A company may adopt many business processes to run its various operations. These differ as per different departments. Likewise, we have many business processes in SAP FICO. That I have explained this below in this blog article.
The order-to-cash process in Accounts Receivable is the lifeline of a company. This business process in SAP is the link to customers to whom the company must offer value-added with its services and products. In return, the customer provides the company with the liquidity it needs to continue as a business.
The order-to-cash process already starts with the first customer contacts in SAP Customer Relationship Management (SAP CRM). However, the process only becomes relevant for accounting when you generate contract information, which later arrives in accounting. This can be an inquiry or an offer where personal and product-related information has already been exchanged.
When this customer contact leads to a complete business transaction, the process goes through various functional areas in the SAP system, primarily sales, logistics material management, accounting and treasury.
Purchase to Pay in Accounts Payable is the other core business process in SAP that deals with Purchase and Vendor Management. This process is associated with spending money. Thus, from an internal control point of view, it’s paramount to ensure that the right amount of money goes to the right payee and that the expenses go to the correct cost.
The purchase requisition comes from different departments in the Purchase department. Such as, the Purchase Department initiates the quotation and purchase orders. While Other departments like Accounting & Material ledger updates the goods’ receipt.
The acquire-to-retire process deals with Fixed Asset Management for a company. SAP FICO provides the tools to support this process.
I can divide this process into three phases. While the Purchase area supports the pre-acquisition and acquisition phases. The Finance department. supports the monitoring phase.
The record-to-report business process in SAP as part of General Ledger is the most important process because it involves the accounting’s responsibility for properly documenting business transactions and providing reliable information about the course of business. All accounting-related postings in the different areas are ultimately consolidated in the general ledger so that financial reports can be prepared.
Individual companies as legal entities are often part of a group of companies for which consolidated financial statements must be created. A very important task in accounting is therefore the identification and recording of intercompany transactions in preparation for consolidation. This is true for the general ledger where the reconciliation and elimination of intercompany transactions must be supported.
The organizational structures that are relevant for financial accounting are defined in the IMG via the menu path. Enterprise Structure-Definition-Financial Accounting.
In addition to the preceding elements and to give you a better understanding of the overall context of the organizational structure, we also need to describe briefly the client element and organizational context of the management accounting area with its basic controlling area elements.
the Client describes the technical framework of the system and is therefore the highest organizational element. For this reason, all the elements described in the following sections are located within a client. When implementing a system for a corporate group from an accounting point of view, you should insist on mapping the entire corporate group within a client. This brings various advantages for master data management, the design of process and the processes and the representation of the group of companies in consolidation according to legal and business dimensions
The organizational element company is intended by SAP in the system for legal entities. It, therefore, describes a business organization for which accounting must be performed and the balance sheet must be drawn up for legal reasons.
However, legal independence in SAP is not a mandatory prerequisite for setting up a company in the system. For example, a legally dependent branch or permanent establishment can also be created as a company to be addressed as a consolidation element.
Also similar to the client as a technical framework, the company conceptually represents a framework within which various organizational elements relevant to accounting can be defined. Therefore basic elements for accounting such as the chart of accounts are not defined at a company level.
Because the consolidated financial statements can primarily be understood as the consolidation of legally independent companies. It’s logical that the company element is used for consolidation in SAP. It is also called a trading partner.
The company code organizational element is not equal to and does not have a 1:1 relationship with the company element. Rather different company codes can be created within a single company. The purpose is to maintain a closed accounting system for each company code with the option of generating a balance sheet and income statement for each company code. Therefore all company codes within a company must use the same chart of accounts and fiscal year. However, you can have different currencies in use to manage a cross-national corporation.
The company code can also be used for example to record adjustment postings for the tax balance sheet so that the combination of a commercial balance sheet company code with the tax adjustment postings results in a complete tax balance sheet.
A controlling area is an organizational unit within a company- although not limited t one company code – that is used for management accounting purposes. A controlling area may include one or more company codes which may use different company code currencies. However, the assigned company code has to use the same chart of accounts.
The purpose of the controlling area is to structure the business organization from a management accounting standpoint. Therefore the definition of controlling area is not limited or dependent on legal limits or accounting regulations. Because several company codes can be assigned to one controlling area, a group of companies can also organize management accounting across legal forms even in different currencies. This also makes accounting much easier because intercompany cost charges can be carried out automatically.
The credit control area is an organizational unit that specifies and checks a credit limit for customers. This is a powerful tool for accounts receivable with a strong link to the sales organization.
Credit control can be assigned to one or more company code
A profit center is an organizational unit of accounting that structures the enterprise in a management-oriented way. The purpose is to create a control unit that is independent of legal forms and may be defined group-wide, so subsequent profit centers can be used across companies.
Period Accounting – For a profit center, you can generate results that are calculated according to cost-of-sales accounting and or period accounting.
ROCE – The profit center is primarily oriented to the figures in the profit & loss statement. However, by also reporting balance sheet numbers, you can support a control concept aiming for a return on capital employed (ROCE) or economic value added.
For Controlling Area – Each profit center is assigned to a Controlling Area and Segment. You can also select the Company Codes where the profit center can be used. By default all company codes assigned to the controlling area are active.
For Legal Accounting View – You can use the profit center to break down the legal accounting view according to internal company criteria. The activity and goods flow between profit centers can be reported. As an additional functionality, it’s possible to apply statistical transfer prices for these cross-profit center flows of goods. However, in this case, the valuation of goods and services processed between profit centers can be different from the valuation approach in financial accounting.
Segments are used for segment reporting according to International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles ( GAAP). In this context, segment reporting is an important tool for external accounting and consolidation to structure the entire company’s consistency into business segments.
In logistics, the plant represents an organizational unit and a physical location where manufacturing takes place or goods and services are provided. The company is thus structured by the plant for production, procurement, maintenance and material planning purposes.
The connection to accounting is made via the company code; each plant is assigned to a single company code, but a company code can be set to several plants.
Regarding accounting, the plant plays an important role in several areas:-
Within the purchasing organization, you organize all business processes regarding purchasing. On this level, we control the purchase requests and orders and you define price conditions and purchasing info records.
Responsibilities for purchasing processes can have either centralized or decentralized regulation. Depending on this decision, you define the integration into accounting and its relationship to the company code.
With the sales organization, you organize your business process in SAP for the sale of materials and services. Based on the sales organization, we can define master data (customer and product) and prices and sales document types.
The integration into accounting is done via company code assignment, a sales organization is assigned to exactly one company code. You can assign the sales organization to the company code.
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