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Set up and utilize internal orders as standard SAP functionality

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Internal orders are an often overlooked part of standard controlling functionality. They offer broad and detailed functionality ranging from planning and budgeting' to cost and revenue analysis. Some key points:
*Internal order configuration basics for statistical orders
*Usage of statistical internal orders
*Standard reporting options for internal orders
*Using internal order hierarchies to support reporting for groups of orders
*Leveraging internal orders for planning
Gain a clear understanding of how you can utilize internal orders, and a better understanding of how to track costs and revenues for a specific job, service, task, or event.

Published in: Technology, Business

Set up and utilize internal orders as standard SAP functionality

  1. 1. Set up and utilize internal orders as standard SAP® functionality John Jordan ERP Corp © 2013 ERP Corp. All rights reserved.
  2. 2. Introduction • • • • 3 Internal Orders Explained • What are they? • How are they used? Real vs. Statistical • Limitations & Benefits • To Plan or Not to Plan • Grouping • Which type better fits your requirements? Case Study: Use of Statistical Orders to Capture R&D Costs • Configuration of Statistical Internal Orders • Collection of Values Reporting
  3. 3. Topics • • • • • Internal Orders - What are they? Real vs. Statistical Case Study: Use of Statistical Orders to Capture R&D Costs Reporting Summary Start of first section: List the main points in your presentation and insert this slide at the start of each new topic. Move the highlighted box down for each new section. This divides your presentation into easy to follow sections. 4
  4. 4. Internal Orders Explained • 5 What are they? • Internal orders are considered a cost object within the SAP Controlling Module • The primary purpose of an Internal Order is to capture costs or revenues related to specific event or project
  5. 5. Internal Orders Explained • How are they used? • Depending on the defined requirements, internal orders are used to capture and monitor: • • • 6 Non-departmental costs Revenues related to a specific sales order Large internal projects
  6. 6. Topics • • • • • Internal Orders - What are they? Real vs. Statistical Case Study: Use of Statistical Orders to Capture R&D Costs Reporting Summary Start of second section: List the main points in your presentation and insert this slide at the start of each new topic. Move the highlighted box down for each new section. This divides your presentation into easy to follow sections. 7
  7. 7. ―Real‖ vs. ―Statistical‖ • ―Real‖ Internal Orders • A Real Internal Order is used to track a cost that can be settled to: • • • • Can be a plan: • • 8 An Asset A General Ledger account Another cost object such as a Cost Center. A new building or a large maintenance project that will result in an asset. SAP Implementation whose settlement will be split between and asset and expense accounts.
  8. 8. ―Real‖ vs. ―Statistical‖ (cont.) • ―Real‖ Internal Orders • Can be planned or budgeted • • • • Not all orders have to be settled • 9 A Plan allows for costs collected/committed to be reported against the planned value assigned to an order or group of orders A Budget allows for costs collected/committed to be reported against the budgeted value assigned to an order or group of orders The difference between the two is specific to the spend – a plan can be exceeded, a budget cannot Internal Orders can be used in the same manner that cost centers can with regard to capturing costs. The key is to ensure that the values are assigned correctly within the OPEX section of the Profit & Loss statement • This can be accomplished by assigning a functional area
  9. 9. ―Real‖ vs. ―Statistical‖ (cont.) • ―Statistical‖ Internal Orders • A Statistical Internal Order simply tracks a certain type of cost that are not directly assignable to a cost center. • This type of Internal Order is used for reporting purposes and cannot be settled. • As a general rule, Statistical orders are used for the following types of spend: • • • • 10 Marketing Spend Trade Show Costs Special Projects (time and expense tracking) Research & Development Spend
  10. 10. Benefits & Limitations Options ‗Real‘ ‗Statistical‘ Plan or Budget Limitation – expected amounts can be assigned to the order but not reported Settlement Benefit – allows for cost collection and settlement according to user defined rules Limitation – cannot be settled Benefit – because settlement is NOT included, there is less maintenance Posting Benefit – costs are posted directly to the internal order Benefit – costs are posted to the relevant department which is ultimately responsible for the costs but the order allows for specific reporting Reporting 11 Benefit – allows for clear view of spend against expectations Benefit – reports can be run by order or group, viewing actual, commitment and plan/budget Benefit – reports can be run by order or group
