Bike Company SE is an international group of companies that reports financial statements in local accounting standards for the various subsidiaries and in IFRS in parallel.
You are responsible for controlling and management reporting and need to evaluate profitability results and understand how they were produced. The Bike Company has chosen SAP S/4HANA as the starting point and centerpiece of its digital transformation.
We assume you have no prior knowledge of SAP S/4HANA and therefore need a brief but concise introduction to the business scope and best practices. Therefore, you need to familiarize yourself with the concepts of controlling that relate to structures, processes, and reporting options in the system.
Our global scenario
You are interested in the quantity and value flows within the controlling and the integration with other modules of the SAP S/4HANA system. Your company manufactures bikes and provides maintenance and repair services to customers. You are interested in how the business processes for production and services are valuated and how planned, target, and actual costs are calculated. You want to learn about variance calculation and results analysis.
You want to be able to track and control the above-mentioned quantity and value flows using a dashboard and detailed reports. You assume that accounting will give you this information, but you are not sure whether it is in financial accounting or in management accounting. Therefore, you want to understand what the difference is between those two.
This lesson describes the tasks of management accounting (also referred to as controlling or CO) and how they differ from financial accounting. We will first describe basic organizational units of accounting and controlling in SAP S/4HANA. Management accounting goals are then compared to those of financial accounting.
Management accounting is designed to assign data from business transactions to CO objects in order to make clear who is responsible for operational expenses and revenues.
For example, to be able to show profit and loss correctly for the "Mountain Bikes in Southeast Asia" market segment, you need to know what the costs of producing a bike are and the revenues brought by the respective sales offices. To do this, you need the direct productions costs as well as auxiliary costs and revenues from the following objects:
- Profitability segments are the market areas you want to analyze and report on.
- Cost centers are areas of responsibility where you can assign costs. They roughly correspond to departments.
- Projects represent a traceable event or undertaking with a fixed start and planned end date, for example, participating in a trade fair or implementing SAP S/4HANA in your company. The associated costs and revenues are collected on the project.
- Internal orders are additional objects (available in SAP S/4HANA Cloud, private edition), which you can think of as projects with limited functionality. You can use these for tracking, for example expenses per company car or mobile phone.
These objects are arranged in different organizational levels.
Organizational levels represent the organizational plan of the company. The organizational structure establishes a framework that supports a company’s financial decisions with the methods the management wants. It supports the development and presentation of relevant information to enable and support business decisions.
In the same way, organizational structures are maintained in all modules of the SAP system. The structures you will encounter most are:
- Financial accounting: company code. Local financial reporting is based on local companies which are identified by their company code, for example, a production company in Germany, a sales company in Singapore.
- Management accounting: controlling area. To be able to display the costs and their structure from producing bicycles in Germany at the Singapore sales company, the two companies must belong to the same controlling area.
- Logistics - general: plant. The cost of producing the bicycle varies depending on where it is produced. The production site is called a plant.