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Gaining better visibility toward allocated cost flows in S/4HANA Finance

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

  • 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.

  • Some capabilities of this subject will begin to be realized in S/4HANA Finance 1809 CE with the newly announced "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

      • Hi Kris

        Thanks for reading the blog and your interest in the topic.  Please keep in mind that deliveries of new features will come earlier in the Cloud Edition of S/4HANA, so we’ll see feature updates in 1811, 1902, 1905, 1908 before the next On Premise release in 1909.   So maybe that is what caused the confusion in the stated timeline; whomever you spoke with before was referring to 1909 OP.

        But you’re right there does not seem to be much publicly available information yet on the Universal Allocation.  One mention I found is in the SAP Best Practices Explorer tool in a page called “One Allocation (2QL)“.   I can also see the universal allocation is released in 1809 as 4 new applications: 1) Manage Plan Overhead Allocation Cycles 2) Manage Plan Distribution Cycles 3) Run Plan Overhead Allocation and 4) Run Plan Distribution.   I provided links to the Fiori Apps Library for each.  From what I heard, these new tiles, which are related to “plan” data, are released to bring parity with the existing allocation/distribution applications for “actuals”.

        Please note that I’m not from the LOB Finance product management team, so I don’t speak officially for the finance roadmap.  But I understand that separate applications will be replaced by one ‘universal’ application which can be used to define and run most types of existing assessments or distributions (meaning for general ledger, cost centers, profit centers, profitability analysis, etc.).  This will go along with the global accounting hierarchy (one place to maintain master data hierarchies and sets).  Allocation simulations and allocation flow graphs, both topics we covered in our prototype, are definitely topics on the official Universal Allocation roadmap in a future release.  So as I said before, stay tuned and watch for future announcements by the development teams.  These are indeed very exciting, and needed, new capabilities which are coming for SAP allocations.

        Best regards,

        Jeffrey Holdeman

        SAP Labs, LLC


        • Hi Jeffrey,


          Great info and confirms my findings, or lack of 🙂

          The "The What's new Viewer" took me to the applications that you mentioned, but I guess the confusion was caused by 'Universal Allocation' where I expected to see a discrete reference to UA for actuals rather that a collection of apps for plan data.

          Exciting times indeed as we are seeing a great demand for granular visibility of allocations, especially sender details and drivers.