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Operating Concern

Updated: Jun 22, 2020

The basic structure without which we can't even imagine CO-PA

What is an Operating Concern?


An Operating Concern represents a part of organization for which the sales market is structured in a uniform manner. It is an organization unit in accounting which structures an enterprise from the Profitability Analysis point of view.

It is the basic configuration required in SAP for Profitability Analysis tool of Controlling module. Without Operating Concern we can not have Profitability Analysis available in SAP.

What does it help us with?

In order to understand Operating Concern better, we need to know what is Profitability Analysis (PA), PA which is also known as CO-PA i.e. Controlling Profitability Analysis, is a very important tool provided by SAP for the top management to have a bird's eye view of their business. Before we move further, lets first try to analyse what management may require to decide on further course of action for e.g.


  • Sale of a particular product in a particular region for the quarter

  • Margin in a business vertical and the break-up of cost, this helps to identify the type of cost to optimise

  • Performance of a particular SBU in terms of plan v/s. actuals over the last 3 years

  • Year to Date apple to apple comparison of top 100 SKUs so on and so forth

If we speak about Financial Accounting i.e. FI Module reporting, the data mentioned above can't be extracted from the fairly wide range of reports available within it. At such a point in time, CO-PA comes into picture as a fantastic tool with possibility of all the above plus many other reports at click of a button.


This tool due to it's dynamic nature of reporting capabilities can help management to take many tactical/strategic decisions. In other words, we can call CO-PA a Management Accounting tool which provides various MIS reports to management.

In our this post, we are going to limit our understanding of configuration of Operating concern.


Structure


An operating concern is divided logically into two parts viz. Characteristics and Value Fields.Before we go ahead on Operating Concern, we would brief you about the two parts involved:


Characteristics

In this, the Characteristics store the various dimensions of a transaction like Customer Code, Sales Organisation, Distribution Channel, Profit Centre. In other words, we can say that the characteristics store various master data involved and numbers like Sales Order, involved in the transaction. The characteristics in the end act as a criteria to analyse reports.


Value Fields

As suggested by the name itself, the value fields store values involved in the transaction. It contains for e.g. the Basic Price, discounts, quantities etc. for sales invoice and in case of production order it contains the value of production variance.


Implementation Consideration


The creation of an Operating Concern is majorly divided into (a) Definition (b) Assignment (c) Configuring the structure


Definition

IMG Path: Enterprise Structure > Definition > Controlling > Create Operating Concern

System navigates you to the screen as appearing in following Image


Here, on this screen, we create a new operating concern by clicking on New Entries button and the system allows us to enter the four digit code and description for the new Operating Concern as appearing in Image as below:



Once a new Operating Concern is created as shown above, it needs assignment to Controlling Area(s).


Assignment

IMG Path: Enterprise Structure > Assignment > Controlling > Assign controlling area to operating concern


Before we go ahead, with assignment, it would be interesting to know that an operating concern is not linked directly to any company code. It links itself to a company code through Controlling area.


Controlling Area is assigned to an Operating concern and the Company code(s) are linked to Controlling area. Controlling Area acts as an organisational unit which links both operating concern and company code.


System navigates us to the screen as appearing in following Image Under this step we enter the corresponding controlling area for the operating concern.



Assign the relevant Controlling Area to the Operating Concern and the system indirectly assigns the Company Code to the Operating Concern.


Configurations

IMG Path: Controlling > Profitability Analysis > Structures > Define Operating Concern > Maintain Operating Concern


System navigates us to the screen appearing in the following Image.


Once we assign the Operating concern to controlling area, we have to go further into operating concern configuration. This part involves defining the structure of the Operating Concern which involves maintaining/assigning following information/configuration:



In the above screen, we can see that SAP has provided various tabs, we will try to go through various fields under relevant tabs one by one:

Data structure

This tab contains configuration of the structure of the operating concern. We will information on all the aspects under this tab one by one:


Type of Profitability Analysis

The Profitability Analysis is available as Costing Based CO-PA or Account Based CO-PA. Here we can select if this is Costing Based CO-PA or Account Based CO-PA.


Data Structure

The data structure determines the structure of the profitability segments that you can analyze and how costs and revenues are organized. You need to set the attributes in each client individually. In data structure we can maintain Value Fields and Characteristics.


Attributes

The tab Attribute looks as appearing in the following Image:



Operating Concern Currency

Under attributes we maintain the Operating Area currency. Here we can maintain the currency that we want CO-PA reporting in. With the operating area currency we also have an option to activate company code currency as well.


Posting Period Variant

Here we assign the posting period variant to the operating concern.

Allocation control requires the same number of posting periods in the company code and in the assigned controlling area. This means that the number of posting periods in the fiscal year variants must be the same in the company code and in the controlling area. The period limits for the two fiscal year variants must also coincide.


2nd period type - weeks
Update actual data in the second period type Update plan data in the second period type

If you set this indicator, the system will store the actual or plan data in costing-based Profitability Analysis in weeks as well. This increases the data volume in Profitability Analysis significantly, which could lead to significantly slower response times in the information system.


There is no alternative period type available in account-based Profitability Analysis.

Environment

The tab looks like as appearing in image below:



Status of the Cross-Client Part of the Environment

The status indicates whether the cross-client part of the operating concern environment (that is, the programs, screens, and other objects generated for an operating concern) can be used.


Status of the Client-specific Part of the Environment

The status indicates whether the client specific part of the operating concern environment (that is, the programs, screens, and other objects generated for an operating concern) can be used.


Colours indicating statuses
  • "Green light": The environment is active. No further actions are required for the cross-client part of the environment.

  • "Amber light": Either a system upgrade has occurred or corrections (support packages) have been imported into the system. Before you can work with the operating concern, any changes need to be copied to the operating concern environment. No further actions are necessary because the system transfers any changes automatically during the first transaction that accesses the operating concern. The automatic transfer takes a few minutes. To avoid delays in a productive system, SAP recommends that you activate the transfer manually using the Customizing activity Maintain Operating Concern.

  • "Red light": The environment is not active. This situation arises either after the data structures have been activated or if errors occurred during activation. If the latter applies, analyze the action log and try to remove the cause of the error. Use the Customizing activity Maintain Operating Concern to activate the environment.

  • "Extinguished lights": No environment has been activated for the operating concern. You need to use the Customizing activity Maintain Operating Concern to activate the environment.


This way we can configure the Operating Concern and embark our journey onto the amazing world of CO-PA.



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