Introduction
This blog post continues a series of Controlling related topics, which circle around showcasing new functionalities in S/4HANA Cloud, comparing functionalities between S/4HANA Cloud and SAP S/4HANA (on premise), as well as general topics to be considered from Management reporting/Controlling point of view, when implement S/4HANA.
The focus of this blog posting is to discuss Management reporting in S/4HANA, with a focus on SAP standard functionalities and what can be used to fulfill customer requirements to enable reporting on different dimensions.
The fundamental concept for financial reporting in SAP S/4HANA is the universal journal, the single source of truth, where all accounting documents are posted. This single source of truth is the key for both Financial and Management reporting in SAP S/4HANA, however there are different functionalities which are worth understanding, to populate the desired dimensions. The next chapters will highlight these type functionalities and things to consider in more detail.
Figure 1: Illustration of the Universal Journal.
Functionalities in SAP S/4HANA
When moving to S/4HANA one should be aware of at least these functionalities to design a system, that enables a standard setup, which fulfill different Management (and statutory) reporting requirements. Some of these have been covered very well in other blog postings, so I will not focus too much on all of them, but rather add a link, from where you can find further information.
Cost of Goods Sold (COGS) Split
The COGS split functionality enables you to split your COGS as per cost components, to get more insights. For further details see:
Links: Cost of Goods Sold Split in Make to Order Scenario (MTO) with SAP S/4HANA | SAP Blogs
Splitting the Cost of Goods Sold – SAP Help Portal
It is worth noticing that COGS split is also available in intercompany scenarios (see following note if you are on an early release of SAP S/4HANA (2587070 – COGS-Split does not work for intercompany invoices processed via IDOC). You can also choose between having the original COGS account as offsetting account or a separate account, which can help reporting in some cases.
Also, consider using actual costing to update COGS split with actuals, to get even more granular profitability reporting.
Figure 2: Illustration of COGS split functionality in SAP S/4HANA.
Figure 2: Illustration of COGS split functionality in SAP S/4HANA.
Production Variance Category split
The production variances split, enables to split the settlement posting of e.g. production orders according to the variance categories. This brings further details, that can be used in reporting based on the Universal Journal.
Figure 3: Illustration of Production variance category split in SAP S/4HANA.
Default account assignment, derivation of dimensions and document splitting
For certain postings it is worth to derive default accounting assignments, e.g. based on the General Ledger accounts that are being used.
- Account Assignment of Controlling Objects – SAP Help Portal
- CO Account Determination – SAP Help Portal
In case you are using Asset accounting and Materials Management, there is an option to use cost element category 90, to enable statistical account assignment for asset and materials management accounts. However, note that in S/4HANA Cloud cost element category 90 has been removed and will be available for a limited time in S/4HANA (on premise). Valuated project stock is in roadmap for CE2208 with the WBS element on the Balance sheet line. Similar new replacing functionalities are being planned.
In case you are using PSM-FM (Public sector Management – Funds Management), there are further considerations to derive dimensions.
- Derivation Logic for Funds Management (PSM-FM) – SAP Help Portal
- FM Derive in S/4HANA Funds Management | SAP Blogs
Another important consideration is to setup document splitting , Document Splitting – SAP Help Portal.
This enables us to get more granular information on important dimensions. Below is an example of inbound accounts receivable invoice, which is automatically split by system, based on profit center.
Figure 4: Illustration of document splitting.
In SAP S/4HANA (on premise) it also possible to create your own dimensions (so called Coding block fields), which you can use as criteria for document splitting. To derive the right values for coding block fields in a posting, you can enter it manually or derive them. However, note that a derivation rule, might require an enhancement, depending on your requirements. Instead of immediately creating coding block fields, you should try to utilize other standard SAP fields instead. Coding block fields can be used for both balance sheet and Profit and loss accounts. For further information on extending the universal journal with your own fields, see following SAP note: 2453614 – FAQ: Universal Journal Extensibility – SAP ONE Support Launchpad.
Profitability Segments and Attributed Profitability Segments – Derivation of dimensions
To derive the profitability dimensions you want to see, you need to create derivation rules, to enable to have these dimensions in Margin Analysis. This is done in Margin Analysis configuration. These derivation rules are mainly used in profit and loss related accounts, e.g. triggered through sales process (goods issue and invoice), different cost objects settlements, but also in so called attributed profitability segments.
Figure 5: Illustration of derivation of dimensions for profitability reporting.
Attributed profitability segments bring the possibility to derive profitability dimensions to postings at the time of postings, so you don’t need to wait for period end settlement.
