Outlining the Course Scenario

You are a new hire in the controlling department at The Bike Company, and you would like to have an understanding of the business scenario of using overhead projects as a means to monitor related expenses.

After completing this lesson, you will know the global picture of the course scenario and how overhead projects are being used. Which common tasks will you be performing and how do you use SAP S/4HANA to perform them?

In this course, we follow the scenario described in the graphic to showcase the key processes of project controlling in the SAP S/4HANA.

The Bike Company is planning to organize several trade fairs to promote their new products in the electric scooter branch. Therefore, it is necessary to create new master data, such as projects, to collect related costs to these new marketing events. In SAP S/4HANA, the projects reflect that kind of undertaking. You will then create three new projects to represent the next three trade fairs taking place in Paris, Atlanta, and Singapore. To simplify the follow-up of the controller, you will use a global hierarchy for grouping the three events.

The person in charge of the three fairs plans operational expenses. In SAP S/4HANA, you can plan on individual cost G/L accounts for each project. You will support the project manager responsible for that, uploading planning data.

The purpose of project accounting is to provide management with tools in the form of reports to properly valuate costs and to assess the performance of each event against the planned and budgeted targets. You will use the embedded analytics in SAP S/4HANA to support the trade fairs organizers to track their projects, their expenses and analyze variances to planned and budgeted amounts.

Overall, it could also be useful to allocate a budget as well to the projects to perform availability check, if necessary.

During each financial period, as part of the normal business operations, events incur various costs that you can directly assign to them (example: purchased services or travel expenses for hotel bookings of the personnel working for the events organization).

In SAP S/4HANA, you use primary cost accounts and, during journal entry, create separate expense line items with the amounts related to each project.

When posting invoices from suppliers or posting G/L journal entries, sometimes, inadvertently mistakes can happen. SAP S/4HANA allows you to use reassignment of costs attributed to the wrong project without reversing and reposting invoices.

Certain departments within The Bike Company supply internal services for some projects during normal business. For example, the consulting department charges projects with internal costs based on the hours they spend working on a market survey for them.

In SAP S/4HANA, you depict these services and quantities through activity types. A cost rate for these activities is input per activity unit. Consulting services are charged per hour, so you enter the costs the consulting department charges for each hour of activity provided. With the entered cost rate, SAP S/4HANA will credit the cost of services from the consulting cost center and debit it to each project through a process called direct activity allocation. These internal postings cover management reporting needs and are made with secondary cost accounts.

In addition, there are overhead costs that are incurred at a higher level, which are difficult to attribute to specific events directly. For example, the marketing expenses charged by your supplier are charged on a contract signed on the marketing department.

To assign these costs to each event, you configure allocation cycles. These allow you to transfer costs posted initially to auxiliary cost centers to the projects of each event. In your company, marketing expenses are distributed based on the percentage that each event represents in term of number of broadcasted advertising spots.

Once costs are all posted to the projects, you may need to reallocate the costs of each trade fair to the Sales Department to get a more global picture. In SAP S/4HANA, the settlement is designed to allow that kind of movement whereas in the meanwhile you can still analyze all the expenses posted to the projects.

Once the settlement is finished as well as the actual marketing event, you can close the project.