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How Expert SAP Consulting Optimizes Your Business

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How Expert SAP Consulting Optimizes Your Business

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Table of Contents


  1. Profitability Analysis

  2. SAP Actual Costing

  3. S/4HANA Transitional Roadmap

  4. SAP Goods Receipt vs Invoice Receipt

  5. SAP Internal Orders vs WBS Elements

  6. SAP Subcontracting

  7. Glossary



At ERPCorp we provide tailored solutions for your unique SAP business challenges. Our core values revolve around understanding the challenges and opportunities that lie within each organization.

Some of the transformative SAP solutions we provide include:


1. Profitability Analysis

We explain profitability analysis reporting in an easy-to-understand way to improve the accuracy of your product margins.

Auto.jpgFirst we analyze your current component and purchasing costs to identify any issues and recommend solutions for you to understand and reduce the costs of your finished products and increase your profit margin.

For example, we worked with an automotive company to analyze and understand their metal and plastic purchasing costs by linking their purchasing conditions and costs to individual cars. This allowed them fine tune their profit margin per car to become more competitive.

Margin Analysis in S/4HANA, offers real-time insights into profitability, allowing you to accurately analyze your margins by products, customers, or market segments. This analysis helps you to focus on the most profitable aspects of your operations. The real-time data processing of S/4HANA improves the accuracy of margin analysis while accessing the Universal Journal real-time.

SAP Fiori apps access the Universal Journal directly. Manufacturing order variance analysis is improved with two new SAP Fiori apps with enhanced views of variance at the order and work center and operation levels, which are now included in the Universal Journal. For example, these two new SAP Fiori apps:

  • Production Cost Analysis App ID F1780
  • Analyze Costs by Work Center/Operation App ID F3331

which are explained in detail in our SAP Fiori apps blog.


2. SAP Actual Costing

Does actual costing explain your purchasing and manufacturing costs in a useful way?

ApplesWe guide you through setting up your actual costing run with transaction CKMLCP and explain the difference postings and messages. We help you understand the option of posting to accrual accounts first and ensure you understand your actual costs and differences clearly before you revalue inventory.

For example, we worked with a food processing company to setup an Alternative Valuation Run to set the plkanned standard cost based on an average of actual costs over 12 months.

Actual costing allows you to release a new, accurate standard cost each month based on the Periodic Unit Price or PUP calculated on actual costs for the previous period. You also have the choice of posting the calculation to an accrual account without revaluing inventory. We carefully guide you through this process and esure you fully understand each step.

For more details on SAP Actual Costing click here to access our blog.


3. S/4HANA Transitional Roadmap

We assist you to take full advantage of the new S/4HANA functionality, by guiding you through the eight roadmap phases:



1. Preparation and Planning

2. Blueprinting

3. System Conversion or New Implementation

4. Functional Configuration and Testing

5. Training and Change Management

6. Deployment and Go-Live

7. Post-Implementation Support

8. Continuous Improvement

We review and evaluate your current business processes with your users in structured workshops, and provide an overview with documentation of S/4HANA benefits and changes that are required during the transition. 

For example, we implemented the 120 cost components available with S/4HANA so a company could improve their reporting.  This allowed them to analyze their cost more accurately, improve their profitability reporting, and become more competitive with better margins.


4. SAP Goods Receipt vs Invoice Receipt

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SAP GR/IR performs a three-way match between:


You use the GRIR clearing account to record the offset of the GR and IR.

When fully processed, the postings are displayed in the clearing account balance. 

Clearing is performed at the PO line item level based on the quantity entered.

You write off small differences with Transaction MR11 or via menu path:

Logistics • Materials Management • Logistics Invoice Verification • GR/IR Account Maintenance • Maintain GR/IR Clearing Account

Before maintaining the GR/IR clearing account, you should establish that no more GRs or IRs are expected for the PO item. If the invoiced quantity is more than the delivered quantity, the system expects another GR. If the invoiced quantity is less than the received quantity, the system expects another invoice.

If the GR/IR clearing account differences are not cleared by a further GR or credit memo or an invoice or return delivery, you must maintain the GR/IR clearing account manually.

For more information, please click here to access our GRIR blog.


5. SAP Internal Orders vs WBS Elements

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 Internal Orders and WBS Elements are tools within SAP for tracking costs and managing projects.

Internal Orders are used for shorter, internal projects focusing on cost tracking and monitoring.

WBS Elements, part of the Project System module, are used for more complex projects, providing a hierarchical structure for detailed planning and execution. Choosing between them depends on the project complexity

We assist you evauate Internal Orders first to see if they meet your reporting requirements. Our SAP experts can also guide you through setting up WBS Elements for more complex project reporting requirements. 

For more details, please click here to access our Internal Order vs WBS Element blog.


6. SAP Subcontracting

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Subcontracting (SC) in SAP involves sending components to a supplier for processing or assembly. This process allows companies to leverage external expertise or capacity. 

  Or a SC supplier manufactures for you because you're busy or you need more manufacturing capacity.
You want to avoid manufacturing it, or you want a supplier to manufacture it in another country.

You send components to the SC supplier. They return the completed assembly. At GR you issue the components from SC inventory. If the supplier consumed a different quantity than planned in the SC purchase order, you adjust the component quantity at GR.

