hierarchical structure. It is typically used to track costs, and revenue, for a specific activity or project.

- WBS: Follows a hierarchical structure, breaking down the project scope into smaller, manageable components. It provides a clear overview of project deliverables and dates including detailed tasks, subtasks and their relationships.

2. Cost Control and Monitoring

- Internal Order: Provides a single charge code allowing cost tracking and monitoring. Costs can be charged to specific internal orders and later allocated or settled to cost centers, enabling accurate analysis of project-driven expenses in contrast to ongoing operational cost center costs.


- WBS: Each WBS can be a charge code and can directly track revenues and/or costs, however, WBS is better utilized to provide a framework for more detailed cost estimation and control at the lower level WBS or networks. By breaking down the project into smaller components (network activities), it becomes easier to estimate costs, plan requisitions and purchase commitments, monitor budget utilization, and schedule accurate delivery dates.


3. Resource Allocation and Planning

- Internal Order: Does not provide a direct mechanism for resource allocation, planning nor scheduling, beyond simple start and end dates. However, it can be used in conjunction with other SAP modules such as purchasing to track commitments and actual costs based on 3-way matches in addition to managing basic logistics effectively.

- WBS: Facilitates resource allocation and planning by breaking down the project into tasks with specific planned and actual completion dates. Each task within the WBS can be assigned to specific resources, ensuring efficient planning, scheduling, and utilization of available materials, equipment, and work teams.

 The Project Planning Tool Decision Matrix provides an approach to help you choose which SAP project tool, Internal Order or WBS, to use based on your detail planning requirements, planning scenarios, and/or use with an external project management application as shown in Figure 1.

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4. Reporting and Analysis

- Internal Order: Offers basic reporting capabilities, allowing project managers to generate reports on project costs, budget utilization, and variances. These reports provide insights supporting simpler funds tracking and cost center allocation and analysis decision-making.
- WBS: Provides extensive reporting features and serves as a foundation for detailed project status management, document management, and advanced reporting. By organizing and scheduling project tasks by deliverables, it becomes easier to track progress, assign detailed costs to the appropriate capital or expense asset, cost center, or sales orders, and support timely and meaningful project decisions.


Integration with Other Modules

Internal Order: Integrates with several modules, including Controlling (CO), Financial Accounting (FI), Purchasing (MM), and Investment Management (IM). This enables a integrated view of project costs, budget allocations, commitments, and financial performance.


WBS: Integrates not only with Controlling (CO), Financial Accounting (FI), Materials Management (MM), and Investment Management (IM) but more importantly with Sales and Distribution (SD), Logistics Execution (LE), Production Planning (PP), Plant Maintenance (PM), Project System (PS-Networks), and Human Resources (HR). This integration leverages the specific module functionality to ensure efficient communication and coordination between different project management functions.


Practical Tips and Tricks

Implementing Internal Orders and WBS requires careful planning followed by timely execution. Here are some practical ideas to consider:

1. Clearly define project scope and objectives before deciding which project type to use, either Internal Orders or WBS. This clarity will help in structuring projects appropriately and selecting the most suitable approach and tool.

2. Involve key stakeholders, including team members, sponsors, and clients, in the design and implementation process to ensure alignment with organizational goals. Their input and feedback will help in selecting the most appropriate project management approach and SAP project concept and ensure buy-in from all parties involved.

3. Regularly monitor and update the chosen project tool, either Internal Orders or WBS, to reflect changes in project requirements. Continuously review and update each as the project progresses. This will help you identify and mitigate potential risks, and ensure the project remains on track.

4. Train project team members on how to use Internal Order and WBS tools to maximize the benefits.

5. Leverage available SAP resources, such as user manuals, company experts, and online forums, to enhance your understanding and proficiency in using these tools.

6. Reporting and Analytics: Understand and utilize the available reporting and analytics capabilities of Internal Orders or Project System WBS to gain insights into project performance, budget capacity, resource utilization, and cost control. This data-driven approach will enable informed decision-making and initiative-driven project management.



In conclusion, Internal Orders and Project System WBS are valuable project management tools in SAP.

While Internal Orders focus more narrowly on cost control and monitoring, WBS provides a flexible multi-tiered, structured approach enabling detailed and process- integrated project planning and execution. The choice between the two depends on complexity, organizational requirements, and team expertise.

By understanding the differences and leveraging their benefits, you can optimize project outcomes and achieve greater success.


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Tuesday, 03 October 2023

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