Introduction to SAP CO
The SAP CO (Controlling) Module provides supporting information to Management for the purpose of planning, reporting, as well as monitoring the operations of their business.
Management decision-making can be achieved with a high level of information provided by this module.
The CO (Controlling) Module has several sub modules as follows:
- Cost Element Accounting: provides all information related to the costs and revenue within an organization. This module works fully integrated with FI so all postings are automatically updated from FI (Financial Accounting) to CO (Controlling). “Cost elements” are the basis for cost accounting since they enable the User to display costs for each of the accounts that have been assigned to the cost element. Examples of accounts that can be assigned are Cost Centers, Internal Orders, WBS (work breakdown structures).
- Cost Center Accounting: provides information related to the costs incurred by the business. Cost Centers within SAP are normally assigned to departments or manager responsible for certain areas of the business, as well as functional areas within the organization. Marketing, Purchasing, Human Resources, Finance, Facilities, Information Systems, Administrative Support, Legal, Shipping/Receiving, or even Quality are normally handled with Cost Centers and specific Cost Centers are normally created for each functional areas.
- Internal Orders: Internal Orders are used as a method to collect costs and business transactions related to a specific task. This level of monitoring is very detailed. Management usually uses this functionality to review Internal Order activity for better-decision making purposes.
- Activity-Based Costing (ABC): This sub module allows a better definition of the source of costs to the process driving the cost. Activity-Based Costing enhances Cost Center Accounting allowing a process-oriented and cross-functional view of the cost centers. It can also be used with Product Costing and Profitability Analysis.
- Product Cost Controlling: Provides the ability to analyze product costs allowing optimal price(s) decision making to market products. Within this module of CO (Controlling) planned, actual and target values are analyzed. This module as well has two Sub-components:
o Cost Object Controlling: includes Product Cost by Period, Product Cost by Order, Product Costs by Sales Orders, Intangible Goods and Services, and CRM Service Processes.
o Actual Costing/Material Ledger: includes Periodic Material valuation, Actual Costing, and Price Changes.
- Profitability Analysis: Provides the functionality and provides the ability to review information related to the company’s profit or contribution margin handled by business segment. The CO (Controlling Module) within the Profitability Analysis provides support for the following two methods to handle the analysis:
o Account-Based Analysis: uses an account-based valuation approach. In this analysis, cost and revenue element accounts are used. These accounts can be reconciled with FI (Financial Accounting).
o Cost-Based Analysis: uses a costing based valuation approach as defined by the User.
- Profit Center Accounting: provides visibility of an organization’s profit and losses by profit center. The methods which can be utilized for EC-PCA (Profit Center Accounting) are period accounting or by the cost-of-sales approach. Profit Centers can be set-up to identify product lines, divisions, geographical regions, offices, production sites or by functions. Profit Centers are used for Internal Control purposes enabling management the ability to review areas of responsibility within their organization. The difference between a Cost Center and a Profit Center is that the Cost Center represents individual costs incurred during a given period and Profit Centers contain the balances of costs and revenues.