Structures of Profitability analysis

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This document provides an overview of the structures of the controlling module of Profitability analysis.

The profitability analysis enables the evaluation of market segments which can be classified according to products, customers, strategic business units (a group of product lines) with respect to the company profit or contribution margin.

The structures of the Profitability analysis are the following:

1) Characteristics

2) Value fields

3) Operating concern

4) Assignment controlling area - operating concern

5) Profitability segment characteristics definition

One of the possible reporting hierarchy in product lines is the following:

Similar products are grouped into strategic business unit, based on which the segment is derived. From the "business segment" the "business field" is derived.

1) Characteristics

Characteristics are the dimensions of analysis, defining what items or objects (sales organization, customer, product) the user will be able to analyze.

The definition occurs under the following path: Customizing--> Controlling-->PA--> Structures --> Define operating concern --> Maintain characteristics:

There are 4 options to select the characteristics:

a)  Copying characteristics from reference tables (characteristics that already exist)

b) Create characteristics from the scratch (to derive values for these characteristics, it is necessary to define a related derivation strategy)

c) Using predefined characteristics (selected from the field catalog and added to the operating concern)

d) Fixed characteristics (automatically predefined in every operating concern)

Pressing "Change" in the "Choose characteristics" tab, the list of characteristics is displayed:

Clicking on "Change" in the previous step, the "Create option" will be available. selecting that the next window will be displayed:

In the top part must be indicated the table (PARAPARTNER) from which transferring the characteristic (Bill-to-party):

If the target is creating a user defined characteristic (eg: Business segment), the second "tab" in the below picture, has to be filled:

The user defined characteristic must be called WW*:

The characteristic has to be activated clicking on the "activation" button in the picture above.

In the same way it's possible to create the "Business field":

2) Value fields

Value fields store the base quantities and amounts for reporting. Value fields can be highly summarized (summary of cost elements) or highly detailed (part of a single cost element).

In the first screen, select value fields, then following the same procedure used for the characteristics:

also the value fields have to be named VV*. In the first step has to be defined if this is a quantity value fields or an amount value fields:

3) Operating concern

The operating concern is the organizational unit in Profitability analysis (CO-PA)

It can have 2 approaches:

a) Costing based: this groups costs and revenues according to value fields and costing based valuation approaches

b) Account based: it groups costs and revenues according to accounts, and uses an account based valuation approach. Account based profitability is permanently reconciled with financial accounting.

The structure of an operating concern is valid in all clients.

The system creates automatically the following tables in costing based co-pa:

- CE1XXXX (XXXX is the operating concern): Actual line items table;

- CE2XXXX: Plan line items table;

- CE3XXXX: Summary records by profitability segments;

- CE4XXXX: Profitability segments definition.

In the data structure tab, it is possible to display (or assign in edit mode) both the characteristics and the value fields to the operating concern:

4) Assign Operating Concern to Controlling Area

Make the assignment under the following path:

5) Define Profitability Segment Characteristics (Segment - Lvl Characteristics)

Customizing --> Controlling --> PA --> Structures --> Define Profitability Segment Characteristics

Here the profitability segments are defined. It is better to minimize the number of profitability segments (and therefore the required summary records) for performance reasons. This can be controlled through the selection of segment level and non segment level characteristics.

It is also possible to configure the system so that certain characteristics are not used in defining profitability segments: the values for these non segment level characteristics will appear on CO-PA line items, but won't be available in the CO-PA reporting drill down.

Here we define which characteristics are used marking them as "Costing based" (as per Operating concern choice). Eg: characteristic EXTG: