Gain Control of Your IT Environment: Q&A on Navigating the Controlling Options of Your SAP System

There are more than a dozen controlling options available in the SAP system. Determining how to best interpret those options depending on how your organization stores data and handles reporting and training requirements can be a challenge.

Financials 2016 speaker Rohana Gunawardena recently took readers’ questions on how to choose the most optimal solution to meet your organization’s needs. He answered questions about the different sub-modules in the SAP controlling functionality and which fits the best IT scenario, such as:

• How does SAP S/4HANA Finance impact CO data structures?
• We don’t currently use Functional Area for reporting, but know we would like to use it. Is it possible?
• What is the best way to reorganize an SAP system where the Chart of Accounts has reached its limits?
• Once a system is productive, is it possible to move to a single Controlling Area, if there are currently multiple?
• What are the benefits of the SAP Revenue Accounting and Reporting module compared to classis SD Revenue Recognition?

Transcript

Natalie Miller, SAPinsider: Hello and welcome to today’s live Q&A on controlling options for your SAP environment. Thank you for joining us. I’m Natalie Miller, features editor of SAPinsider and insiderPROFILES, and I’m happy to introduce today’s panelist, Rohana Gunawardena, co-head of the SAP practice division at Quality Systems & Software (QS&S).

Rohana has been working with SAP since 1992 and throughout his career has assisted multiple clients on detailed system correction projects, such as correcting inventory balances, controlling area reorganizations, retrospectively activating group currency, and optimizing intercompany accounting transactions. He is a regular speaker at many SAP conferences — and will be speaking at the upcoming Financials 2016 event in Las Vegas next month!

Hi, Rohana, thank you so much for being here today.

Rohana Gunawardena, QS&S: Natalie, thanks for inviting me to this Q&A and for the great introduction. Also, thanks to everyone who has taken the time to join this Q&A session. I am glad to see there is so much interest in this topic, as a lot of questions are already entered.

Natalie Miller: Thanks, Rohana! There are some great questions from readers already waiting for you, but to kick things off, can you share your thoughts on the overall controlling philosophy? Do you find businesses reluctant to adopt CO? If so, why, and also, why shouldn’t they be reluctant to move in this direction?

Rohana Gunawardena: Natalie, thanks for the great introductory questions. They match well with questions I get asked frequently, where users are confused about the different modules in CO. A lot of this confusion is due to U.S.-based users having been educated with a different accounting philosophy than Germans.

In the U.S. system, there is an expectation that all accounting, both financial and managerial, match up to the trial balance, balance sheet, and P&L with consistency between financial and managerial accounting.

The SAP CO module is based on the German Grenzplankostenrechnung (GPK) management accounting philosophy. This emphasizes that financial and managerial accounting do not have to match, as they address different audiences and they need different tools.

In early releases, CO functionality focused on GPK accounting exclusively; now, the functionality has been rounded out with, for example, the addition of account-based CO-PA.

In the US, GPK is better known as Resource Consumption Accounting (RCA), which was built on the foundation of GPK.

To address the question of, “Do you find businesses reluctant to adopt CO?,” I find most SAP Financials customers use CO as well, but often just for Cost Center Accounting or other, simpler CO modules where the customer tries to use the functionality to support US accounting philosophy. The real question is the extent of CO adoption, which varies widely across customers.

Comment from David: When implementing CO planning functionality for high-volume turnover clients (thousands of customers), we’re currently making use of CO planning functionalities, including Planned Order Settlement, CO-PA Valuate process for alternate units, revenue and discount pricing, and cost of sales (saved future standard costs). We’re also using Assessment Cycles to have a complete Actual vs Plan Income Statement within the CO-PA module. Is this still the preferred ECC planning solution? If not, can you advise on preferred planning solutions and ideas where planning needs to go down to the product and customer grouping level?

Rohana Gunawardena: David, thanks for your question. Over time SAP has changed its preferred primary planning modules, such as planning in CO, Integrated Planning, SEM-BPS, and BusinessObjects BPC (Business Planning and Consolidation). Currently the preferred offering from SAP is BusinessObjects BPC .

However, I tell clients to look at the cost benefit of any change. If you already have an effective system using CO-PA planning that you have tuned to your business requirements, it makes sense to continue using it. On the other hand, if your users are looking to adopt BusinessObjects BPC for consolidation or another functionality, it may make sense to switch.

Comment from Sharad: How can companies that wish to send cross charges to group companies in different countries use CO allocation cycles when a mark-up and/or taxes are involved?

Rohana Gunawardena: Sharad, this is a very interesting question. It is a very effective way to use the more advanced CO functionality.

In general the answer is yes, but it depends a great deal on exactly what the company is trying to achieve, the company’s business processes, the associated SAP logistics functionality being used, and the tax environment of the customer.

I have worked on this type of functionality with customers, and achieving an effective solution needs quite a bit of planning. In most cases these customers were larger companies with multiple company codes.