- e.g. earlier in SAP ECC you could only get values to CO-PA, when settling a WBS to CO-PA at period end (the dimensions that are derived from settlement rules). In SAP S/4HANA you can derive these dimensions at the time of posting, which can enables you to do more real-time reporting, and be less dependent on period end data.
- This functionality is described in following blog and SAP help:
This functionality enables populating profitability related dimensions also for balance sheet items (note, not in all processes). E.g. for material movement see following notes:
- 2401838 – S/4 HANA Finance: Product related characteristics not derived in case of goods movement
- 2843578 – S/4 HANA Finance: Attribute assignment for material inventory lines I
For service and maintenance orders, see also:
Figure 6: Showing example of attributed profitability segment. Additional dimensions are derived e.g., from WBS or cost center.
Universal Parallel Accounting
In S/4HANA Cloud Essentials it is possible to valuate Cost of goods manufactured (COGM) according to local accounting principles and have it integrated to production accounting and asset accounting. These are described very well in following postings.
Parallel Accounting in Inventory Accounting – SAP Help Portal
Production Accounting for Universal Parallel Accounting | SAP Blogs
Inventory Accounting for Universal Parallel Accounting in SAP S/4HANA Cloud 2105 | SAP Blogs
Asset Postings with Universal Parallel Accounting | SAP Blogs
In SAP S/4HANA (on premise) there is a similar possibility, to activate Parallel Cost of goods manufactured, which enables to have a COGM according to local accounting principle. However, it is worth noticing that the on premise solution is not as advanced as S/4HANA Cloud Essentials, e.g. when comparing production accounting functionalities.
Universal Parallel Accounting is planned for greenfield customers in SAP S/4HANA (on premise) in the release of 2022.
- The SAP S/4HANA (on premise) is described, very well here: Parallel Inventory with Different Accounting Principle (Parallel COGM) | SAP Blogs
- 1852519 – Supplementary documentation and FAQ for business function FIN_CO_COGM – SAP ONE Support Launchpad
Figure 7: Parallel COGM functionality in SAP S/4HANA (on premise)
Ledgers, currency types and parallel valuations
Consider currency type and ledger requirements from reporting point of view, including statutory reporting requirements (e.g. Tax and hard currency), but also from management point of view (group and profit center valuation).
- Note, also the importance about single- vs multi-valuation ledger in SAP S/4HANA (on premise). The recommendation is to use multi-valuation ledger in SAP S/4HANA (on premise), e.g. as there are limitations on asset accounting integration in single val. Ledgers setup ( see 2554992 – Multiple valuation approaches/transfer prices: Permitted representative ledgers in Asset Accounting – SAP ONE Support Launchpad). However, note also that it is not possible to limit authorizations by currency types in Fiori reporting.
- In SAP S/4HANA cloud essentials single-valuation ledger does not have this type of restrictions.
Figure 8: Single- vs multi-valuation ledger in SAP S/4HANA (on premise).
- There are limitations on what currencies can be changed and added later on, e.g. currently it is not possible to add a new valuation or a 3rd BSEG currency in SAP S/4HANA (on premise) after go-live. https://launchpad.support.sap.com/#/notes/3015594 , https://launchpad.support.sap.com/#/notes/2334583 ).
- 2894297 – Handling of Currencies in Controlling in SAP S/4HANA
In SAP S/4HANA (on-premise) there are also following currency settings to consider:
- Functional currency – Functional Currency – Availability in Finance Apps – SAP Help Portal
- Functional currency functionalities are more advanced in SAP S/4HANA Cloud
- Alternative object currency in Controlling
- You have an option to enable alternative object currency, in basic settings of controlling for following cases:
Figure 9: Options for alternative object currency in SAP S/4HANA (on premise).
Consider also extension ledgers for predictive accounting (Predictive Accounting – SAP Help Portal) and statistical sales conditions (Statistical Sales Conditions – SAP Help Portal).
Organizational structures and integrations from other Lines of Businesses
Consider best practices when creating organizational structures in SAP, not only for Profit center structures, but also organizational structures from other lines of business (modules), as many of them are standard fields in the universal journal (e.g. Sales Organizations, Plants..).
It is also important to consider what are the posting flows in your processes (e.g. What dimensions you get from integrated processes, like sales, procurement, production, etc.). Also consider integrations from SAP IBP for planning, SAP TM for freight costs, and/or EWM/TM for detailed warehouse costs (SAP S/4HANA Extended Warehouse Management – Warehouse Billing – oxenbyandrovang).
