Technical Tips and Tricks to Get More out of Your SAP ERP Financials Transactions (Transcript)

Insider Learning Network recently hosted a web forum with Paul Ovigele on technical tips and tricks to get more out of SAP ERP financials. Paul is a featured speaker at SAPinsider Financials conferences in the US and Europe, and he will also be speaking at the upcoming Reporting & Analytics 2011 conference in Las Vegas, November 2-4.

For the full Q&A, you can view the questions from Insider Learning Network members and Paul Ovigele’s responses in the Financials Forum or read the following excerpts from the transcript of the Q&A:

Technical Tips and Tricks to optimize your SAP ERP Financials: An exclusive Q&A today with SAP PRESS author Paul Ovigele 

Gary Byrne (Moderator):

Welcome to today’s forum on enhancing your Financials transactions. Thanks to everyone for joining us, and thanks for taking these questions, Paul. We have a few questions already posted, so Paul will be responding to these shortly. 

Darya Fadeyeva:

Paul, I kindly ask you to answer the following questions: 

1. Do you know projects where calculation of actual costs per cost components across multiple company codes was realized? If yes, would you please describe how it was realized?

2. Would you please advise on which pitfalls could the Group face during the realization of actual costs per cost components if the Group has companies in different countries, such as Russia, USA, Ukraine, Great Britain, Italy, Switzerland, etc.?

3. Would you please advise on which pitfalls the Group could face during the realization of different types of accounting (IFRS, management, local GAAP, tax) if the Group has companies in different countries, such as Russia, USA, Ukraine, Great Britain, Italy, Switzerland etc.?

Paul Ovigele:

Hi, Darya – To calculate actual costs per cost components across multiple company codes, you would need to implement a tool called material ledger. This will accomplish two objectives:

(1.)  It will allow you to record your inventory costs using multiple valuations (US GAAP, IFRS, etc.) and in multiple currencies, and;

(2.)  It will also allow you to revalue your inventory costs from standard to actual, based on the price and exchange rate differences that occurred during the month.

To set up the material ledger, you will need to set up the necessary configuration, including activating material ledger and the “actual cost component split” (which you can find in the IMG menu under Controlling -> Product Cost Controlling -> Actual Costing/Material Ledger). You then need to run a “production startup” program (Transaction CKMSTART) for your materials, purchase orders, and purchase order history so that they are “material ledger compatible.” Also you need to change the Price determination of all materials from “Transaction-Based” to “Single-Multilevel” (Transaction CKMM). When you have set up material ledger, you then need to run the actual costing program every month (Transaction CKMLCP) to revalue the materials to actual cost and hence produce an actual cost component split. 

A key area to watch out for when performing a multi-country implementation of material ledger is what currencies you have set up in FI for your company codes (transaction OB22). You need to make sure that these are the same currencies that are set up for material ledger (which you can do in transaction OMX2); otherwise, material ledger and FI will not be reconciled. Also you need to make sure that you have set up the relevant parallel currencies for your company codes (i.e., group currency, hard currency, etc.) before you activate material ledger; otherwise, it will be very difficult to change this after the fact. 

Actually, material ledger helps with the reporting of different accounting standards as you can record your inventory costs using up to three different valuation approaches. So basically you can have a legal valuation (e.g., for local GAAP), profit center valuation (e.g., for management), and group valuation (e.g., for IFRS) for the same material. Also, by using the “Alternative Valuation Run” you can calculate different actual activity rates based on parallel valuation methods (such as the different methods of depreciation by different accounting standards).

Sydnie McConnell:

What recommendations do you have around reporting for AR and AP, particularly aging?  I’ve seen custom ABAP reporting for aging, but are there good standard solutions in ECC? Thanks! 

Paul Ovigele:

Unfortunately, the AP and AR aging reports, although accurate, are not really user-friendly. This leads to many customers creating custom aging reports, but as you know when you create a custom program you stand the risk of not getting accurate data or having issues during upgrades. I recommend a very simple, but effective solution which involves setting the “Use Accessibility mode” indicator which you can find in your computer’s control panel by clicking on the “SAP Configuration” icon.

