Controlling
Module in SAP provides supporting information to Management for the purpose of
planning, reporting, as well as monitoring the operations of their business.
Management decision-making can be achieved with the level of information
provided by this module.
Some of the components of
the CO (Controlling) Module are as follows:
· Cost
Element Accounting
· Cost Center
Accounting
·
Internal Orders
·
Activity-Based Costing (ABC)
·
Product Cost Controlling
·
Profitability Analysis
· Profit Center
Accounting
Cost Element Accounting: component provides information which includes
the costs and revenue for an organization. These postings are automatically
updated from FI (Financial Accounting) to CO (Controlling). The cost
elements are the basis for cost accounting and enable the User the ability to
display costs for each of the accounts that have been assigned to the cost
element. Examples of accounts that can be assigned are Cost Centers,
Internal Orders, WBS(work breakdown structures).
Cost Center Accounting: provides information on the costs incurred by
your business. Within SAP, you have the ability to assign Cost Centers to
departments and /or Managers responsible for certain areas of the business as
well as functional areas within your organization. Cost Centers can be created
for such functional areas as Marketing, Purchasing, Human Resources, Finance,
Facilities, Information Systems, Administrative Support, Legal,
Shipping/Receiving, or even Quality.
Some of the benefits of Cost
Center Accounting: (1) Managers can set Budget /Cost
Center targets; (2) Cost Center
visibility of functional departments/areas of your business; (3) Planning;
(4) Availability of Cost allocation methods; and (5) Assessments/Distribution
of costs to other cost objects.
Internal Orders: provide a means of tracking costs of a specific job, service, or task.
Internal Orders are used as a method to collect those costs and business
transactions related to the task. This level of monitoring can be very detailed
but allows management the ability to review Internal Order activity for
better-decision making purposes.
Activity-Based Costing: allows a better definition of the source of costs to
the process driving the cost. Activity-Based Costing enhances Cost Center
Accounting in that it allows for a process-oriented and cross-functional view
of your cost centers. It can also be used with Product Costing and
Profitability Analysis.
Product Cost Controlling: allows management the ability to analyze their
product costs and to make decisions on the optimal price(s) to market their
products. It is within this module of CO (Controlling) that planned, actual and
target values are analyzed. Sub-components of the module are:
· Product Cost Planning
which includes Material Costing( Cost estimates with Quantity structure, Cost
estimates without quantity structure, Master data for Mixed Cost Estimates,
Production lot Cost Estimates) , Price Updates, and Reference and Simulation
Costing.
· Cost Object
Controlling includes Product Cost by Period, Product Cost by Order, Product
Costs by Sales Orders, Intangible Goods and Services, and CRM Service
Processes.
· Actual
Costing/Material Ledger includes Periodic Material valuation, Actual Costing,
and Price Changes.
Profitability Analysis: allows Management the ability to review information
with respect to the company’s profit or contribution margin by business
segment. Profitability Analysis can be obtained by the following
methods:
· Account-Based Analysis which uses an
account-based valuation approach. In this analysis, cost and revenue element
accounts are used. These accounts can be reconciled with FI(Financial
Accounting).
· Cost-Based Analysis uses a costing
based valuation approach as defined by the User.
Profit Center Accounting: provides visibility of an organization’s profit and
losses by profit center. The methods which can be utilized for EC-PCA (Profit
Center Accounting) are period accounting or by the cost-of-sales
approach. Profit Centers can be set-up to identify product lines, divisions,
geographical regions, offices, production sites or by functions. Profit Centers
are used for Internal Control purposes enabling management the ability to
review areas of responsibility within their organization. The difference
between a Cost Center
and a Profit Center
is that the Cost Center represents individual costs
incurred during a given period and Profit Centers contain the balances of costs
and revenues.
Controlling (CO) and Financial Accounting
(FI) are independent components in the SAP system. The data flow between the
two components takes place on a regular basis.
The data relevant
to cost, flows automatically to Controlling from Financial Accounting. At the
same time, the system assigns the costs and revenues to different CO account
assignment objects, such as cost centers, business processes, projects or
orders. The relevant accounts in Financial Accounting are managed in
Controlling as cost elements
or revenue elements. This enables you to compare and reconcile the values from Controlling
and Financial Accounting.
