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Introduct ion toControlling
Reporting Requirements for
Cost and Profitability Management
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© SAP AG 2001, Title of Presentation, Speaker Name 2
Introduct ion to Controlling
Controlling: Integrating financial and operational information What the online transaction processing system (OLTP) does
Why add Business Information Warehouse?
Introduction to Overhead Management Typical reporting requirements
What an online analytical processing system (OLAP) adds
Introduction to Product Cost Controlling Typical reporting requirements
What an online analytical processing system (OLAP) adds
Introduction to Profitability Analysis Drill-down reporting in R/3
What a dedicated online analytical processing system(OLAP) adds
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© SAP AG 2001, Title of Presentation, Speaker Name 3
What is Controlling?
Integrating financial and operational information
Overhead Cost Management
Activity Based Costing
Product Cost Planning
Cost Object Controlling
Actual Product Costing
Profitability Analysis by Market Dimensions
Responsibility Accounting by Profit Centers
Transfer Pricing
Integrated Sales & Net Profit Planning
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CO: Integrat ing financial and operat ional information
ECEC--PCAPCA
P r of i t C en t er A c c o un t i n g
Product Cost
Controlling
Product Cost
Controlling
Profitability AnalysisProfitability Analysis
Profitability
segment
COCO
PCPCOverhead Cost ManagementOverhead Cost ManagementCOCO
OMOM
COCO
PAPA
Activity
types
Cost Center
Processes
Sales Order
Projects
Manu-
facturing
Order
Internal
orders
Material-
valuation
Material-
valuation
Cost Element AccountingCost Element AccountingCOCO
CELCEL
HRHR HumanRessource
Sales andDistribution
Sales andDistribution
MaterialsManagement
MaterialsManagement
MMMM SDSDVertriebVertriebProductionPlanning
ProductionPlanning
PPPP
Financial AccountingFinancial AccountingAsset
RevenueExpense
FIFI
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Cost Flow s: Overhead Management
Act. Plan
Documents
Value flows
Salaries
Benefits
FIFI Direct
postings
Goods Issues
FIFI--AAAA
Planning
HRHR
COCO--
OMOM
Allocations
- Activities
- Orders
Depreciation
MMMM
Cost Center
Salaries-Salaries
-Social Expense
Travel
-Hotel
-Drive
Office
-Building
-Office Supplies
Shared Services-Maintenance
-Energy
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Cost Flow s: Product Cost Controlling
Act. Plan
DocumentsValue flows
MMMM Goods
COCO--
OMOM Activity UsageOverhead
COCO--
ABCABC
Goods Receipt
Settlement
Planning
MMMM
Manu-
facturing
Order
Process Usage
Material Usage
Labor Machine Time
Overhead
Procurement
Deliver to Stock
i s s u e s
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Revenue and Cost Flow s: Profitability Analysis
Sales quantity
Sales revenue
- Rebates
Net revenue
- Direct costs
- Var. prod. costsContrib. margin I
- Fixed prod. costs
Contrib. margin II
- Variances
- Overhead costs
Operating profit
Act. Plan
DocumentsValue flows
SDSDTransfer of
billing docs
FIFI
COCO--
PCPC
Direct p o s t i n g s Valuation
using costestimates
COCO--
PCPC FIFI
COCO--
OMOM
Transfer of
overhead
Planning
Profitability
segment
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Why add Business Information Warehouse?
Replicate transactional data in Business Information
Warehouse
Free resources in OLTP (Online Transaction
Processing) system
Optimize OLAP (Online Analytical Processing)system for reporting needs
Unify reporting across all functional areas and R/3
applications
Include non-R/3 data in reports
Make reports available to occasional users via Web
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Introduct ion to Controlling
Controlling: Integrating financial and operational information
What the online transaction processing system (OLTP) does
Why add Business Information Warehouse?