A typical scenario would involve a company in Europe with a commissionaire base sales structure but with services provided by local companies. The local company codes need to invoice the commissionaire company codes for the services they provide, which is triggered by intercompany billing from the SAP service order.

This scenario may or may not be similar to what you are thinking. Feel free to email me at Rohana@QSandS.com to discuss your scenario in more detail.

Comment from Aruna: I have question on RAR. For a client implementing RAR for a specific business scenario, do they have to pass all revenue-related transactions though RAR, or can the client pick and choose what goes through RAR and what through classic SD?

Rohana Gunawardena: Aruna, I am currently working on a RAR project, so this is a question I have addressed directly.

From a systems point of view, RAR is configured by SD Item Category, so you can activate it for one item category or for all.

In the long term (after a two-year comparative period), having RAR and classic SD Rev Rec running in parallel is not a good idea. An important question for customers moving from Classic SD Rev Rec to RAR is, should only the item categories configured for Classic SD Rev Rec be configured in RAR, or should all item categories be processed through RAR? For the sake of consistency of accounting and simplification of reporting, there is a strong argument for all transactions to go through RAR, even if they are not subject to Classic SD Rev Rec today.

Comment from Julie: We may be setting up a new company in the future (in a different currency) and are wondering what the pros and cons are of using the same CO area or a different CO area.

Rohana Gunawardena: A single controlling area:

• Allows cross-company controlling transactions, e.g. allocations and distributions
• Supports cross-company logistical processes, e.g. cross-company service orders
• Support cross-company CO reporting, e.g. IT expenses across the enterprise
• Reduces replication of configuration

Multiple controlling areas (one per company code):

• Allow company-specific configuration in cases where configuration is done by controlling area
• However, it’s considered best practice to have a single or as few as possible controlling areas

I have personally worked on controlling area merger projects where customers who had one controlling area per company code moved to a single controlling area to be able to support their intercompany business processes.

Julie, I hope this helps you. Do reach out if you need more information.

Comment from Julie: Yes, thanks. It gives us something to think about!

Comment from Ingrid: My company is evaluating a move to S/4HANA. How does S/4HANA Finance impact CO data structures?

Rohana Gunawardena: Ingrid, this is a common question I get, and I will be addressing it in presentation slides at the conference.

For participants not up on SAP terminology, “S/4HANA Finance” is the new name for “Simple Finance.”

From a simple end user and even analyst perspective, there is no change. At a technical level, SAP has simplified the tables at a database level to remove data duplication and increase data transaction and reporting speeds. However all legacy tables, e.g. COSP, COSS, and COEP, are maintained as views on the new tables, so any Z reports using the legacy tables still work but are faster. Also, any SE16 or other direct table display will be supported.

For optimum performance with new reports, your development team needs to learn the new FI & CO table structure and know which legacy tables can be replaced.

Comment from Sharad: Hi, Rohana. I wanted to know if SAP CO allocations could be leveraged to do intercompany allocations across different countries as well, especially if there is a mark-up and/or a tax involved?

Rohana Gunawardena: Sharad, again, the simple answer is yes, but I suspect you are looking for more detail on how to accomplish this. Without a more detailed analysis that information is hard to provide —I would need to know, for example, how the mark-up is calculated, whether it is a simple percentage for all transactions or material specific, the number of different tax rates required, how many countries’ taxes are covered, if the taxes are simple VATs or more complex taxes, etc.

Comment from Sharad: Rohana, thanks. The requirement is quite similar. However, we are unable to resolve the mark-up and tax from the standard allocation cycles. I will reach out to you later in case we need to proceed further.

Comment from Nicolas: Hi, Rohana. The invitation I got to join this chat mentioned several items that were going to be addressed, and one that caught my attention was the question of merging controlling areas when you started with multiple. Can you elaborate on how feasible that is and what needs to be considered or done to make that happen? Thanks!

Rohana Gunawardena: Nicolas, as I mentioned in my response to Julie, I have personally worked on controlling area merger projects where customers who had one controlling area per company code moved to a single controlling area to be able to support their intercompany business processes.

Typically, these projects take 12-16 weeks and are of moderate expense. Given the alternative of re-implementing SAP, which is often suggested, it is quick and cheap.

The main areas to consider are:

• Customer resources available to support testing
• Naming conventions for merged objects (for example, CoCd 0001 and CoCd 0003 both have cost center 8000. What should it be called in the new merged controlling area?)
• Review any controlling area-specific configuration and define values for the merged controlling area
• For a company code to be assigned to a controlling area, the chart of accounts and fiscal year variant must match, so review these settings for your company codes

Do contact me at Rohana@QSandS.com. I can provide you with more information on a controlling area merger.

Comment from Guest: A few clients are still on Classic GL, not New-GL, and cross-company code primary postings are controlled via FI. For clients on New-GL, we have activated FI-CO Realtime Integration. What is the best manner to control cross-company maintenance postings through activities? Currently we don’t generate FI entries via the CO module for balancing the two modules at company code. Any recommendations for controlling or balancing the secondary activity allocations between company codes within controlling areas? Thanks.

