Configuring the New Commitment Management Solution

Commitments indicate the cost of materials and services that you have requested or ordered. They tie up funds that will become costs at a later point in time.

The commitment management accordingly depicts the cost side of procurement processes in MM purchasing to the account assignment objects. The costs incurred are allocated to business objects such as orders, cost centers or projects.

Obligations result in purchasing through:

• Purchase requisitions (purchase requisition commitments or requisition commitments)

Purchase requisitions define the internal requirements for a material or a service. Purchase requisitions have a control function and can be changed at any time.

• Purchase orders (purchase commitments)

Orders are the contractual request to a supplier to provide certain goods or services under the specified conditions. Short-term, unilateral changes are no longer possible here.

• Funds commitments (funds commitment)

With funds commitments, you reserve funds for a relatively secure cost that you cannot yet assign to a specific business transaction such as a purchase order or purchase requisition.

Commitments management distinguishes three types of commitments, depending on the account assignment object:

• Order commitments:

The commitment is pre-assigned to an order.

• Cost center commitments:

The commitment is pre-assigned to a cost center.

• Project commitment:

The commitment is pre-assigned to a project or a work breakdown structure element.

The preceding figure gives an overview of the modeling approaches used in Commitment Management.

The classic Commitment Management on cost centers does not differ from that on internal orders.

• Increase of Commitments

For example, certain goods are ordered for an order, a cost center or a project. In this case, an order commitment arises in the amount of the order value. The system always displays commitments with the value and, if necessary, the quantity for the cost element, fiscal year and period of the expected cost incidence.

• Currencies of Commitments

The system executes each commitment in the currency of the triggering transaction (for example, in the purchase order currency) and converts the amount into the controlling area, company code and object currency. Conversions are based on the order rate.

• Reduction of Commitments

Business transactions such as incoming goods reduce commitments; Actual costs are incurred on the corresponding account assignment object. This happens until, for example, the "order" business transaction has been completed and the order commitment has been completely reduced.

• Commitments carried forward at the end of the fiscal year

To support the fiscal year closing, you can carry forward the open commitment values ​​from purchase requisitions, purchase orders, and funds commitments to the first period of the next fiscal year. You can select according to account assignment objects (order, cost center or project). If necessary, you can also edit individual documents.

The commitment carry forward is executed for each controlling area.

• New Commitment Management Solution

Creating an extension ledger for commitments activates the new commitment management based on posting documents in the journal.

Posting documents for commitments are posted to this extension ledger so that they can be distinguished from actual postings.

Even if this new type of commitment is activated, the old commitment tables are still posted in parallel so that the old commitment reports and Budget Management continue to work. The following applies to reporting:

• The old commitment reports do not show any commitments based on posting documents in the extension ledger; these are only displayed in the SAP Fiori apps Commitment by Cost Center and Project Cost Report/Budget Report.

The preceding figure describes the most important functional restrictions of the new Commitment Management.

The following is a complete list of all restrictions:

• Only projects (WBS elements) and cost centers are supported as account assignment types.
• No manual commitments are supported.
• No commitment carry forward is supported.
• Only purchase orders and purchase requisitions are supported.
• For Release S/4HANA 1809: The purchase orders and purchase requisitions must be for a material with a material master. Since S/4HANA 1909 purchase orders and purchase requisitions without material master are also supported.
• No separate commitments for freight costs are possible.
• "Planned" commitment - like in the old commitment solution - cannot be reported. Only the "current" commitment can be reported. 
• A GR/IR account needs to be configured.
• Purchase order or purchase requisition with account assignment G/L account of cost element category 90 is not supported. Because the G/L Account Type is "Balance Sheet Account". Therefore, an account assignment WBS element in combination with asset is not supported.
• The posting (and reduction) of commitment line items will be triggered with the respective transaction currency. All values in other currencies are calculated during each posting according to the current currency conversion rules configured in the ledger settings. That means after the lifetime of a purchase orders or purchase requisitions a balance of 0 can only be expected for transaction currency. All other currencies could deviate from 0, because of rounding differences or different currency conversion rules.
• Commitments from down payments are not supported.
• A single purchase order must not contain more than 499 account assignments. If you use a purchase requisition as reference for the creation of a purchase order the maximum number of supported account assignments of the corresponding purchase requisition is 249. See SAP Note 2991264. 
• The correction report RKANBU01, which is used to correct classic commitment (table COOI) can not be used to correct new commitment (table ACDOCA)! There's no report which automatically adjusts or corrects new commitment in ACDOCA.
• Commitment Overhead Calculation is not supported.
• The concept of additional statistical objects in the same journal entry item like the real object is not supported. In case a statistical objects (WBS element) is used in the PR/PO item in parallel to a real object (cost center), the statistical WBS element is posted as a separate predictive journal entry item. That's different compared to the real goods receipt / invoice receipt posting.

By using a parallel ledger to the Universal Journal, all postings related to the future or those that may not appear in the legal accounting can be kept as a subledger, i.e. alongside the real financial postings.

The setup and use of extension ledgers in various scenarios and in combination with real ledgers (ACDOCA) is also referred to as predictive accounting.