Introduction to Overhead Management Typical reporting requirements
What an online analytical processing system (OLAP) adds
Introduction to Product Cost Controlling Typical reporting requirements
What an online analytical processing system (OLAP) adds
Introduction to Profitability Analysis Drill-down reporting in R/3
What a dedicated online analytical processing system(OLAP) adds
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Overhead Management in Brief
Generally Involves:
Real time assignment of expenses to cost center Expenses may also be assigned to orders, projects,
or business processes
Allocation of costs to profitability segments or other
cost centers using tools such as distribution and
assessment, often at period close
Planning of anticipated expenses
Advanced Overhead Management:
Production cost centers use activity types to
allocate machine time, labor and so on to
manufacturing orders
Cost Center
Other cost centers use activity types or business
processes to allocate costs to profitability segments
Activity/process prices and quantities
Cost component split for each activity price
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Overhead Management: User Groups
Manager:
Responsible for one or more cost centers Cost center reporting is not main job
Also uses HR reports
Also uses reports from other areas
Manager‘s reports need to be
Easy-to-use
Intuitive
Just like those in other areas Cost Accountant:
Responsible for wider functional area
Familiar with powerful reporting tools
Big picture and detail
Cost Accountant‘s reports need to
Support tasks like planning, period close
Support trend analysis
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© SAP AG 2001, Title of Presentation, Speaker Name 12
InfoCube for Cost Center
Total Actual Costs in Thousands
1999 2000 2001
Production Material 120 150 190
Salaries 240 250 300
Energy 100 230 340
Sales Material 100 100 90
Salaries 102 114 149
Energy 123 123 156Administration Material 23 27 28
Salaries 176 193 198
Energy 45 47 48
Facts
Year
CostCenters
Cost Elements
Total ActualCosts in
Thousands
Production
Sales
Administration
1999 2000 2001
Material
EnergySalaries
4745
InfoCube
48
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© SAP AG 2001, Title of Presentation, Speaker Name 13
Overhead Costs for the Line Manager
Task: Analyze total actualcosts for your cost center
by cost element and year
Total Actual CostsSales Sales
Cost Elements 1999 2000
Material 100 100
Salaries 102 114
Energy 123 123
Total by Cost Element 325 337
WorkbookProduction
Sales
Administration
1999 2000 2001
Year
CostCenter
Material
EnergySalaries
Cost Elements
Total Actual Costs
Query
O h d C t f C t A t t (1)
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© SAP AG 2001, Title of Presentation, Speaker Name 14
Overhead Costs for Cost Accountant (1)
Task: Analyze actual
costs for 2000 by cost
centers and cost
elements
Production
Sales
Administration
1999 2000 2001
Year
CostCenters
Material
EnergySalaries
Cost Elements
Total actual costs
Query
Actual costs: 2000
Cost Center / Cost Element Material Salaries Energy
Production 150 250 230
Sales 100 114 123
Admini stration 27 193 47
Total for Cost Centers 277 557 400
Workbook
O h d C t f C t A t t (2)
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© SAP AG 2001, Title of Presentation, Speaker Name 15
Overhead Costs for Cost Accountant (2)
Task: Analyze actual
salary costs by cost
center and fiscal year
Production
Sales
Administration
1999 2000 2001
Year
CostCenters
Material
EnergySalaries
Cost Elements
Total actual costs Query
Cost Centers1.999 2.000 2.001
Production 240 250 300
Sales 102 114 149
Ad mi nistrat ion 176 193 198
Total for Cost Centers 518 557 647
Workbook
Di i f I f C b f O h d M t
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© SAP AG 2001, Title of Presentation, Speaker Name 16
Dimensions of InfoCube for Overhead Management
Partners
Cost Element
Value Type/Version Unit of Measure
Time
Data Packet
Valuation
Currency Type
AccountAssignment Object
Cost Center
Order
Network
Network ActivityWork Breakdown
Structure Element
Reinventing order and project reporting
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© SAP AG 2001, Title of Presentation, Speaker Name 17
Reinventing order and project reporting
Show me the
costs for allResearch and
Development
projects
Cost Center
Jobs/
Orders
Projects
Networks
Show me thecosts for all
Marketing
orders
Show me the
costs for allMaintenance
orders
Why keep Overhead Management in R/3?