  11. 11. To Plan or Not to Plan • There are two types of Internal Order planning in ECC 6.0 • Plan Integrated • • • Non plan-integrated • 12 This scenario combines cost elements and internal orders within the same plan as cost centers and all planned allocations are updated on the sender/receiver cost centers. This type of planning can also be transferred to Profit Centers & the Extended General Ledger based upon configuration and activation. Only allows for the local planning of costs or activities related to an internal order that is not setup for settlement to cost centers and/or Profit Centers and the Extended General Ledger.
  12. 12. To Plan or Not to Plan • Budgeting for Internal Orders • In SAP, exceeding a budgeted value applied to an internal order is considered a hard stop, unlike planning which is a warning. If the proposed spend exceeds budgeted value by any amount, the system will not allow the transaction to post. • • Any excess amounts require an adjustment to the budget. In addition to actual posted values, the budget can take into account any values committed via a purchase order during entry of financial postings (invoices or G/L entries).* *This requires that commitment management has been activated 13
  13. 13. Grouping • • Unlike Cost Centers, Internal Orders are not associated with a mandatory hierarchy. Orders can be grouped by activity or project based upon planned usage. An example is as follows: A2 Cycles Trade Show 400237 Booth Rental • 14 4002378 Travel 400239 Promotional Items One of the main benefits of grouping orders together is to increase efficiency related to execution of settlement and reporting.
  14. 14. Grouping • • 15 In addition, a grouping of Internal Orders can also be used to collect and budget a large project where you want to charge to a lower level, but report at a higher level. Examples of this would be one of the following: • large scale building • renovation projects • large scale marketing/advertising
  15. 15. Which type of order better fits your requirements? • 16 Determine how the order will be used • Will it require settlement to a cost center, asset or GL account? • Do you require planning or budgeting? • It is necessary to review Actual vs. Commitment vs. Plan? • Is the purpose to collect department related costs specific to an event or project for internal reporting requirements?
  16. 16. Topics • • • • • Internal Orders - What are they? Real vs. Statistical Case Study: Use of Statistical Orders to Capture R&D Costs Reporting Summary Start of second section: List the main points in your presentation and insert this slide at the start of each new topic. Move the highlighted box down for each new section. This divides your presentation into easy to follow sections. 17
  17. 17. Case Study: Statistical Orders to Captured R&D Spend • Company/System Profile • Small privately held company in the United States • Implemented ECC 6.0 with the New GL in early 2008. Controlling functionality implemented included: • • • • • Requirement Provided: • Identify the correct tool to capture R&D expenditures by individual product. • 18 Cost Center Accounting Profit Center Accounting Product Costing CO-PA Project Systems or Internal Orders
  18. 18. Case Study: Statistical Orders to Captured R&D Spend • Current method of identifying R&D Costs • Cost Center Reporting • • 19 Upon further discussions with the controller and CFO, it was confirmed that the R&D department was represented by various cost centers which are organized by function (Engineering, Design, General R&D) and location (Plant 1, Plant 2, etc.). The client did not have any systematic method of identifying the costs and manually reporting on the values using spreadsheets.
  19. 19. Case Study: Statistical Orders to Captured R&D Spend • Recommendation: • Statistical Internal Orders • • • 20 Given the base requirement that the existing cost centers retain responsibility as designed AND the reporting requirements, this was the most efficient option. Project Systems would require too much overhead and was an overblown solution based upon the requirement. In addition, the cost of implementing Statistical Internal Orders equated to 20 hours of consulting versus a full blown implementation of PS into an existing system.
  20. 20. Configuration of Order Type for Statistical Order • Transaction: KOT2 Menu Path: SPRO  Controlling  Internal Orders  Order Master Data  Define Order Types • Select Cat 0420 • 21
  21. 21. Configuration or Order Type for Statistical Order (cont.) • Field requirements: • Header • • General Parameters • • • • CO Partner Update = Active Classification = X Commit Management = X Status Management • • 22 All fields blank Control indicators • • Order Category = 1 Status Profile = ‗00000002‘ Release Immediately = X
  22. 22. Creation of a Statistical Internal Order • Transaction: KO01 Menu Path: Accounting  Controlling  Internal Orders  Master Data  Internal Order  Special Functions  Create • Select Order Type 0420 • 23
  23. 23. Creation of a Statistical Internal Order (cont.) • Field requirements: • Header • • Assignment Tab: • • 24 Description Company Code User Responsible
  24. 24. Creation of a Statistical Internal Order • Field requirements: • Control Data Tab • • • 25 System Status = REL Currency = Company Code Currency Statistical Order = X
  25. 25. Creation of a Statistical Internal Order (cont.) • Field requirements: • General Data Tab • • • Estimated costs = Enter estimated amount for project/event* Click Save System displays a message stating: ―Internal order was created with Order number 400XXX‖ *Information only; not included in reporting 26