Predictive accounting is based on 2 pillars, which together show future trends and results:

• Data structure of ACDOCA with all balance sheet and P&L information as well as historical data
• Extension ledger with data that contain expected calculations and simulation results.

Concept of the extension ledger (so-called forecast ledger):

This is a special subledger in which the forecast results are stored structurally exactly like the historical actual data. This means that all financial processes can be carried out not only with real data, but also with future data - based on current financial data. This allows you to predict how the financial results will develop at the end of the current financial period or the current quarter and understand the reasons for this.

Accounting has traditionally focused on fact-based, current and historical reporting, i. e. what happened last week, month, last year, how do the numbers differ between the previous year and this fiscal year. This past-oriented perspective offers the added value for understanding the current situation, but does not help to better predict or plan the future. Predictive accounting offers a central solution for this, which combines the views of accountants and controllers.

For example, in the area of ​​purchasing, a purchase order or purchase requisition is the basis for predicting future material costs, a goods receipt and an invoice receipt.

When goods are received, the actual material costs as well as goods receipt and invoice receipt are posted.

Both predicted and actual values ​​are saved in the ACDOCA table. However, they are assigned to different ledgers. Predicted values ​​are assigned to the extension ledger, actual values ​​are assigned to the leading ledger and, if applicable, a non-leading ledger if a ledger approach is used for parallel accounting.

So table ACDOCA is the central data source for actual and predicted values.

Forecast in purchasing: Material will be ordered for cost centers and it is expected that a commitment will be posted to these cost centers.

Prerequisite:

• The Commitment Management for Controlling must be activated.
• Assignment of order items to a cost center or a WBS element.

When the purchase order is saved, a predictive accounting document is created that contains the forecast material consumption for a cost center as well as the expected change in the GR/IR account, i.e. the results of the simulation are stored as posting documents in the predictive ledger.

When the actual goods receipt for the purchase order is posted, the forecast material purchasing costs/the simulated postings are reversed in the enhancement ledger and the actual documents for the goods receipt/material costs are posted in the leading ledger. The value on the GR/IR account in the extension ledger is also reversed.

In order to be able to use the predictive accounting functions and to collect all preview documents for predictive accounting, an extension ledger must be created and assigned.

An extension ledger is assigned to a standard ledger and inherits all posting documents from the standard ledger for reporting.

The basic ledger must be a standard ledger. Postings that were explicitly posted to an extension ledger are visible in this extension ledger, but not in the underlying standard ledger.

With this concept, you can avoid double posting documents if many business transactions are valid for both ledgers and only a few adjustments are required in the extension ledger.

For example, if you assign purchasing documents to a cost object, the value and quantity are displayed on the cost object.

In the case of commitments, it is not a question of costs, but of budget consumption, which is expected to later become costs.

The commitments are still written to the old commitment tables in the new commitment management and posted to the ACDOCA table in parallel.

Since commitments are not real costs, they are separated from real costs by assigning them to a ledger, the so-called extension ledger of type P - line items with technical numbers/no deletion possible. This must be selected in Customizing using the Extension Ledger Type field.

The type of posting documents that are posted to the respective ledger is determined using the extension ledger type. The following extension ledger types exist:

This type of posting document is identical to the posting documents posted in the underlying ledger.

This type of posting document is saved with document numbers.

These posting documents cannot be deleted and must be canceled if necessary.

Extension ledgers with standard posting documents are used, for example, to manually adjust posting documents to a different set of accounting principles or a certain type of administrative adjustment postings that are not visible in the underlying ledger.

This type of posting document is only saved with technical numbers (that is, without document numbers).

They cannot be deleted and must be canceled if necessary.

You can use these accounting documents, e.g. for obligations or predictive accounting purposes.

This type of posting document is only saved with technical numbers (that is, without document numbers).

These posting documents can be deleted. You can use them, for example, for simulation purposes.

In addition, an extension ledger must be assigned to a fixed ledger. In the preceding figure, Ledger ZP was used to post commitments.

A ledger is then assigned to a ledger group. When posting, the system uses the representative ledger of a ledger group to determine the posting period and checks whether the posting period is open.

If the posting period for the representative ledger is open, the system posts to all ledgers in the ledger group, even if the posting period is closed for the non-representative ledgers.

Each ledger group must contain exactly one representative ledger.

The Predictive Accounting functions for accounting processes based, for example, on customer orders must be activated.

The activation of Predictive Accounting for business processes takes place here for a combination of controlling area and fiscal year.

This means that all original documents in the process that were entered in the system for the fiscal year are taken into account in predictive accounting.

For example, if Predictive Accounting is activated for sales processes for a specific fiscal year, the data from every sales order posted to the controlling area in this fiscal year is taken into account in predictive accounting with the posting date of the sales order.

The extension ledgers to be used for Predictive Accounting are added here.

In addition, the budget availability control can be activated for one of the extension ledgers by selecting Relevant for Commitment Management.

The Commitment Management must be activated for each controlling area from a selected fiscal year.

