SAP – Types of Profitability Analysis
SAP – Types of Profitability Analysis
Profitability Analysis (CO-PA) as we saw in the previous post is one of the most important tool available in SAP for MIS reporting.
The Profitability Analysis in SAP is divided into two methods which have their own way of working. Given below is the list of methods available in SAP:
Costing Based Profitability Analysis
Account Based Profitability Analysis
In this post we will try to understand about both the methods in brief.
Account Based Profitability Analysis
Firstly we will try to look into the Account Based Profitability Analysis.
Following explanation will help us understand how it works:
What SAP says about this method
This type of profitability analysis enables you to reconcile cost and financial accounting at any time using accounts. In contrast to costing-based profitability analysis, this type uses cost and revenue elements, which gives you a unified structure for all of accounting.
The system posts all revenues and costs to both Financial Accounting and Profitability Analysis at the same time and using the same valuation method. This means that the cost of sales is posted to Profitability Analysis at the point of goods issue.
What does it mean?
Under this method all the amounts are posted in Finance as well as CO-PA at the same time. Under this profitability, the amount in CO-PA always tie with Financials.
Unlike “Costing Based CO-PA” you don’t need Cost/Revenue Elements and their mapping here.
Costing Based Profitability Analysis
Now let’s look into the Costing based Profitability Analysis:
What SAP says about this method
This type of profitability analysis is primarily designed to let you analyze profit quickly for the purpose of sales management. Its main features are, firstly, the use of value fields to group cost and revenue elements, and, secondly, automatic calculation of anticipated or accrual data (valuation). The advantage of this method is that data is always up to date and therefore provides an effective instrument for controlling sales.
What does it mean?
The working of this method can be understood as below:
Posting of Data
Under this method unlike “Account Based CO-PA” the values are not posted immediately. Every value is posted in CO-PA based on certain logic. In some cases they post automatically and in some cases they are to be done manually. We will try to understand both the scenarios below:
Cost/Revenue Elements (Automated)
Under this method, all the Revenue and Primary Cost General Ledger Accounts can not be posted directly to CO-PA as in “Account Based PA”. Under this method we need to create an element known as “Value Fields” .
Now let’s see how Finance General Ledger Accounts get posted to the Value Fields.
Sales Invoicing (SD)
In case of Sales invoices posted through Sales and Distribution Module the General Ledgers are not directly mapped to Value Fields. Instead the Sales Condition Types in SD Module are mapped to the Value Fields in CO-PA (Transaction Code KE4I). This is done to capture the Real and well as Statistical Condition Type Data available under Sales Pricing Procedure.
Real Condition Types
The Real Condition Types contain value that are going to be posted to Finance. For e.g. Revenue, Discounts, Taxes, COGS etc.
Statistical Condition Types
Statistical Condition Types contain values which do not post to Finance but have greater significance for either calculation in SD or analysis under MIS Reporting. For e.g. MRP of a product, working of margins to be allowed to dealers (FMCG). This data does not have any accounting importance and is very important when it comes to reporting.
Material Management (MM)
Under Material Management there are certain instances where primary cost is booked. This cost can be automatically posted to CO-PA. Following types of cost are involved in MM Module that can be transferred to CO-PA automatically:
Manual Revaluation
Revaluation due to Cost Estimate Run
Price Rate Differences in Vendor Invoices
Price Rate Differences in Material Transfer
Physical Inventory Differences etc.
In these cases, we are required to map these Cost Elements (General Ledger Accounts) to particular Value Fields. They are generally mapped under a separate “Value Field” and considered as a part of COGS.
Cost/Revenue Elements (Manual)
there are certain values where automatic posting is not possible. But in these cases we can define certain degree of automation which takes care of the posting in CO-PA. But at broader level they can be treated as manual transfer to CO-PA.
Let’s try to see under what scenario we have to transfer the values manually to CO-PA
Controlling Module
Cost Allocation
The costs booked on Cost Centre during normal processing have to be transferred to CO-PA at the period end. This process is called Cost Centre Assessment to CO-PA. In this process, we create “Assessment Cycles” for the set of Cost Elements manually and define the “Value Fields” / “Characteristics” where the cost will appear in CO-PA.
Production Variances
Production Variance is the difference between Standard Cost calculated by the system (as per BOM and Routing or Recipe) and actual cost incurred during production. For transfer of this cost to CO-PA the Variance Cost Element is to be mapped to “Value Field” in configuration (PA Transfer Structure) and the system automatically posts Production Variance value to the relevant “Value Field” upon settlement of Production/Process Order at period end.
Internal Orders
Internal Orders are another Cost Object that is available for booking of costs. While creation of Internal Order we have to define the Settlement Rule which decides where the cost will be transferred upon settlement. Under Settlement Rule, we can define the Characteristics where cost will be posted under “Profitability Segment”. In this case the Mapping of Cost Element to Value field is done in PA Transfer Structure
Project Systems (PS)
In Project Systems we can create Work Breakdown Structure (WBS) Elements or Networks which work as Cost Objects and can bear costs. Under these WBS Structure / Networks we have to define the settlement Rule which identifies the receiver of the cost upon settlement in period end. In the settlement Rule we have to define the Characteristics on which this cost will be posted. The mapping of Cost Elements to Value fields in this case is done in PA Transfer Structure.
Finance (FI)
There are many direct costs where information about various CO-PA Segments is available. In such cases, the Finance line item has option to directly post the values to CO-PA. Under every entry the user has to enter the Characteristics where the values should be posted, with regards to Value Fields, the mapping of Cost Elements to Value Fields is to be maintained in PA Transfer Structure.
With this information we will close this post and hope the post has been informative to you.
In all the cases apart from values flowing from Sales Invoices, the mapping of Cost Element to CO-PA Value Fields is maintained at PA Transfer Structure.
What Next?
We will continue our understanding of CO-PA further in the forthcoming posts.
Have a great day ahead……..
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References
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