Allocations
In case it is not possible (or feasible) to derive the correct dimensions at the time of posting, then it is possible to utilize following functionalities to allocate amounts to a more detail level or further dimensions. E.g.:
- Allocations & Universal Allocation
- Top down Top-Down Distribution in SAP S/4HANA
- Realignments – Realignment – SAP Help Portal
- Actual Costing – Actual Costing – SAP Help Portal
Reporting; Real dimensions in the Universal Journal vs. attributes in reporting
Consider that not everything needs to be a field in the universal journal that you need to report. Utilizing the attributes functionality, you can bring information from master data to your reports.
The below example shows the attributes (e.g. master data fields, in this case from profit center), that can be added to reporting.
In case you add your own fields to master data elements, they are also available (assuming, they are created with the custom fields and logic Fiori app).
Figure 10: Journal entry analyzer fiori report, showing attribute functionality, in this case from profit center.
Figure 11: Journal Entry analyzer fiori report, showing Language key (a master data field from profit center) on the report.
Another important consideration in reporting is the availability of different time dependent hierarchies:
- Global hierarchies –
- It is also possible to create hierarchies for your own dimensions (this is described further in: 2922493 – Extensibility with Hierarchies – SAP ONE Support Launchpad)
- Flexible hierarchies – Manage Flexible Hierarchies – SAP Help Portal
Below is an example of maintaining a profit center hierarchy in the Manage Global hierarchies fiori app and then selecting it in a report for viewing financial statement, while using the profit center hierarchy.
Figure 12: Manage Global Hierarchies – Opening a profit center hierarchy.
Once the hierarchy is activated, it can be selected in reports. Below is an example of selecting the profit center hierarchy in Journal Entry analyzer report. Note, in case the same hierarchy exists for multiple different time intervals, you can select the one you wish to use.
Figure 13: Selecting the profit center hierarchy in Journal Entry Analyzer app.
Figure 14 displays the profit center level balances, utilizing the profit center hierarchy from earlier. Both the Financial statement version (which creates the hierarchy for the General ledger accounts) and the profit center hierarchy have been maintained in the Global Hierarchies Fiori app.
Figure 14: Journal Entry Analyzer Fiori report, displaying profit center balances.
Further considerations
Usually, you also need to consider the overall landscape – every IT landscape, can add its own twist to the end result, and these are always important to consider, from architecture (multiple systems) and a time line perspective (e.g. If you are replacing one system with another, then during interim phase there might be aspects to consider).
Remember also to challenge what is an actual reporting requirement and what is just a lazy definition. E.g. there are can be cases where initially a dimension for ”market” is required for full Profit & loss and balance sheet. But after discussing about the requirement further and understanding what is meant with market, it turns out to be ”sold-to-market”, which in a make-to-stock environment will not have a full balance sheet (e.g. for inventory accounts you would not know the market, before a product is sold and left stock).
With SAP S/4HANA, you can also do real-time revenue recognition (e.g. defer COGS until you are allowed to recognize revenue ). There are multiple different scenarios supported, e.g. project and sell from stock. As in the other developments, there are more functions available in SAP S/4HANA Cloud (which are not yet in SAP S/4HANA (on premise). For further information you can see e.g.
- Event-Based Revenue Recognition – SAP Help Portal (SAP S/4HANA on premise)
- An Introduction to Event-Based Revenue Recognition with Customer Projects in SAP S/4HANA Cloud | SAP Blogs
In case there is a need to make an enhancement, consider using SAP BTP SAP Business Technology Platform and In-App extensibility (S/4HANA In-App Extensibility – End of Classical -Extensions? | SAP Blogs) where applicable, to keep your SAP S/4HANA core as clean as possible, to enable smooth upgrades to newer versions.
Conclusion
This blog post was focusing on different functionalities that support creating an SAP S/4HANA system to enable Realtime reporting, utilizing multiple different dimensions and standard functionalities. There are various aspects to consider, from the organizational setup, ledger and currency setup, to document splitting and Margin Analysis functionalities. The purpose is to point out the importance of considering an end-to-end solution, as well as highlighting to understanding what is a real business need, and how those can be achieved with a SAP standard.
The end result is usually a combination of all of these; the fundamental basic setups (e.g. ledgers and currency types), organizational structures, master data, utilizing the new functionalities, as well as balancing what are important reporting dimensions.
What are your experiences? Do you know any other good tips & tricks that you want to share? Please let me know in the comments below.
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