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Internal orders are cost objects in SAP Controlling. They are temporary cost collectors for short-term projects or events which you can attach to a group.
Cost centers are long term cost objects and belong to a standard hierarchy.
You configure the control parameters of SAP internal orders with the order type.
Internal orders have an advantage over cost centers since you can plan, budget, and set up availability control. This allows you to monitor project and event spending by comparing to plan, as well as limiting spending against a budget. Plan equals funds approved and budget equals funds appropriated.
Internal orders also allow you to collect revenue in addition to costs, and to utilize results analysis to determine profitability.
As you post transactions to internal orders, you can analyze the activity in real time with reports in the information system and branch to additional reports, accounting documents, and the source document.
At period-end, you allocate from orders to other cost objects during settlement. Settlement can be to one receiver, or to multiple receivers with several tracing factors. You can use periodic reposting to allocate costs from internal orders with statistical key figures.
Internal orders can also be statistical orders where there is no further allocation or settlement.
The following 5 different types of internal orders are available:
Used for short to medium-term monitoring of overhead costs or parts of overhead costs such as marketing campaigns.
Let you monitor investment costs to be capitalized and settled to fixed assets.
Accrual orders enable you to monitor period-related accrual calculation between expenses posted in Financial Accounting and Controlling.
Let you monitor costs and revenues that are incurred for activities for external partners, or for internal activities. These can be used if you haven’t implemented the Sales and Distribution component.
In this type of internal order, the cost center is maintained in the order as the real cost object. When a transaction is posted to this type of order, the real cost is incurred by the cost center and the internal order maintains a statistical balance.
Marjorie Wright is an SAP S/4HANA Expert, Keynote Speaker, and CEO/founder of Simply FI-CO, an SAP Training and Consulting Company. Margie is the author of several bestselling SAP books including:
SAP S/4HANA Management Accounting Certification Guide
Practical Guide to SAP CO Internal Orders
An accrual order enables you to monitor period-related accrual calculation between expenses posted in Financial Accounting and Controlling.
A cost center is master data that identifies where the cost occurred. A responsible person assigned to the cost center analyzes and explains cost center variances at period-end.
Fixed assets are company-owned, long-term tangible assets, such as forms of property or equipment. These assets make up its day-to-day operations to generate income. Being fixed means they can't be consumed or converted into cash within a year.
An internal order monitors costs and revenue of an organization for short- to medium-term jobs. You can carry out planning at a cost element and detailed level, and you can carry out budgeting at an overall level with availability control.
The order type categorizes orders according to their purpose and allows you to allocate different number ranges and settlement profiles.
Periodic reposting is a posting aid that enables you to adjust postings made to your cost centers or business processes, internal orders, or WBS elements. It has the same result as transaction-based reposting. The results of transaction-based repostings have a direct effect on the actual costs of the sender and the receiver, whereas periodic repostings have a one-time effect on actual costs at period-end closing.
Postings relevant to Controlling (CO) such as telephone costs, postal charges, insurance, and so on are entered in Financial Accounting (FI) and posted to an allocation cost center or a business process. These are used exclusively for cost collection. This minimizes the number of different account assignments you have to make when entering data in FI. At the end of the period, the collected costs are reposted to the cost centers or business processes which incurred the costs by of means user-defined keys (fixed values or dynamic tracing factors)
Work in process (WIP) and variances are transferred to Financial Accounting, Profit Center Accounting (PCA), and Profitability Analysis (CO-PA) during settlement. Variance categories can also be transferred to value fields in CO-PA.
A standard hierarchy represents your company structure. A standard hierarchy is guaranteed to contain all cost centers or profit centers because a mandatory field in cost and profit center master data is a standard hierarchy node.
Statistical key figures define values describing cost centers, profit centers, and overhead orders such as number of employees or minutes of long-distance phone calls. You can use statistical key figures as the tracing factor for periodic transactions such as cost center distribution or assessment. You can post both plan and actual statistical key figures.
In this type of internal order, the cost center is maintained in the order as the real cost object. When a transaction is posted to this type of order, the real cost is incurred by the cost center and the internal order maintains a statistical balance.
