Getting an Overview of the Core Terms in Margin Analysis


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  • Get an Overview of the Core Terms in Margin Analysis

Overview of the Core Terms in Margin Analysis

Introduction to Margin Analysis

The following video provides an overview of Margin Analysis.

Master Data

Master data in margin analysis include profitability characteristics and functional areas. Functional areas break down corporate expenditure into different functions, in line with the requirements of cost of sales accounting.

These functions can include:

  • Production.
  • Administration.
  • Sales and Distribution.
  • Marketing.
  • Research and Development.

For primary postings, the functional area is derived according to fixed rules and included in the journal entries. For secondary postings, the functional area and partner functional area are derived from the sender and receiver account assignments to reflect the flow of costs from sender to receiver.

Profitability Characteristics

Profitability characteristics represent the criteria used to analyze operating results and the sales and profit plan. Multiple profitability characteristics are combined to form profitability segments. The combination of characteristic values determines the profitability segment for which the gross margin structure can be displayed. A profitability segment corresponds to a market segment.

For example, the combination of the characteristic values North (Sales region), Electronics (Product group) and Wholesale (Customer group) determine a profitability segment for which the gross margin structure can be displayed.

The image represents a financial snapshot of a company's performance in the North region, focusing on the Electronics product group and the Wholesale customer group. The data includes key metrics such as revenues of 800, discounts of 100, cost of goods sold (COGS) of 550, and a gross margin of 150. Additional details include a specific product (Prod1), customer (Cust2), and sales representative (Miller).

True vs Attributed Account Assignments

Each activity relevant to Margin Analysis in the SAP system, such as billing, creates line items. G/L line items can carry true or attributed account assignments to profitability segments.

  1. In the case of a true account assignment the profitability segment has already been determined by the sending application, and the profitability segment number has been transferred to the general ledger. Only the costs and revenues for true account assignments are available in follow-on processes such as allocations. Examples of true account assignments are:
    • Goods issue item or billing document item in a sell-from-stock scenario.
    • Manual FI posting to profitability segment.
  2. In the case of an attributed account assignment to a profitability segment, the costs and revenues are only shown in reports. Follow-on processes, which read line items from the database and transform them into new line items do not take attributed profitability segments into consideration. Instead, newly created line items are reattributed according to the specified mapping logic. The corresponding G/L account for attributed profitability segments must be one of the following account types:
    • Primary Costs or Revenue.
    • Secondary Costs.
    • Balance Sheet Accounts with a statistical cost element assigned.

The derivation of attributed profitability segments is based on the true account assignment object of the G/L line item. This object can be of the following types:

  • Cost Center.
  • Project.
  • Sales Order.
  • Production Order (only for Engineer-to-Order process.)
  • Maintenance Order.
  • Service Document (service order or service contract.)

After the profitability characteristics are derived, the resulting data is mapped to the G/L line item according to specific mapping rules. An attributed profitability segment is derived to fulfill the requirement of filling as many characteristics in the item as possible to enable the maximum drilldown analysis capability.

There are also special cases where even balance sheet accounts without an assigned cost element are attributed, if one of the preceding account assignments exists in the G/L line item. For example, WIP postings from event-based revenue recognition.

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