In order to generate more benefit, your company’s efforts should be aimed at value-adding activities. Far too often, a business’ decisions are being bogged down by (compliance) issues and a focus on short-term problem-solving. Hence, there is an ever-growing need for data structuring and visualization within the business. SAP ECC and SAP S/4HANA have come up with a solution to this need: the FI-CO modules.
In what follows, I will explain to you why these modules ought to be the financial basis for your company’s strategic decision-making. The main focus will be on the CO module and its potential benefits for your business.
What is FI-CO?
`FI-CO´ is a combination of two SAP modules: `Financial Accounting´ (FI) and `Controlling´ (CO). Both modules allow you to integrate data from other SAP modules (e.g. Sales and Distribution, Production Planning) into structured reports.
- Financial Accounting is a module that, among other things, helps to generate the financial statements of a company (e.g. Balance sheet, P&L). It is used for external reporting purposes.
- The Controlling module is used for internal reporting. It provides a company’s management with supporting information for planning and performance management.
What are the benefits of the SAP Controlling module?
The SAP CO module could offer several advantages to your organisation, including:
- An efficient, effective, and consistent controlling environment which improves long-term decision-making
- Standardized and sustainable business processes across the organization allow you to take advantage of best practices
- Data integration across various SAP modules that could help you in finding critical improvements within different areas of your organisation
- The ability to reconstruct your business hierarchy and processes in SAP CO allows detailed tracking and analysis of your performance (see below, `cost centre accounting´)
Furthermore, the SAP Controlling module contains a variety of components, which in turn offer various advantageous functionalities as well. Below are some examples:
Cost Element Accounting
- This component creates structure in your company’s accounting by providing an overview of the different costs and revenues incurred during a period (the Profit and Loss statement). As so-called primary cost elements can be linked to General Ledger accounts, cost element accounting helps to reconcile the Finance and Controlling modules. Internally, cost elements equally allow classifying costs and revenues to management accounting controlling objects such as cost centres (discussed below).
Cost Center Accounting
- This component provides information on the costs made by an individual business department or functional area (a so-called ‘cost centre´). Cost centres structure an organization by responsibility, and can be arranged in a hierarchy.
For example, different cost centres could be created for the marketing, accounting, production, and legal department.
Internal Order Management (part of Overhead Cost Management)
- Internal orders are used for short-term projects. In contrast to cost centres, internal orders do not reflect the organizational structure. Instead, they represent a variety of projects such as ‘Software implementation’, ‘Build of a new warehouse’, etc.
- This component is mainly focused on planning and controlling the costs of your (manufactured) products and services. The collected information can be used for production cost controlling, price setting, inventory valuation, profit analysis, etc.
Profitability Analysis (CO-PA)
- This component supports the decision-making by providing an analysis of the profitability of a product, customer group, project, strategy… Data can be moved to CO-PA to extract responses to questions such as `Who are my customer groups experiencing the strongest growth? Has my department reached its sales targets? What effect does a change of strategy have on my revenue numbers?´
Profit Center Accounting
- Profit centres maintain all data related to the profit of an area within the company (functional area, regional area, product line…). Unlike cost centres, they deal with information on both costs and revenues and have a greater area of influence. While profit centres directly focus on profit generation, cost centres only have a direct link to cost controlling.
How PIKON can help you implement SAP FI-CO into your organisation?
With every SAP implementation, it is important to start by understanding the organisational structure and processes of your company, as this will be our guide in determining the setup of your system.
We at PIKON have experience in this field. If you would like to see a presentation on how it is done in the SAP system, feel free to contact us and learn how SAP FI-CO can structure your financial transactions. Together we’ll dive into our SAP S/4HANA system and show you a system demo of all functionalities. Furthermore, we also share our project experiences.
If you have any questions about the SAP FI-CO modules, do not hesitate to request more information or leave a comment in the comments section below.