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© SAP AG 2001, Title of Presentation, Speaker Name 18
Why keep Overhead Management in R/3?
Cost Center Accounting receives costs from HumanResources, Asset Management, MaterialsManagement modules
Transfer of overhead to Profitability Analysis using
assessment cycles or activity allocations
Transfer of overhead to Product Cost Controllingusing activity allocations and surcharges
Further transparency if Activity Based Costing used
Why use BW for Cost Center Reporting?
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© SAP AG 2001, Title of Presentation, Speaker Name 19
Why use BW for Cost Center Reporting?
Benefit from OLAP structure:
Which costs did my cost center incur?
How have wage costs increased over time?
Which cost centers incurred wage costs?
Special infocube for orders and projects assigned to cost centers Integrated report rather than jumps via „partner object“
View all relevant data
Multiple currencies and valuations Multiple plan versions
Build highly personalized queries and workbooks for occasional users
Only show what is relevant (not whole CO menu)
Only show „my cost center“, „my orders“ (no more confusing selection screens)
Show year-to-date, current month (no more manual entry of period to be
reported)
Publish to Web
Should I st ill report in R/3?
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© SAP AG 2001, Title of Presentation, Speaker Name 20
Should I st ill report in R/3?
Use standard R/3 reports to check that extractors are functioning
correctly and queries are defined correctly
Support period close activities
Assessment cycles
Target Costs
Actual activity prices
Variances
Audit trail
Line items
Documents from other areas
Corrections
Introduct ion to Controlling
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© SAP AG 2001, Title of Presentation, Speaker Name 21
Introduct ion to Controlling
Controlling: Integrating financial and operational information
What the online transaction processing system (OLTP) does
Why add Business Information Warehouse?
Introduction to Overhead Management
Typical reporting requirements
What an online analytical processing system (OLAP) adds
Introduction to Product Cost Controlling
Typical reporting requirements
What an online analytical processing system (OLAP) adds
Introduction to Profitability Analysis Drill-down reporting in R/3
What a dedicated online analytical processing system(OLAP) adds
Product Cost Controlling in Brief
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© SAP AG 2001, Title of Presentation, Speaker Name 22
Product Cost Controlling in Brief
Generally Involves:
Calculating standard costs for product at start of year or period
Calculating material usage via BOM (bill of material)
and activity usage via routing
Tracking actual costs via goods issues and
confirmations to manufacturing order
Calculating variances and work in process at period
close
Advanced Product Cost Controlling: Calculating actual costs for product at period close
Updating costs for all products to include variances
Manu-
facturing
Order
from purchasing and production
Multiple currencies and valuations
Make to Order Environments:
Manufacturing order linked to sales order or project
Stock valuation per sales order
Product Cost Controlling: User Groups
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© SAP AG 2001, Title of Presentation, Speaker Name 23
Product Cost Controlling: User Groups
Manager:
Primary responsibility is production
Also needs cost impact of decisions
Manager‘s reports need to
Highlight impact of scrap, rework, ...
