Real-Time WIP with S/4 HANA Cloud 1902
SAP Finance and Controlling are changing by the day at a very fast pace. Leveraging the new data model of Universal Journal, super-fast underlying HANA platform coupled with robust strategy of SAP to make the ERP an intelligence business suite, there are several new features popping up in finance area, making it more tempting for the businesses to take S4 more seriously
One such feature that I would like to talk about is Real-Time WIP Posting that comes as part of S4 HANA Cloud 1902 MTE (Multi-Tenant Edition).
What is WIP?
For the uninitiated, WIP amounts to the input components consumed during the manufacturing process coupled with some value adding costs also incurred on them; but the final output is yet to be received in stock. Since these are expenses incurred to build an asset (stock), these must not be reported as part of Income Statement. Rather, these should be reported in Balance Sheet, along with other stocks
How the WIP was accounted for till now?
Until now (i..e without the new feature that this blog is going to talk about) WIP was calculated as a part of period-end tasks. Before calculating WIP, one of the important step to be fulfilled is to charge the overheads to the manufacturing order. After calculating the WIP, the financial posting takes place in a separate step called Settlement.
With the new feature
The production order WIP is posted based on the occurrence of certain events, such as goods issues, activity confirmation, etc. This eliminates the need to calculate work in process, or apply overhead at month end, thereby making WIP calculation up to date in real time by linking WIP posting to business events.
In short, WIP is going to be posted under the following conditions (same as earlier):
- There are component raw materials issued to the production order.
- There are partial goods receipts posted on the semi-finished and/or finished products
- The order is not technically completed yet
However, the S4 Cloud 1902 system is smart enough to identify such orders, automatically apply the overhead at a set percentage (planned overhead) and then process the orders for WIP posting
To enable this feature,
- Scope item 3FO needs to be requested
- In SSCUI (Self Service Configuration User Interface):
- RA Key needs to be changed from MBMF01 to RSEBW for Order Type YBM1
- Costing Sheet in valuation variant must be changed to “Event-Based Costing Sheet”
Real-Time Work in Process Reporting: With this app you can see work in process and related production cost data in real time. The app uses event-based posting to show values for any specified key date, both as a total for the selected cost objects and at the level of individual production orders
Inspect WIP/Variance Posting: With this app you can run reports to review if any errors need to be resolved. Finally, you can simulate the posting and post to FI-GL
This scope item is currently available for US and DE.
Conclusion: With this new innovation, SAP has inched closer to its objective of enabling a faster period-end close. As you can see, the ERP is becoming more and more intelligent by the day, providing a choice of eliminating some of the steps to achieve a faster close
Impacts: Enabling this scope item may mean you are also doing away with revaluation of production orders using actual activity prices and also applying the overheads to production orders at actual rates. But, in my experience, I have seen several customers who are not so fussy about completely truing-up everything at actuals. So this scope item comes as a great relief for such customers
Stay tuned for more and more innovations from SAP, taking finance to the next-level