This means that commitments can generally be posted in the relevant controlling area.

In the following scenario, the budget should first be posted to a cost center as an example.

A purchase order is then created and assigned to the budget cost center. When the purchase order is saved, a purchase order commitment is created. The system checks whether the expected costs are within the budget of the cost center, taking into account the tolerance limits for warnings and error messages.

If the goods receipt is posted to the budget cost center, the purchase order commitment is reduced and actual costs arise.

In the preceding example, a budget of 120 Euros for fiscal year 2021 is posted to cost center 90700. A warning should be issued if the budget is exceeded by 5%. If the budget is exceeded by 10%, an error message is issued.

The messages should be triggered when booking purchase requisitions or purchase orders (as in our example). So that the system can carry out this budget check, account 516000 (Consumption of trading goods) has been included in the G/L account hierarchy that is used for the budget check.

Both the Cost Center Budget Report app and the Commitment by Cost Center app can be used to report the budget as well as the budget used and the budget still available.

With the help of the Cost Center Budget Report app, information on the budget, actual costs, commitments and available budget can be displayed for the budget-bearing cost centers.

The Cost Center Budget Report app always shows the data from the Classic Commitment Management, i.e. refers to the table COOI (commitment line item).

The profile for budget availability control is maintained and account groups are assigned to this profile. The assignment of account groups defines the following:

• Which accounts are checked when posting actual costs
• Which accounts are analyzed with this Cost Center Budget report

With this app you can:

• Display budget, plan data, actual costs and commitments from budget-bearing cost centers. The information displayed is based on filter criteria such as company code or fiscal year.
• Display cost and budget details of several budget-bearing cost centers from different company codes.
• Switch between visual filter and compact filter for the available budget.
• Navigate to view the details of a cost center Navigate to the line items for actual costs and commitments.

The Commitments by Cost Center app always shows the data from the New Commitments Management Solution, i. e. based on posting documents in the extension ledger.

With the help of the Commitment by Cost Center app, you can:

• Analyze commitments made by cost centers for each business period, cost center and cost type.
• Compare commitments with actual, planned and assigned expenses.
• Drill down to the original documents such as purchase requisitions or purchase orders.

The actual costs displayed in this app are based on the leading ledger in the comprehensive posting document (table ACDOCA), whereas commitment data is based on the enhancement ledger in the comprehensive posting document (table ACDOCA).

The plan costs are derived either from the plan data repository in the comprehensive posting document (table ACDOCP) or from the Business Warehouse (BW), depending on your system settings.

The preceding figure shows the posting of the material order to cost center 90700, for which the budget availability control applies to G/L account 51600000 (Consumption of Merchandise). The booking is carried out because it is not an error message.

The Cost Center Budget Report app shows the budget of EURO 120 and the order commitment of EURO 130. In the Available Budget column you can see that the budget was exceeded by 10 EURO.

The report Commitments by Cost Center shows the amount of the purchase order commitment, as well as how much the budget has been exceeded and allows you to drill down to document level.

The preceding figure shows the posting of the goods receipt for the order. Since the goods receipt is part of the purchase order and the budget check was carried out when the purchase order was placed, no further warning is issued.

In the background, however, the following is checked:

• If the actual costs at goods receipt are greater than ordered, a corresponding warning or error message is generated.

Posting the goods receipt results in actual costs and the purchase order commitment has been reduced. The budget is exceeded by 10 EURO. The Commitment by Cost Center app enables you to drill down to the original document.

When the order was saved, a Predictive Accounting document was created. The document number begins with PA….

In the app Display Journal Entries - In T Account View you can see the forecast material consumption for the cost center as well as an expected change on the GR/IR account.

When the goods receipt is saved, the forecast material purchasing costs are reversed in the extension ledger and posted as actual material costs in the leading ledger 0L.

The amount on the GR/IR account is also reversed in the extension ledger.

In the app Display Journal Entries In T-Account View, you can see the reversed postings of the extension ledger.

The actual material costs in connection with the purchase and goods receipt for cost center 90700 are displayed in ledger 0L of table ACDOCA.

Overall result in predictive accounting:

• All forecast values ​​for the cost center were reversed in the extension ledger.
• The actual material costs in connection with the purchase and goods receipt for cost center 90700 are displayed.

The forecast and actually posted values ​​for each balance sheet and income statement item can be compared with one another in the Balance Sheet/Income Statement – Multidimensional app.

To do this, you must enter the extension ledger as well as the leading ledger and the corresponding reporting periods as parameters.

The Period Balance column shows the predicted values ​​from the Extension Ledger and the Comparison Balance column shows the actual values ​​from the leading ledger.

The original journal entries can be accessed by drilling down.

• Commitments represent future costs for materials and services, impacting procurement processes and tying up funds.
• Commitment types include order, cost center, and project commitments, each pre-assigned to specific account objects.
• Predictive accounting combines historical and future data, aiding in forecasting financial results and planning.
• Post budgets to cost centers and create purchase orders to manage commitments within budget limits.
• Analyze commitments with the Commitments by Cost Center app, comparing them to actual, planned, and assigned expenses.