Identify orders for sales order X
Cost Accountant:
Responsible for wider functional area
Familiar with powerful reporting tools
Big picture and detail
Cost Accountant‘s reports need to
Support tasks like planning, period close
Support trend analysis
InfoCube for Manufacturing Order
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© SAP AG 2001, Title of Presentation, Speaker Name 24
InfoCube for Manufacturing Order
Total Actual Costs in Thousands
1999 2000 2001
Glassware Material 120 150 190Labor 240 250 300
Overhead 100 230 340
Ceramics Material 100 100 90
Labor 102 114 149
Overhead 123 123 156Plastics Material 23 27 28
Labor 176 193 198
Overhead 45 47 48
Glassware
Ceramics
Plastics
1999 2000 2001
Material
OverheadLabor
Year
ProductGroups
Cost Elements
484745
Facts
Total ActualCosts in
ThousandsInfoCube
Product Costs for the Line Manager
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© SAP AG 2001, Title of Presentation, Speaker Name 25
oduct Costs o t e e a age
Task: Analyze total actual
costs for product groupCeramics by cost element
and year
Glassware
Ceramics
Plastics
1999 2000 2001
Year
ProductGroups
Material
OverheadLabor
Cost Elements
Total Actual Costs
Query
Total Actual CostsCerami cs Cerami cs
Cost Elements 1999 2000
Material 100 100
Labor 102 114
Overhead 123 123
Total by Cost Element 325 337
Workbook
Product Costs for Cost Accountant (1)
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© SAP AG 2001, Title of Presentation, Speaker Name 26
( )
Task: Analyze actual
costs for 2000 by product
groups and cost elements
Year
Glassware
Ceramics
Plastics
1999 2000 2001
ProductGroups
Material
OverheadLabor
Cost Elements
Total actual costs Query
Product Group / Cost Eleme Material Labor Overhead
Glassware 150 250 230
Ceramics 100 114 123
Plastics 27 193 47
Total for Product Groups 277 557 400
Workbook
Product Costs for Cost Accountant (2)
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© SAP AG 2001, Title of Presentation, Speaker Name 27
( )
Task: Analyze actual
labor costs by product
group and fiscal year
Glassware
Ceramics
Plastics
1999 2000 2001
Year
ProductGroups
Material
Overhead
Labor
Cost Elements
Total actual costs Query
Product Group 1.999 2.000 2.001
Glassware 240 250 300
Ceramics 102 114 149
Plastics 176 193 198
Total for Product Groups 518 557 647
Workbook
Dimensions of InfoCube for Cost Objec t Controlling
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© SAP AG 2001, Title of Presentation, Speaker Name 28
j g
Partner Object:
Material Input
Partner Object:
Business Process
Partner Object:Cost Center/Activity
Type
Partners
Cost Element
Controlling
Area/Plant
Value Type/Version
Unit of Measure
Time
Data Packet
Order/Material
Currency/Valuation
Reinventing the audit t rail
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© SAP AG 2001, Title of Presentation, Speaker Name 29
g
Which
productsused
machine
hours?
Milling Machine
Machine
Hours
Product/ProductionOrder Procure
Raw Materials
GOODS ISSUE
Which
products
used raw
material X?
Which
products
required the
procurement
process?
Which
products did
my costcenters work
on?
Why keep Product Cost Controlling in R/3?
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© SAP AG 2001, Title of Presentation, Speaker Name 30
Product Cost Controlling perfectly integrated withvalue flow in R/3
Standard Costs based on BOMs and routings inLogistics
Standard Costs provide basis for inventoryvaluation
Cost tracking per production order, process order,
sales order...
Work in process at period close
Detailed variance analysis
Actual Costs based on multi-level actual costing atperiod close
Why use BW for Product Cost Report ing?
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© SAP AG 2001, Title of Presentation, Speaker Name 31
Benefit from OLAP structure: Top-down: Product costs for material X
Bottom-up: Impact of raw material costs for all products
Time-line
Close functional gaps:
Price history for standard costs (MBEW only contains two periods)
Extract standard costs from material master each period
Material groupings from material master
Free OLTP for production
Extract CO-relevant data from production orders
Production orders can be archived as soon as final settlement is
complete
Should I still report in R/3?
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© SAP AG 2001, Title of Presentation, Speaker Name 32
Use R/3 drill-down reports to check for dataconsistency when testing extractors
Analyze costing run before releasing results for
inventory valuation
Support period close activities
Check work in process
Check variances
Check actual costs (ML)
Check line items
Audit trail
Introduct ion to Controlling
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© SAP AG 2001, Title of Presentation, Speaker Name 33
Controlling: Integrating financial and operational information
What the online transaction processing system (OLTP) does
Why add Business Information Warehouse?
