Allocations & Universal Allocation
This blog post will include a series of Controlling related topics, which circle around showcasing new functionalities in S/4HANA Cloud, comparing functionalities between SAP S/4HANA Cloud and SAP S/4HANA (on premise), as well as general topics to be considered from Management reporting/Controlling point of view when implement SAP S/4HANA.
Allocation & Universal Allocation
An Allocation is a process of distributing Cost, Revenue or Balance sheet values from specific sender account(s) and object(s) (e.g. Cost Center, Profit Center) to specific receiver account(s) and object(s) (e.g. Cost Center, Profit Center). An example of a cost allocation can be rental expense, which are first booked to a general cost center, and should then distributed to cost centers of the departments that use those facilities and should bear part of the cost.
Universal Allocation are the Applications (Apps) that we use to create, run and view allocations in SAP S/4HANA, instead of the multiple transactions we had in SAP ECC. With the manage Allocations app, we define and create segments, which include the rules for the senders and receivers (e.g. which accounts to be used for sender values, should the allocation be posted using the original account or a separate account (Overhead Allocation), which cost objects should be senders and receivers and so on).
This allocation tool is continuously being improved and below are some of the useful functionalities it provides.
- Allocation in multiple currencies (with balancing values in all currencies), something which was not possible in SAP ECC
- Postings updated in the Universal Journal
- Simple user interface
- Planned and Actual values in one environment
Flexible Ledgers functionality in Universal Allocation
In SAP ECC it was not possible to select the ledger to be used in an allocation. In SAP S/4HANA, when you create an allocation cycle, you select a ledger for the allocation. Which will be the ledger that is being read for values that should be allocated and is the ledger where you post your allocated results. Earlier if you wanted to allocate in multiple ledgers, you had to maintain multiple cycles, with flexible ledger you can maintain the cycle once, and execute it in any other parallel ledger.
Flexible Ledgers is available in SAP S/4HANA Cloud (Version 2102).
- This enables maintaining an allocation cycle once, and executing it in any other parallel ledger
- By doing this you can keep a main ledger “clean” from certain allocations (e.g. if you do not wish for everyone to see some allocations or you want less postings in one of the ledgers).Although, it requires that the second ledger is full ledger (same values as the leading), in the case of an allocation using the sender rule “posted amounts”.
- It also reduces time to maintain allocation cycles, as you need to maintain it only once (instead of once per ledger)
- Technically you tick box the cycle header the “flexible ledger” field , and when running the allocation, you select which ledger you want to post to
- It is also worth noting that once a cycle is on executed as a flexible ledger cycle, then it cannot be deselected anymore
Running the flexible ledger allocation cycle
- When running the allocation cycle, using the flexible ledger cycle functionality, you can select to which ledger you allocate in (in below example ledger 2L)
Viewing the Allocation Results
At this point, the allocation has been created using the Manage Allocation App (where we have defined sender & receiver objects). The allocation has been run (using the Run Allocations App) and now we move to the last stage of viewing our allocated costs, using the Allocations Results App.
- The network graph (Allocation results App) gives a visual overview of what has been allocated
- The group functionality can be used to view from different dimensions (E.g. View from functional area point of view, instead of cost center).
- When an allocation is executed for only one ledger (using the flexible ledger functionality), it will only be posted to that ledger (e.g. In the below case to 2L)
Possibility of adding Notes:
- Adding notes to cycles is easy and can be a good tool to document changes on cycles.
- Notes can be added on cycle header or to segments
- This functionality is currently available in SAP S/4HANA Cloud , and has not been available in SAP ECC
- When viewing the cycle, you can easily see the what has been written to different segment notes:
Possibility of Upload through Excel
You can create and update allocation cycles either through the Manage Allocations app, but there is also possibility of uploading them through excel, which can make the process quicker. Both of these approaches are completely new compared to SAP ECC, where only manual updates where possible.
- You can create cycles (header and segments) through simple excel upload, both in SAP S/4HANA Cloud and SAP S/4HANA (on premise) (Version 2020)
- You can also upload percentages within the cycle receivers
This blog post focused on explaining and showing the functionalities of adding notes to allocation cycles, as well as utilizing the flexible ledger option to create an allocation cycle once and then running it to specific a separate ledger.
Personally, I believe the flexible ledger functionality, is a good improvement that enables more options for how to setup allocations for a company, and the possibility of adding notes will add value for documenting changes to allocations cycles.
What do you think? How would you utilize these functionalities in your project or organization? Let me know what you think!
EDIT: Update regarding flexible ledger functionality.