SAP S/4HANA FUNDS MANAGEMENT-Part 1 (what’s in it for private owned Customers)
As I wrote in my previous blog post, budget availability control in S/4HANA is a very comprehensive topic.
There are some possibilities to approach the topic:
- If you want to use the Cost Centers new functionalities of AVC in Controlling in S/4HANA please read this blog post.
- Instead if you have decided to use the Funds Management functionalities you may want to continue to read this blog post.
Please be aware that:
Funds Management was developed by SAP to be used in the Public Sector and as stated by OSS Note 195122 limitations may arise if you want try to activate it and compare CO and FM values.
PERSONAL OPINION: Funds management is part of Public Sector Management solution; therefore it is mainly used for Public Sector Customers. Despite that I have used it in many ‘privately owned ’ customers implementations and it worked perfectly for their requirements as well. Personally, in the implementations I have followed at ‘privately owned customers” I have never found discrepancies between FM and CO mentioned by OSS note 195122.
[Added in February 2022]. Please also be aware that limitations arises for implementation of Funds Management in S/4 HANA. Depending on the release you want to use you may want to check following notes:
In very simple words, the main idea of Funds Management for private owned customers is:
- to prepare budget on specific Funds Management master data
- to insert (or automatically derive) these master data in consumption documents (for example Financial documents or Purchasing Documents)
- to match the document value (plus the already posted documents values on the same master data) towards the budget by
- sending the Budget Responsible a warning message in case the budget is almost consumed
- blocking the posting if the budget is completely exhausted.
- doing nothing if the document value the is below the budget value.
Of course Funds Management is able to provide solutions to other requirements (for example the possibility to create expense commitment chain documents) but the main requirement funds management I have received by “private” (not public) customers are related to budget preparation and the availability control functionalities.
FM Budget Availability Control (from now on AVC) was able to provide solutions to many customer requirements I have received in the past years:
- I would like to control my expenses independently on the receiver controlling objects. In other words, I would like to check my budget globally and independently of single objects (Cost Centers, Orders or Wbs Elements). My budget belongs to departments and they are responsible to post their expenses in different objects.
- I would like to check my budget per single expense and limited to some expenses
- I would like to check my expenses on different levels of the hierarchical structure and not on the single object.
- I would like to check the project annual budget and to give warnings about its consumption, but if expenses are within the overall (multiyear) project budget I want to allow the expenses till the overall limit (and not the until the annual limit).
- To avoid the early consumption of my annual budget I would like insert the budget and to check the availability control monthly or quarterly or twice a year.
PERSONAL OPINION. To be honest, giving the cited requirements, I could not find any standard alternative to Funds Management implementation.
And I have seen some customers (not my customers!) spending a lot of consulting days to create custom programs to meet to these requirements (frequently solvable by SAP standard). These customers were then obliged to revise (and to spend even more days) these custom programs every time they decided to have a modification in their processes and coding block flows.
As an SAP consultant I do not recommend this custom approach.
So why these implementations did not consider Funds Management as an option?
For me there are two main reasons:
- Funds management must be activated via a business function as specified by OSS note 2503381. Until you activate the business function, you will not see customizing and User Menu. So a lot of consultants ignore even Funds management is existing.
- As already said Funds management is considered a solution valid only for Public Sector Customers.
Anyway in this blogpost I will talk about the master data argument: how to create and derive Funds Management Master data and how to make them work in derivation rules.
In part two if this blog posts I will describe the Budget Availability Control (AVC) Functionalities.
Funds Management has its own master data:
- Funds Center (Mandatory)to represent the company structure (usually but not always Cost Center structure)
- Commitment Item (Mandatory) , to represent nature of cost and other General ledger accounts
- Funded Program (Not Mandatory) to represent for Public sector customers the work program funded (e.g. Security, Public Health, Environment care). Funded program can also be used by not public customers to represent something else (for example projects or part of them)
- Fund (Not Mandatory) that as per SAP documentation represent financial resources that are provided for a specific purpose by a sponsor and managed separately. Funds represent own/external funds that are limited time-wise (financing period) and functionally (application of funds), which have been designated for a specific expenditure. They can also be used as administration or accounting units to separate activities so as to facilitate further analyses or another Reporting.
- Functional Area. (Not Mandatory) that as per SAP documentation is an account assignment characteristic that sorts operating expenses according to functions. For example Production, Administration, Sales, Research and development
Only Funds Center and Commitment items are mandatory fields in Funds Management, so depending on the requirement you have, you may want to use only them or to add the others.
If you want more information on the Funds Management master data please have a look to the SAP official help.
As said in a previous blog post some of these master data (Commitment Items, Funds Centers, and Funded Programs) can be created automatically via a standard program.
How are these master data used?
Funds management has a derivation tool (quite similar to the one used in CO-PA) that allows the FM master data to be derived from other master data. Some Examples are
- Commitment Item from G/L Account (
- Funds center from Cost Center or from Internal order
- Funded program from Wbe or from network or from network activity
In general I see derivation rules working in 2 different ways:
- There are customers creating 1:1 FM master data per CO and FI master data (e.g. a Funds Center for every Cost Center, a Funded Program for Every Wbs Element A Commitment Item for every Cost Element). If you think about a customer managing complex projects this may mean to create thousands of funded programs to represent Wbs elements and this may request a lot of work. On the other hand customers may still need to execute AVC for their lower level of the Wbs structure (and that means not alternative to create many master data. For this reason SAP has created automatic creation of master data. I have talked about this argument in this blog post
- Other Customers that decide to have n:1 relation creating FM master data aggregated towards FI-CO Master data (A Funds Center for many Cost Centers, a Funded Program representing level 1 or level 2 in the Wbs, a Marketing Commitment Item to represent every Marketing Cost Element.
Personally I do not have a predefined preference among the specified alternatives. I think it depends on different things:
- Level of detail needed in budget and AVC process
- Level of complexity in master data (customers with thousands of Wbs elements may not want to have the same level in FM)
- Level of expected changes in following years for the master data
These are the field you can use to derive FM master data
Derivation is the perfect tool to allow the User not to insert Funds management master data in documents. Therefore you may put the budget on FM master data and then, to check the budget without any action from key users, you simply derive the FM master data in Documents (e.g purchasing and financial documents). In this way the user that creates the purchasing document does not have to insert FM master data manually in the document.
Derivation tool is so flexible that you can use various methods to derive your master data and if you are not happy with these methods you can also write your own code.
Of course the reason to derive FM Master Data in a document is due to the fact you want your document to be matched with the budget you have previously inserted on these master data.
The good thing about derivation is that it can be used not only to derive master data in documents but also:
- To derive different availability control objects. For example you may want to check the budget of the entire project (Funded Program ) or going up in the Cost Center structure (Funds Center structure
- To derive different tolerance profiles. For example you may want to give specific tolerances to specific objects.
- To address period closing procedures (if you want to derive different objects for commitments)
- To execute initial data migration (for example if Funds management is being implemented on an existent implementation).
This keeps the entire solution very flexible and allows to obtain some specific possibilities in Availability Control. (I will talk about them in the second part of this blog post).
In part 2 of this blog post I will talk about Budget Availability Control and how to provide solution to the customer requirements I have described in the first part of this blog
This blog post is part of my implementation experience and I am willing to know what you think about it.
Have you ever implemented Funds Management in a Private Owned Customer?
How was it?
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SAP S/4HANA Regional Implementation Group