Doing the above will make the standard aging reports user-friendly ALV reports!

Gary Byrne:

Hello, Paul. Thanks for joining us today. I have a question for you. What are the rules that guide whether to create a cost element automatically or manually, when a general ledger account is created?

Paul Ovigele:

This normally depends on the organization’s requirements. Some companies prefer to manually create cost elements after the general ledger profit and loss account has been created. This ensures that certain P&L accounts which should not be set up as cost elements are not created that way. The type of P&L accounts that should not be created as cost elements are as follows: 

– Work-in-process account;

– Production Variance account

– Results Analysis accounts

Basically anytime a cost object (production order, internal order, WBS element, etc.) is being settled to a P&L account and also another cost object (such as a profitability segment) in parallel, the P&L account should not be set up as a cost element.

However, I think it is much easier to allow the system to create cost elements automatically when a P&L account is created. That way, you can ensure that every relevant primary cost element is set up. It is difficult to automatically back post documents to a cost element after it has been created. Using transaction OKB2 you can enter the range of cost elements that should be created automatically, and hence, you can leave out the ones (mentioned above) that should not.

Gunter Humpf:

Regarding the A/R and A/P reporting:

Do you have any recommendations to perform these tasks via BW? Are there any standard cubes and reports existing, and how big is the effort to set this up?

Paul Ovigele:

Hi, Gunter,

I am not a BW expert, but I would assume that by using the standard infocubes for AR and AP (0FIAR_XXX, etc.), you can also create more user-friendly reports. My solution is one for those who wish to see the data directly in the ERP system.

Sydnie McConnell:

On the BW side, we did use those standard cubes at a previous company, and they were great!  We’d already been using BW, and implementing these standard cubes was relatively simple. We were able to get really good aging reports from there. 

Tim Worsham:

Hello, Paul. Is there an easy way to pull into transaction S_ALR_87012284 – General -> Actual/actual comparisons -> Balance sheet/P+L statement the cost center information? Currently for the month end we download this information and combine it with reports from S_ALR_87013611 – Cost Centers: Actual/Plan/Variance, using Excel.

Paul Ovigele:

Hi, Tim. It looks like you are using the classic and not the new GL right? If this is the case, the financial statement version report is strictly for GL accounts only. In the old SAP environment, FI and CO sit in different tables and ledgers, and this is why new GL is a big advantage. For example if you have new GL you can pull the cost center scenario into your leading ledger, and hence, financial statement reports will be by account and cost center (and any other dimension you have assigned to the ledger. 

One work-around in your case may be to use functional areas. Even in classic GL you can assign functional areas to your financial statement version (transaction OB58), and these functional areas can also be assigned to a cost center or a cost center category. This way, you can run a financial statement report by functional area which will have the values that hit the respective cost centers that they were assigned to.

Tim Worsham:

Yes, correct, we are still using classic GL. Do you know if it is possible to use report writer or Painter to combine the information from these tables to a custom report?

Paul Ovigele:

You can use report painter, but remember the tables are different. The general ledger uses table GLT0, while cost centers use CCSS. Now if you have profit center accounting activated you may be able to accomplish this by using one of the profit center tables 8A*. This is because the cost centers should be assigned to profit centers, and the GL accounts (balance sheet and PL) can also be assigned to profit centers. You would need to run the month-end transfer programs (if you do not already) so that AP, AR, FA, and Inventory are transferred to profit centers.

Werever:

Hi, Paul. Could you please answer me the following questions:

Regarding new GL scenarios configuration:

I have a situation where the customer needs to do IFRS segment reporting at the group level. They will use SAP Business Objects BPC functionality to do this. In ECC 6.0 they will only use FIN_PCA scenario and document splitting with profit center characteristic, but no zero balance.

