2.3 Links with other SAP modules
The finance training manual covered additional interesting links between various modules and controlling. There are links between the PP, SD, and the MM modules, but Alex was most interested in the links between supply chain functionality and the FI and CO modules, since that was going to be his job focus.
2.3.1 MM and CO-PC
Standard costs of procured materials are calculated at the beginning of the period in controlling-product costing (CO-PC). The standard cost is then used to valuate inventory, as well as record goods movements during the month in materials management (MM)
2.3.2 MM and FI-GL + FI-AP + CO-PC
Actual price on the purchase order (from MM) and on the invoice receipt from the vendor (from (FI-AP) tracks purchase price variance in accounting (in FI-GL) compared to the standard price of the material (part of CO-PC).
2.3.3 PP and CO-PC
Raw material cost is derived using quantities from the bill of material (BOM) multiplied by the raw material procurement price. Conversion cost is derived using activity quantity from routing multiplied by the predetermined activity rate. BOM and routing/recipe (recipe contains the steps to manufacture a product) are part of production planning (PP) module. Production and process orders record costs during the lifecycle of the orders and allow for WIP/variance calculations at month end.
2.3.4 PP and CO-ABC
Production/process orders use activity types that are confirmed during production to record labor and machine hours. They use predetermined activity rates through activity based costing (CO-ABC)
2.3.5 MM and FI + CO-PC
Supply purchases are directly expensed to a cost center. Raw materials are inventoried to the balance sheet. Consumption of raw materials is recorded on orders.
2.3.6 MM and FI-AA
Capital equipment purchases are recorded to an asset or capital project (part of FI-AA).
2.3.7 SD and FI-GL + FI-AR + CO-PA
Customer sales are recorded in the FI-GL and FI-AR at the time of billing to the customer. Additionally, profitability analysis (CO-PA) captures this information in multidimensional reporting known as characteristics and value fields.
2.3.8 SD and CO-CCA/CO-OM
Samples shipped to customers can be charged to a specific cost center (cost center accounting – CO-CCA) or internal orders (overhead management CO-OM) for future tracking and reporting purposes.
The training manual went on to say that the MRP controller and financial controller are the two most powerful functions in an SAP environment. The MRP controller decides what to produce and when to produce it, whereas the financial controller keeps track of all of the costs and variances in the plant. However, all of this depends on the demand. It is assumed that there is a constant demand for the product.
Role of MRP controller and financial controller
MRP Controller and Financial Controller are often regarded as two key roles in an organization that uses SAP business software.
Alex remembered reading about how a manufacturing facility needs to ensure that it produces a good quality product at optimal inventory levels, while keeping a close eye on the costs. He realized that CO would help him achieve the task in his role at CGI as long as he used the available tools effectively and the processes were adhered to.
3 Controlling organization structure: It’s all in the family
“I cannot trust a man to control others who cannot control himself.”
—Robert E. Lee
Every organization has various departments or functions that are responsible for implementing strategic plans, converting them into action, and managing day-to-day operations. This type of functional or departmental structure is depicted in the business system as well. This chapter provides an overview of controlling organization structure in SAP business software.
Alex continued to read through the finance training manual and came across a chapter on organization structure. There was a diagram depicting overall organization structure at GCI (see Figure 3.1).
Figure 3.1: GCI SAP software organization structure
The training manual went on to further explain the importance of the SAP software organization structure.
The SAP software organization structure is fundamental to the overall structure in which master data and transaction data is defined in SAP. It is essentially the backbone of the system. Accurate design and setup of the software organization structure is a critical step in SAP implementation, given that it is extremely difficult to change the structure once designed, configured, and transaction data is posted.
SAP software organization structure reflects a business’s own organization structure, reporting requirements, and processes in the SAP system
An enterprise’s organization structure is mapped to the SAP system organization structure. This is done early on in SAP implementation projects. The idea is to ensure that all business processes are able to function smoothly, not only from a transactional processing point of view, but also from an internal and external reporting point of view.
Company code is defined based on legal entities. Since GCI has more than one legal entity, multiple company codes (for example, GCI1, GCI2, etc.) have been defined to facilitate external reporting. However, there is only one controlling area, which will allow consolidation for internal reporting.
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