COST OBJECT CONTROLLING – PLANNING TO SETTLEMENT

In SAP Cost Object Controlling there are multiple stages involved:

Cost Object Planning

Budgeting

Allocation

Settlement

Planning Profile

Planner profiles use to control the process flow for planning. They are hierarchically structured. In a planner profile, you specify the planning layout to be used for each planning area, such as cost elements/activity inputs, activity types/prices planning. You can store any number of planning layouts for each planning area in a planner profile.

You need planning profiles for the planning methods below:

• Overall planning for internal orders
• Hierarchy cost planning for projects
• Preliminary costing for production orders that do not have a quantity structure (CO production orders).
• Cost planning for investment programs or investment measures, and for appropriation requests.
• Financial budgeting

Budgeting Profile & Availability Control

Budgeting Profile:

The budget is the approved cost limit for a project.

In contrast to planning, budget management is binding. In the planning phase you need to estimate costs, whereas during the approval phase, funds are prescribed by the budget.

It differs from project cost planning due to its binding nature. Whereas the project costs need to be estimated as accurately as possible during the planning phase, the funds are predetermined as a budget in the approval phase. The budget is the limit set by management for project costs over a certain period of time.

Availability Control:

 The real time checking of the availability of funds, in order to identify possible budget under runs or overruns when funds are being committed.

Availability control can help you recognize possible budget overruns in time and can automatically trigger different actions.

You configure availability control for each budget profile. You can define one or more tolerance limits for the

different activity groups within a budget profile. When these tolerances are reached, you can have the system trigger specific actions (warning, warning with Mail, error message).

Allocation Structure

During settlement, costs incurred under the primary and secondary cost elements by a sender are allocated to one or more receivers. When you settle by cost element, you settle using the appropriate original cost element.

An allocation structure comprises one or several settlement assignments. An assignment shows which costs (origin: cost element groups from debit cost elements) are to be settled to which receiver type (for example, cost center, order, and so on).

You have two alternatives in settlement assignment:

• You assign the debit cost element groups to a settlement cost element.

• You settle by cost element – that is, the debit cost element is the settlement cost element.

This is a good idea, for example, if the required capital spending for an asset you are building yourself is to be monitored. These costs are settled by cost element to an inventory account in Asset Accounting at the end of the year, or when the measure is complete.

Each allocation structure must fulfill the following criteria:

• Completeness

An allocation structure is assigned to each object to be settled. All cost elements in which costs are incurred, must be represented in the appropriate allocation structure.

• Uniqueness

Each cost element in which costs are incurred may only appear once in an allocation structure. Only one settlement cost element may be assigned to a source within a particular allocation structure.

Settlement Profile

In the settlement profile , you define a range of control parameters for settlement. You must define the settlement profile before you can enter a settlement rule for a sender.

If you want to settle the costs each time to just one cost center or just one G/L account, you need a settlement profile. As you cannot maintain the settlement parameters during settlement to a receiver, you must save the settlement profile either in the order type or in the model order or reference order.

• Settling a product cost collector

The settlement profile for settling a product cost collector must allow settlement to a material. If you want to settle variances to Profitability Analysis, the Variances indicator must also be selected and settlement to a profitability segment must be allowed.

The settlement profile is proposed through the order type of the product cost collector.

• Settling a cost object hierarchy

The settlement profile for settling a cost object hierarchy must allow settlement to a G/L account. If variances are settled to Profitability Analysis, the indicator Variances must also be set and settlement to a Profitability Segment must be allowed.

The settlement profile for settlement of a cost object hierarchy is proposed through the cost object profile. If you specified in the cost object category that the costs of the hierarchy must be distributed to the assigned product cost collectors, you must maintain only the settlement parameters for product cost collectors.

Cost Object Hierarchy:

The business object “cost object hierarchy” contains a number of cost objects structured in hierarchical form.

A cost object hierarchy can be used to analyze target costs, actual costs, and variances in situations where costs cannot be collected at the level of orders or materials.

A cost object hierarchy consists of cost object nodes to which you can assign the following:

• Material/plant

• Material/plant/production process