  26. 26. Topics • • • • • Internal Orders - What are they? Real vs. Statistical Case Study: Use of Statistical Orders to Capture R&D Costs Reporting Summary Start of second section: List the main points in your presentation and insert this slide at the start of each new topic. Move the highlighted box down for each new section. This divides your presentation into easy to follow sections. 27
  27. 27. Reporting • 28 The reporting found in Internal Order Accounting is very useful. And, like other costing modules, it is broken up into multiple compartments to make it easier to find the report you are looking for. In this area, the reporting is broken out as follows: • Plan/Actual Comparisons • Actual/Actual Comparisons • Planning Reports • Line Items • Master Data Indexes • Summarization Reports • More Reports
  28. 28. Reporting • 29 The two primary reporting areas for Statistical Internal Orders are as follows: • Actual/Actual Comparisons • Line Items
  29. 29. Actual/Actual Comparisons • This selection of reports provides a means to compare results on a period, quarterly, or annual basis with a prior fiscal year. These two reports provide you with a means of identifying where your department is over time from a spend analysis perspective. • Period Comparison • • Quarterly Comparison • • The report shows quarterly totals for the fiscal year specified. Fiscal Year Comparison • 30 The report shows period totals for the fiscal year specified. This report details the current fiscal year totals along with the totals for the two previous years.
  30. 30. Line Items • The group of line item reports provides access and research tools that enable you to view the line item data relevant to actual postings, commitments, and plan data. The two most relevant reports are as follows: • Orders: Actual Line Items • • CO Documents: Actual Costs • 31 This report provides a display of all line items that posted to the Internal Order or Internal Order/cost element combination you select. This report provides a display of the actual CO document created either internally or externally (from FI).
  31. 31. Topics • • • • • Internal Orders - What are they? Real vs. Statistical Case Study: Use of Statistical Orders to Capture R&D Costs Reporting Summary Start of second section: List the main points in your presentation and insert this slide at the start of each new topic. Move the highlighted box down for each new section. This divides your presentation into easy to follow sections. 32
  32. 32. Summary • 33 Statistical Orders can provide valuable reporting with limited time and expenditures. • Retains reporting by Cost Center • Allows for Grouping of Internal Orders based upon event
  33. 33. Five Key Ideas • Implement Statistical Orders for the following events: • Trade Shows • Conferences • R&D Expenses • Entertainment • • • • 34 Collect costs related to company Christmas party Implement Real Orders without settlement for projects that do not require capitalization Implement Commitment Management Consider Reporting using FAGLL03
  34. 34. Resources • ERPtips Journal Articles • An Inside Job: Internal Order Processing in SAP - Part I • • An Inside Job: Capital Internal Order Configuration-Part II • 35 Sales orders drive an enterprise. But if you work in the financial area, you know that sales orders just begin the cycle: internal orders are just as important for the purposes of planning, collecting, & settling the costs of internal projects. Readers may know that SAP allows you to monitor these internal orders through the entire lifecycle from creation to posting. What you may not know is exactly how the internal orders are processed within SAP, & how to configure your system to make them fit your particular needs. In Part I, we focus on expense & statistical internal orders, looking at the process from Controlling area configuration to Model Order configuration. Gives the low-down on Capital IO configuration including the Model Order, Internal Order, Asset Under Construction, Fixed Asset, and Settlement. This is Part II of a three-part series on Internal Orders—contains some very strategic knowledge that can help you use SAP to calculate depreciation of a project—a real boon come tax time!
  35. 35. Resources • • • • • 36 ERPtips Classes • Controlling Workshop - http://www.erptips.com/SAP-Training/SAPCourse-Listing/SAP-Financials/Controlling.asp SAP Help for Internal Orders • http://help.sap.com/saphelp_erp60_sp/helpdata/en/a9/ab7f68414111 d182b10000e829fbfe/frameset.htm ERPtips Manuals • Controlling Training Manual - http://www.erptips.com/SAPTraining/Course-Manuals.asp ASUG Special Interest Group (SIG) – (must be logged in) • http://www.asug.com/Communities/SpecialInterestGroups/Process/ tabid/169/Identifier/GP_CU/TaxonomyId/275/Default.aspx SDN Wiki for FICO • http://wiki.sdn.sap.com/wiki/display/ERPFI/FICO+Resources
  36. 36. Questions • • Now: • Ask questions now for immediate answers Later: • jjordan@erpcorp.com Q&A 37
  37. 37. Disclaimer SAP®, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver®, Duet®, PartnerEdge, and other SAP® products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. ERP Corp is neither owned nor controlled by SAP.

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