Cost Allocation via Universal Allocation
Welcome to my first blog post. Here, I am going to give a detailed view of the Universal Allocation feature available in SAP S/4HANA Cloud 1905 and above.
Before deep-diving into the capabilities of Universal Allocation, let me quickly give an overview of Cost Allocation and the need of it in simple terms. In every organisation, there are various types of cost involved in different departments; each department can have particular ways of running their day to day operations which can have direct or indirect incurred cost. Think about a dynamic organisation with complex processes where daily activities are taking place, which involves cost.
Now, how to report the accurate costing flow in the most efficient way?
To showcase the same at the reporting level, we need the Cost Allocation planning, which has two allocations methods in SAP:
- Distribution (Primary Cost Element)
- Assessment (Secondary Cost Element)
During the period-end closing activities, various organisations use the above-stated methods.
Note– The importance of using different Cost Element is not explained here, one can reach out to https://help.sap.com/viewer/index or Google, you can also reach out to me ?
Why the need of the hour? To answer this, let me quickly explain to you what were the challenges faced in the earlier process of Cost Allocations. It lacked the traceability of the data involved; also, the granular visibility at the reporting level was missing. In simple words, today’s organisations struggle to understand their allocation cycles and the resultant cost flows. At the same time, failed to explain them to the related stakeholders.
Please refer to the below image as well for the detailed explanation:
Image reference- Markus Hauser
The entire process to show cost allocations involved various tcodes and core tables which was later simplified to a great extent by the concept of SAP Universal Journal which plays a vital role in the Universal Allocation process.
Benefits of Universal Journal: It provides us with a simplified data model by removing a handful core tables which in return reduces the database size significantly. Besides, significant benefits are as follows:
- Easier Data reconciliation.
- Efficient analysis at the reporting level.
- Month-end activities.
To know more on the above three, I will try to write another blog; else one can reach out to me for any clarifications.
Let’s now address the elephant in the room “Universal Allocation.”
- This Next-generation allocation in SAP S/4HANA is showcased through Manage allocation app, which enables you to allocate and distribute overheads from one object to one or many others. The allocation process debits the requesting cost centers and credits the cost centers that provided the services. With the allocations features, you can manage and perform various overhead allocation and distribution tasks for different allocation contexts, such as cost centers or profit centers. You can periodically allocate amounts and quantities from sending objects to receiving objects.
- Customers can quickly identify possible financial effects of changed allocation rules on their financial data.
- Allocations for plan data, you can now perform allocations for actual data.
- Allocations for cost centers, you can now perform allocations for profit centers.
- Provides one architecture for FI and CO allocations.
- Combines actual and plan.
- Provides simulation capabilities.
- Includes actual and predictive data (ledgers).
- Provides all the required reporting currencies.
- Provides traceability of the value flow.
- Simplifies the process with guided procedures and validations.
- Instant Insights of the cost related to G/L account for respective cost center and profit center.
Note – Two core tables used for Actual and Plan data respectively are: ACDOCA and ACDOCP.
The two main apps to be used are: one is Manage Allocation, where you can find the standard allocation cycles available which can be extended and changed as well. At the same place, you can configure them as well. Below are the few relatable screenshots from the system:
Above screen shows, three standard cycles already present in the selected combination.
The other app is- Run Allocations, where we get an option of running the allocation cycles in test mode to see how the data will look and then run it in live mode. Another feature available here is – Reversal of allocation cycles. Let me give you a scenario here, for a presales person to showcase the demo of Universal Allocation multiple times can be a task as that much of data should be configured in the demo system. Isn’t it? Now to deal with this- Recently I have prepared a demo, where I have just maintained data for a single month and year, and with the help of reversal feature of allocation cycles, presales person can run the demo as many times as we want and showcase it in the reporting level with ease.
Below screens are from the system itself to give you an idea:
There is still a lots of scope which can make this process even worth more, like having a single source of truth (universal journal) comprising of profitability analysis and also a feature of running the allocation cycles through job scheduling and many more.
I hope this blog post finds the right audience and might interest them. As this is my first blog post, I am very much keen about the feedback and response on this. Looking forward to answering any related questions under best of my capabilities ?
Feel free to get in touch.
Note- Anyone who has access to SAP Demo Store or SAP Demo Library can also go through the Universal Allocation script.