SAP – What is Profitability Analysis?
SAP – Profitability Analysis
Profitability Analysis in SAP Controlling Module (CO-PA) is a widely discussed and used tool available for very detailed analysis. CO-PA provide effective tools for analyzing profitability in your organization.
We can find a lot of information about CO-PA on web as well as on SAP’s help website.
Profitability using SAP Financials (FI)
Now someone may debate that profitability is available in Financials Module then what is the need for a separate tool (CO-PA) for the same?
To answer this question let us try to find out the levels at which Profitability can be derived using FI Module.
These are the four levels using which we can derive profitability from Financials (FI) Module.
Now just imagine about your market, at how many levels do the Marketing Manager need Profitability?
Do you think the above four levels can help him make decisions about which product should be promoted more and which in which region? The answer is big big NO………
To meet the requirement of your Sales / Marketing / Management we need to have CO-PA available as part of our reporting.
So to conclude, reporting from Financials are useful, no doubt, but they are designed from Financial and Statutory Reporting stand point. Hence Financials reports can’t fulfill specific requirements of other departments when it comes to strategic decision making about products.
What help.sap.com says about CO-PA?
The application CO-PA lets you analyze the profitability of segments of your market – structured according to products, customers, orders, and summarisations of these and other characteristics – and organizational units such as company codes or business areas. The aim is to provide your sales, marketing, planning, and management organizations with decision-support from a market-oriented viewpoint .
CO-PA can be used by companies in any branch of industry (mechanical engineering, wholesale and retail, chemical, service industries and so on) and with any form of production (repetitive manufacturing, make-to-order manufacturing, process manufacturing). The data can be analyzed by period, or by order or project.
Source of data
CO-PA can provide you reports based on may dimension (Characteristics) most of which are already available for use in standard SAP. In case where we do not find the required dimension, we have option to create customised Characteristics to help in decision making.
CO-PA itself does not generate any data and the information available for reporting is flown from other modules. Given below is the brief information about the sources of data for CO-PA
Sales and Distribution
All the sales related data from Sales Invoices, Debit Memo, Credit Memo etc. is fetched from Sales and Distribution (SD) Module.
All the material related data like Revaluation, Physical Inventory Differences, Price Differences etc. is passed by Material Management (MM) Module to CO-PA
In cases where Project billing is done (Engineering Industry with complex projects), the sales related information is fetched from Project Systems rather than Sales and Distribution Module, even though the milestone billing may be done from SD module.
Controlling is an important part of data for CO-PA. Controlling passes most of the information like Production Variances, Costs from Cost Centre (Assessment), Internal Order Cost etc.
Finance has an option to post expneses directly to Profitability Segment while posting of Primary Costs. Profitability Segment is one of the CO Object along with Cost Centre, Order etc.
Customer Service Module can be implemented in service industry. In this case the data of sales is captured from Customer Service (CS) Module.
This post may help you understand the basic concept of CO-PA.
In the forthcoming posts we will delve further in SAP’s most dynamic and flexible tool called Profitability Analysis.
Till then have a great day ahead………