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SAP allocation cycles work great until…you have to change them … or explain the cost flows … or …

SAP Allocation Cycles

The traditional cost allocation techniques of assessment or distribution are used widely in the period end closing steps by enterprises that run SAP Financials.  Organizations use allocation cycles to transfer costs between cost centers, profit centers, internal orders, and to assign costs to profitability segment characteristics.  For many enterprises, the allocation cycles are defined initially upon migration to SAP and then subsequently adjusted at least yearly to coincide with the annual budget, or more frequently if needed to adapt to changes in the business span of control — such as for an acquisition or divestiture which results in a change in the SAP organizational structures.


It is not uncommon for the SAP allocation cycles to be defined using very comprehensive and granular business rules.  In some organizations this complexity leads to thousands of combinations of sender and receiver relationships.  Often there is a separation between the financial users who define the allocation logic and the SAP IT administrators that maintain th cycles in the system.  Due to such an environment, today’s organizations struggle to understand their allocation cycles and the resultant cost flows.  Controllers and financial analysts cannot easily answer questions like:

“How do amounts flow across the chain of cycles and segments?”  or “Who is impacted and how much so when a change is made to the allocation rules and amounts?”

Opportunities for improvent

The new architecture of S/4HANA Finance, the power of SAP HANA and the improved usability capabilities of SAP Fiori all provide a new opportunity to address these areas where organizations struggle with the cost allocation processes.

Cost allocation and simulation

The SAP Labs Innovation Center Silicon Valley has developed a prototype of a new application that seeks to give better visibility toward the allocated cost flows in S/4HANA Finance with real time calculations of the allocated amounts and a modern user interface to see the cycles and their related cost flows.  Please checkout the video of our prototype application here:

Interested in learning more?

We are seeking SAP S/4HANA Finance customers that want to work with our development team to give feedback on the future direction of the application, especially on the topic of simulation of cost allocations. 

You can contact me directly or get in touch with us at  Also watch for this topic as a Customer Engagement Initiative (CEI) program during the first quarter of 2016 at

**  Due to the architecture which is utilized, we do not anticipate to offer this application to run on SAP ERP 6.X releases with non-HANA databases ** 

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    1. Jeffrey Holdeman Post author

      Thanks Rishab.  There’s no definite timeline yet.  Our current priority is to do another round of development taking into account customer feedback.

  1. Nathan Genez

    The opening lines says it all…

    End-of-line managers have no clue what is behind the charges they see in their cost centers and a lot of SAP support folks sometimes little knowledge of how or why the allocations were developed the way they were.  If a change is required, they are loath to touch it.

  2. Jeffrey Holdeman Post author

    Some capabilities of this subject have been realized in S/4HANA Finance 1809 in the Universal Allocation.   Please check out the SAP release notes and watch the roadmap for the Universal Allocation going forward.

    Best regards,

    Jeffrey Holdeman

    SAP Labs, LLC


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