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Cost Center Commitments in SAP S/4HANA Cloud

Introduction

Commitment management in SAP S/4HANA tracks future commitments against cost objects (I.e. Cost center, Internal order etc.) This helps user to do comparison between actuals and commitments. Commitment amounts are available as information for reporting purpose. You cannot use commitments to prevent user from creating the purchase order that exceeds budget. Prevent user to post actual greater than budgeted is available in Availability Control functionality in SAP S/4HANA Cloud. Commitment management is a part of the cost monitoring process. Commitment Management line items are triggered by purchase requisitions and purchase orders that utilize cost centers. These commitments are updated in Extension Ledger 0E (pre-delivered) in the ACDOCA table. Commitments are reduced by various business transactions such as goods receipt, service entry sheet etc.

With this functionality, we can post commitment against PR/PO which are assigned to Cost center and predict our future obligation in PR/PO. We can also get comparisons of actuals vs commitments via analytical SAP Fiori App.

Flow%20in%20Commitment%20Management

Flow in Commitment Management

Prerequisites

  • Non-standard scope item 2I3 needs to be activated.
  • Commitment Management must be selected and activated. Once activated, commitment management ledger 0E is active and applicable for all company codes and all countries.
  • Supported for Cost centers and Projects.
  • “Commitment Update” must be active in Cost Center master.
  • In App: Manage Cost Centers, the flag “Lock Commitment Updates” should be unflagged.
  • Non-stock material PR/PO works for commitment.

 

 

Process – Commitments by cost center

Step 1: Purchase order creation

Purchase order created with 10 PC and cost of material is 1876.88 USD. Purchase order assigned to Cost center (17101101) via account assigned category.

Purchase%20Order

Purchase Order

Step 2: SAP Fiori App to Check commitment on cost center

This report allows visibility of purchase order commitments to be viewed by cost center and General ledger. User can also track and compare your Actuals with Commitments.

Purchase order has been created with 1876.88 USD. This App will show commitments of 1876.88 USD on purchase order 4500006150.

Commitments%20by%20Cost%20center

Commitments by Cost center

Step 3: Inbound delivery / PGR

Purchase order has been created for 10 PC, However inbound delivery / post goods receipts has been posted for 1 PC.

Inboud%20Delivery

Inbound Delivery

Accounting document created for 1 PC through post goods receipt. Consumption account gets debited and GR/IR account gets credited with 187.69 USD.

Accounting%20Entry

Accounting Entry

Step 4: Commitments reduced on cost center

Purchase order has been created for 10 PC with 1876.88 USD and Post goods receipts posted with 1 PC and 187.69 USD.

Actual cost on purchase order is 187.69 USD.

Commitments on purchase order = Total commitments for 10 PCs – Commitments fulfilled for 1 PC

= 1876.88 – 187.69 = 1689.19 USD

Fiori%20App

SAP Fiori App

Business Benefits

Commitment by cost center functionality will help business to analyze commitment on cost center which are still not fulfilled. Business can also track commitments on the purchasing side and can compare actuals, plans and budgets. They can also compare commitments with actuals and drill down to GL level.

Conclusion

This functionality helps organization to understand commitment lying on cost center which needs to be fulfilled. Commitments on cost center also helps organization to provide information related to provision entry.

 

Reference SAP Best practice: Scope item J54 and 2I3.

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