Introduction to Overhead Management
Typical reporting requirements
What an online analytical processing system (OLAP) adds
Introduction to Product Cost Controlling
Typical reporting requirements
Whatan online analytical processing system (OLAP) adds
Introduction to Profitability Analysis
Drill-down reporting in R/3
What a dedicated online analytical processing
system (OLAP) adds
Profitability Analysis in Brief
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© SAP AG 2001, Title of Presentation, Speaker Name 34
Cost and revenue assignment to profitability
segment (group of characteristics) rather than one
object (cost center, order)
Revenue from billing document assigned to
dimensions customer, product, strategic business
unit, and so on
Different levels of cost assignment depending on
type of expense (costs of goods sold,advertising
costs, distribution costs)
Integration with CO-PC (standard costs and
production variances) and CO-OM (overhead,
activity types, processes)
Drill-down reporting in R/3
Profitability
segment
Drill-dow n Reporting in R/3
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© SAP AG 2001, Title of Presentation, Speaker Name 35
Sales Organization
Division
Customer Group
Customer Group RevenueCustomer Group Revenue
01 Retail 2,000,000
02 Wholesale 3,500,000
03 Brokers 2,500,000
04 Mailorder 1,100,000
05 Direct 1,300,000
06 Outlet Malls 2,000,000
07 Factory Stores 1,000,000
S a l e s
O r g a n i z a t i o n
C u s t
o m e r
g r o u p
M a t
e r i a l
D i v
i s i o
n
C u s t o m e r
P l a
n t
Customer Group RevenueCustomer Group Revenue
01 Retail 1,000,000
02 Wholesale 2,500,000
03 Brokers 1,500,000
Customer Group
Sales Org. 1000
Division 007
Sales Organization
Division
Customer Group
Results 6,000,000
InfoCube for Profitability Analysis
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© SAP AG 2001, Title of Presentation, Speaker Name 36
Customer
group
Dept. Stores
Wholesale
Retail
Glass- Ceramics Plastics Pottery Copper Pewter
ware
N
o r t h
S o u
t h
E a s t
R e g i o n
Division
Structure of InfoCube
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© SAP AG 2001, Title of Presentation, Speaker Name 37
Mandatory
Unit of Measure
Time
Data Packet
WBS Element
Organizational
Structure
Plant
Company Code
Controlling Area
Business Area
Material
Material Group
Profit Center
Division
Customer
Customer Group
Sales Office
Distribution Channel
Sales Employee
Value Type
Valuation View
Version
Event Type
Currency Type
Profitability Analysis w ith BW
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© SAP AG 2001, Title of Presentation, Speaker Name 38
Why keep Profitability Analysis in R/3?
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© SAP AG 2001, Title of Presentation, Speaker Name 39
Profitability Analysis perfectly integrated with
value flow in R/3
Consistent matching of revenues earned withcosts incurred
Revenues and sales deductions from SD
Enriched real time with product costs and
accrued costs
Period end allocation of overhead, process
costs, variances
Why use BW for Profitability Report ing?
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© SAP AG 2001, Title of Presentation, Speaker Name 40
No limitations on number of characteristics
No limitations on number of value fields
Consistent Reporting Interface
Reporting in dedicated system (OLAP)
Cross-application report data
Data Storage is used solely for report data
Integration with other SAP products, such as Customer
Relationships Management, Strategic Enterprise Management,…
When to Use Business Information Warehouse
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© SAP AG 2001, Title of Presentation, Speaker Name 41
Multiple R/3 Systems
Combine data from differentorganizational subunits in asingle InfoCube
Harmonize heterogeneousoperating concerns
Group Profitability
Distringuish sales to customers
from sales to affiliated companies Use group cost estimate to
eliminate intercompany profit
Legacy systems
Use staging mechanisms for bulkimports of imported data
High-Volume and Cross- Application Reporting
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© SAP AG 2001, Title of Presentation, Speaker Name 42
Collect ing Data from Several R/3 Systems
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© SAP AG 2001, Title of Presentation, Speaker Name 43
CO-PA CO-PACO-PA
Collect ing Data from Legacy Systems
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Legacy
System
CO-PA
Should I st ill report in R/3?
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© SAP AG 2001, Title of Presentation, Speaker Name 45
Use R/3 drill-down reports to check for data
consistency when testing extractors
Use reconciliation reports to look for postinganomalies
SD/FI -> CO-PA
Order settlement -> CO-PA
Audit trail
Line items
Links to other documents
Corrections