Rohana Gunawardena: I am going to assume your question is “Can FI-CO Realtime Integration be activated for secondary cost elements?”

The answer is yes, FI-CO Realtime Integration can work for secondary cost elements. However, as secondary cost elements do not have a matching FI-GL account, you have to use account determination in real-time integration to define an FI-GL account. Do look at CO substation call-up point “60,” where you can define a mapping of secondary cost elements to FI-GL account. In the IMG, look for they node “Define account determination for real-time integration.”

Comment from Dammah: How do you do a detailed actual profit margin analysis to the minute level if CO-PA is not structured well? Can simple condition tables like A005 and KONP link to the actual data like VBRP/VBRK?

Rohana Gunawardena: Dammah, my first option would be to look at restructuring CO-PA. Given the richness of CO-PA functionality, it is better to work with it than to have to add on Z reporting. However, I do realize changing CO-PA may be a large undertaking your business users may not want to proceed with.

In theory, condition tables like A005 and KONP can be linked to the actual data tables, e.g. VBRP and VBRK, to produce custom reporting. In practice, this type of reporting starts with a simple report spec form that gets more and more complicated as users realize how many pricing and business process variations there are. Also, as new pricing and functionality is added, the custom coding needs to be updated.

Modifying CO-PA modules that are already live is something QS&S has worked on many times, e.g. activation of Dual CO-PA (both costing-based and account-based CO-PA at the same time), restructuring of CO-PA reports to focus on new characteristics, addition of new characteristics post go-live, etc.

Do get in touch at Rohana@QSandS.com if you would like a more detailed analysis of your options.

Comment from Siva: We have implemented PC with ML and costing-based CO-PA. My management is looking for a parallel P&L-like budget and forecast along with a current P&L with version “0.” They are looking for a P&L with alternate prices like Planned Price 1, 2 & 3 in costing tab. Based on that, they would need to analyze and prevent losses if the raw material prices are going up, and at the same time, they would like to see the P&L impact. 

To my knowledge, there is no standard SAP CO process that fulfills this requirement, but as a SAP CO person, I can provide them with three different costing variants to populate the planned prices 1, 2 & 3.

My question is, is there any way in SAP CO to get the parallel P&L using these planned prices 1, 2 & 3?

Rohana Gunawardena: Your requirement is quite similar to the SAP transfer pricing scenario using ML where a single transaction can have up to three valuations. This is one approach I would consider. Each valuation can have its own costing based on planned prices 1, 2 & 3. FI-GL can have up to three additional valuation buckets to support the three P&Ls you require.

FI-GL supports up to four currencies per transaction: Transaction Currency, Local Currency 1, Local Currency 2, and Local Currency 3.  Local Currency 1 is defined in the company code master data. Usually Local Currency 2 is set as Group Currency (the enterprise-wide currency). The Local Currencies can have valuation types to support the additional costing.

Your major stumbling point will be that FI-GL most likely does not have the correct currency buckets set up to support your reporting requirements, and a post go-live conversion is required to set up the buckets.

Do contact me at Rohana@QSandS.com, and I can go through the options in more detail with you.

Natalie Miller: As we reach the end of today’s Q&A, I’d like to thank you all for joining us and for all these great questions!

Thanks to you, Rohana, for being here today and for these insightful answers!

Rohana Gunawardena: Natalie, thank you for all of the support setting up the Q&A and getting so many participants.

Thank you to all of the participants for the great questions they have submitted.

I will be presenting at SAP Financials 2016 in Las Vegas from March 15-18, 2016.

I will be presenting six sessions:

• How to effectively report operating expenses with standard SAP ERP Financials functionality
• Expand your reporting options with an extended G/L code block
• Using validation and substitution rules with SAP General Ledger
• Deciphering the CO settlement process
• Navigating the controlling options in your SAP system: A practical guide
• Tips and techniques for identifying and analyzing CO data

Natalie Miller: Thanks, Rohana! Readers can click here for more information about the Financials 2016 event, including a full list of speakers and details about how to join us in Las Vegas!

Rohana Gunawardena, co-head of the SAP practice division at Quality Systems & Software (QS&S)
Rohana has been with SAP since 1992. He has assisted multiple clients on detailed system correction projects, such as correcting inventory balances, controlling area reorganizations, retrospectively activating group currency, and optimizing intercompany accounting transactions.
He has spoken at many SAP conferences and has published more than 20 magazine articles in SAP Financials Expert, SAP SCM Expert, and the former SAPtips magazine on various aspects of SAP. His presentations have focused on financial module selection, the order-to-cash process, global rollouts, business segment reporting, cross-module integration, and the financial impact of SCM transactions. Rohana is widely acknowledged as a leading SAP expert.
Rohana has been speaking at SAP conferences since 2004 and writing for SAP Experts Magazine since 2003. He is a Fellow of the Institute of Chartered Accountants in England & Wales and has previously worked with the consulting practices of Accenture, Deloitte, and PwC. Rohana is a graduate of University of Manchester, United Kingdom.