My question is: Do they need to activate FIN_SEGM scenario or can they get segment information from profit center master data? I think this approach is the correct one, and as far as I know, the best practice is to always activate both scenario FIN_SEGM and FIN_PCA.

My second question is related to EHP 5. In summary w hat are the new functionalities for EHP5 that could impact financial transactions and reporting?

Paul Ovigele:

Hi. This is a good question, and I get asked this a lot. One thing to note is that the segment scenario is only necessary if it is not practical to do document splitting by profit center. For example, if you have over 500 profit centers, I will not recommend that you do document splitting on this basis as it will lead to too many lines being created (potentially) from just one accounting document. In that case I would recommend that you assign the profit centers (in groups) to segments, and do document splitting on a segment basis. If, however, you do not have that many profit centers, or you are relatively new to SAP and your profit centers are set up for segment reporting, then you do not need to also assign the segment scenario, as I believe it will be unnecessary duplication. 

A key tool that exists with EHP 5 is profit center reorganization. Here you can delete, merge, split, and retroactively repost profit centers when a major organization change takes place.

Dave Hannon:

Hi, Paul. Any tips on how best to configure FI to comply with US GAAP requirements for segment reporting? Thanks.

Paul Ovigele:

To achieve segment reporting, you need to activate document splitting. This is currently the best way to ensure that you get a full balance sheet for a noncompany code object. Note that although it is called “segment reporting,” it does not mean that you need to use a segment for document splitting. You can use other dimensions such as profit center, business area, or even a custom field. It depends on what is most practical to your business. Three important things to ensure are that:

(1) You have set up the relevant dimension (e.g., segment, profit center, etc.) as a document splitting characteristic;

(2) You have set up the characteristic to be zero-balanced and;

(3) You have set it up to be mandatory

Laura Casasanto:

Hi, Paul. Could you help me understand the difference between Dummy Profit Center and Default Profit Center? Thanks.

Paul Ovigele:

Hi, Laura. These are sometimes two very confusing terms. They basically do the same thing, which is automatically assigning a profit center to an item when none currently exists. However, the dummy profit center is populated automatically by the system, while the default profit center is manually assigned to a configuration table for the relevant GL accounts.

Note that the dummy profit center no longer needed for the new GL, while the default profit center is still used, and can be assigned using transaction FAGL3KEH.

Laura Casasanto:

Got it. Thank you for the clarification!

Sanjay Wagh:

Hello, Paul. To upload mass journal entries, I know that there are two options:

1. Third-party solutions which cost extra

2. Custom programs which could have bugs.

Is there any other option/s you are aware of to meet this requirement? Thanks.

Paul Ovigele:

Hi, Sanjay. Two standard tools that you can use are as follows:

(1) LSMW

(2) CATT 

Both involve setting up the fields that you want to upload and entering them into a predefined template. Personally, I prefer using LSMW because I find it more user-friendly and flexible. CATTs are also good, but I believe they are no longer accessible with the newer versions of SAP (from ECC 6.0). Instead, you need to use eCATT.

Gary Byrne:

One last question, Paul. Can you share any data preparation and/or management techniques to ensure a smooth conversion to the material ledger?

Paul Ovigele:

Yes. The things to consider upon conversion to material ledger are as follows:

– Ensure that all plants in the company code are activated for material ledger;

– Activate material ledger at the start of the period (to ensure that all inventory movements for the period are captured);

– Ensure that no inventory transactions are made during production startup

– All FI currencies should be enabled in material ledger.

Gary Byrne:

Thanks to all who posted questions and followed the discussion!

A full summary of all the questions will be available here in the Financials Forum and in the Financials Group. I encourage you to join these groups for ongoing information and additional resources. You can also listen to Paul’s recent interview for additional tips and work-arounds.

And thank you again to Paul for joining us today.

Paul is also a long-time technical advisor for Financials Expert. You can read his articles and find FI resources and expertise — as well as other validated strategies, step-by-step instructions, and best practices — from Financials Expert.