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Tracing factors determine the cost portions received by each receiver from senders during periodic allocations, such as assessments and distributions.
SAP Fiori is a web-based interface that can be used in place of the SAP GUI. SAP Fiori apps access the Universal Journal directly, taking advantage of additional fields like the work center and operation for improved variance reporting.
Work in process (WIP) and variances are transferred to Financial Accounting, Profit Center Accounting (PCA), and Profitability Analysis (CO-PA) during settlement. Variance categories can also be transferred to value fields in CO-PA.
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.
A settlement rule determines which portions of a sender’s costs are allocated to which receivers. A settlement rule is contained in a manufacturing order or product cost collector header data.
You need setup time to prepare equipment and machinery for the production of assemblies, and that preparation is generally the same regardless of the quantity produced. Setup time spread over a smaller production quantity increases the unit cost.
The process of recording actual costs for cost objects, such as manufacturing orders and product cost collectors in cost object controlling, is called simultaneous costing. Costs typically include goods issues, receipts to and from an order, activity confirmations, and external service costs.
Source cost elements identify costs that debit objects, such as manufacturing orders and product cost collectors.
A source list is a list of available sources of supply for a material, which indicates the periods during which procurement is possible. Usually, a source list is a list of quotations for a material from different vendors.
You can specify a preferred vendor by selecting a fixed source of supply indicator. If you do not select this indicator for any source, a cost estimate will choose the lowest cost source as the cost of the component. You can also indicate which sources are relevant to MRP.
The standard price in the Costing 2 view determines the inventory valuation price when price control is set at standard (S). The standard price is updated when a standard cost estimate is released. You normally value manufactured goods at the standard price.
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.
Tracing factors determine the cost portions received by each receiver from senders during periodic allocations, such as assessments and distributions.
The efficiency and speed of the SAP HANA in-memory database allowed the introduction of the Universal Journal single line-item tables ACDOCA (actual) and ACDOCP (plan). The Universal Journal allows all postings from the previous financial and controlling components to be combined in single items. The many benefits include the development of real-time accounting. In this book, we discuss both period-end and event-based processing.
The valuation class in the Costing 2 view determines which general ledger accounts are updated as a result of inventory movement or settlement.
The valuation date determines which material and activity prices are selected when you create a cost estimate. Purchasing info records can contain different vendor-quoted prices for different dates. Different plan activity rates can be entered per fiscal period.
The valuation grouping code allows you to assign the same general ledger account assignments across several plants with Transaction OMWD to minimize your work.
The grouping code can represent one or a group of plants.
You use valuation types in the split valuation process, which enables the same material in a plant to have different valuations based on criteria such as batch. You assign valuation types to each valuation category, which specify the individual characteristics that exist for that valuation category. For example, you can valuate stocks of a material produced in-house separately from stocks of the same material purchased externally from vendors. You then select procurement type as the valuation category and internal and external as the valuation types.
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.
This valuation variant allows a choice of cost estimates to valuate scrap and WIP in a WIP at target scenario. If the structure of a routing is changed after a costing run, WIP can still be valued with the valuation variant for scrap and WIP resulting in a more accurate WIP valuation.
In the context of multiple valuation and transfer prices, you can define the following views:
– Legal valuation view
– Group valuation view
– Profit center valuation view
Operations are carried out at work centers representing; for example, machines, production lines, or employees. Work center master data contains a mandatory cost center field. A work center can only be linked to one cost center, while a cost center can be linked to many work centers.
Work in process (WIP) represents production costs of incomplete assemblies. For balance sheet accounts to accurately reflect company assets at period end, WIP costs are moved temporarily to WIP balance sheet and profit and loss accounts. WIP is canceled during period-end processing following delivery of assemblies to inventory.
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Marjorie Wright is the founder of SimplyFI-CO, LLC: an SAP training and consulting company. She is an SAP expert with over 25 years training and accounting experience across multiple industries. She has trained over 3,500 learners in live and virtual sessions.
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