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Most Common SAP Controlling Pitfall: Beyond Cost Center Accounting – there’s more to SAP CO than meets the eye!

Martin MunzelOur blog series on the most common SAP Controlling pitfalls and how to avoid them continues this week. SAP Controlling 2013 speaker Martin Munzel discusses the most common pitfall is from his perspective.

A common error I have found in companies using SAP CO is that they were trying to make some of the submodules do things they are not designed for.

Instead of using internal orders or projects, some created cost centers for each and every temporary activity, or even customer project. Some customers posted all their revenue to cost centers because they did not understand CO-PA and did not know where to put the revenue otherwise. One customer even used production orders to manage highly indiviudal customer projects and never got the costs right. I have seen a customer use a user exit to post all the cost of sales for all sales orders to one dummy cost center and then had trouble doing a segment reporting. I still hear from many companies that they are trying to do segment reporting with cost center accounting instead of profit center accounting and never really manage to get all the costs from the different submodules together.

When designing your processes in SAP, use the CO modules for the purposes they were designed for. Cost centers are meant to represent your organizational hierarchy in terms of responsibility; you can track who is responsible for costs and how well they fare in comparison to their budget. Internal orders are used for temporary, cross-functional activities, like tradeshows or R&D projects. You can choose projects instead of internal orders for complex projects with strong logistics integration. Product cost controlling helps you to analyze your production costs, either in repetitive manufacturing as periodic cost controlling or in order-related cost controlling. Profitability Analysis allows you to analyze your external market segments – you can analyze which of your products are selling well, in which regions you are selling to successfully and who your best customers are. Profit center accounting, on the other hand, provides an overall look at your own organization – which is your most profitable division, how did your overhead costs develop in comparison to the cost of sales, and what is the return on investment of your divisions?


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Comments 1

Guest - Michel on Wednesday, 23 January 2019 17:29

What about cross-department costs, such as buying company cars or office supplies, should they be accounted for on a separate cost center?

What about cross-department costs, such as buying company cars or office supplies, should they be accounted for on a separate cost center?
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