When MRP needs to replenish a material with special procurement type 30 in the MRP 2 View it searches for an SC purchasing info record, and issues a SC purchase order to the supplier.

For more details, please access our SAP Subcontracting blog here.


From initial system evaluation and strategies to improve your implementation and ongoing support, we guide you through every step of your SAP journey.

Please contact us to schedule a meeting:

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Accrual Order

An accrual order enables you to monitor period-related accrual calculation between expenses posted in Financial Accounting and Controlling.

Cost Center

A cost center is master data that identifies where the cost occurred. A responsible person assigned to the cost center analyzes and explains cost center variances at period-end.

Fixed Assets

Fixed assets are company-owned, long-term tangible assets, such as forms of property or equipment. These assets make up its day-to-day operations to generate income. Being fixed means they can't be consumed or converted into cash within a year. 

Activity Type

An activity type identifies activities provided by a cost center to manufacturing orders. The secondary cost element associated with an activity type identifies the activity costs on cost center and detailed reports

Allocation Structure

An allocation structure allocates the costs incurred for a sender by cost element or cost element group, and it is used for settlement and assessment. An assignment maps a source cost element group to a settlement general ledger account.

Alternative Hierarchy

While there can only be one cost center standard hierarchy, you can create as many alternative hierarchies as you like. You create an alternative hierarchy by creating cost center groups

Automatic Account Assignment

Automatic account assignment allows you to enter a default cost center per cost element within a plant with Transaction OKB9.

Availability control

Availability control enables you to control costs actively by issuing warnings and error messages when costs are incurred.

Bill of Material (BOM) 

A bill of material (BOM) is a structured hierarchy of components necessary to build an assembly. BOMs together with purchasing info records allow cost estimates to calculate material costs of assemblies.

Controlling Area Currency

You use the controlling area currency for cost accounting. You specify the controlling area currency when defining the controlling area in customizing for Controlling . You can assign more than one company code with different currencies to a controlling area.

Cost Center

A cost center is master data that identifies where the cost occurred. A responsible person assigned to the cost center analyzes and explains cost center variances at period end.

Cost Component

A cost component identifies costs of similar types, such as material, labor, and overhead costs by grouping together cost elements in the cost component structure.

Cost Component Group

Cost component groups allow you to display cost components in standard reports. In the simplest implementation, you create a cost component group for each cost component and assign each group to a corresponding cost component. You assign cost component groups as columns in cost estimate list reports and costed multilevel BOMs.

Cost Component Split

The cost component split is the combination of cost components that makes up the total cost of a material. For example, if you need to view three cost components (material, labor, and overhead) for your reporting requirements, the combination of these three cost components represents the cost component split.

Cost Component Structure

You define which cost components make up a cost component split by assigning them to a cost component structure. Within the cost component structure, you assign cost elements and origin groups to cost components.

Cost Component View

Each cost component is assigned to a cost component view. When you display a cost estimate, you can choose a cost component view, which filters the cost components displayed in the cost  estimate.

Cost Element

Cost elements are included as part of a general ledger account. Primary cost elements identify external costs, while secondary cost elements identify costs allocated within controlling, such as activity allocations from cost centers to manufacturing orders.

Cost Estimate

A cost estimate calculates the plan cost to manufacture a product or purchase a component. It determines material costs by multiplying BOM quantities by the standard price, labor costs by multiplying operation standard quantities by plan activity price, and overhead by costing sheet configuration.

Costed Multilevel BOM

A costed multilevel BOM is a hierarchical overview of the values of all items of a costed material according to the material’s costed quantity structure (BOM and routing). You display a costed multilevel BOM on the left side of a cost estimate screen. You can also view a costed multilevel BOM separately with Transaction CK86_99.

Costing BOM

Costing BOMs are assigned a BOM usage of costing and are usually copied from BOMs with a usage of production. You can make adjustments to costing BOMs if you require them to be different from production BOMs. With system-supplied settings, standard cost estimates search for costing BOMs before production BOMs.

Costing Lot Size

The costing lot size should be set as close as possible to actual purchase or production quantities to reduce lot size variance. Unfavorable variances may result if you create a production order for a quantity that is less than the costing lot size. You need setup time to prepare equipment and machinery for production of assemblies, and that preparation is generally the same regardless of the quantity produced. Setup time spread over a smaller production quantity increases the unit cost. This also applies to externally procured items because vendors typically quote higher unit prices for smaller quantities.

Costing Run

A costing run is a collective processing of cost estimates, which you maintain with Transaction CK40N.

Costing Sheet

A costing sheet summarizes the rules for allocating overhead from cost centers for cost estimates, product cost collectors, and manufacturing orders. The components of a costing sheet include the calculation base (group of cost elements), overhead rate (percentage rate applied to base), and credit key (cost center receiving credit).

Costing Type

The costing type determines if the cost estimate can update the standard price.

Costing Variant

The costing variant contains information on how a cost estimate calculates the standard price. For example, it determines if either the purchasing info record price is used for purchased materials, or an estimated price is manually entered in the Planned price 1 field of the Costing 2 view.

Currency Type

The currency type identifies the role of the currency such as local or global.

Demand Management

Demand management involves planning requirement quantities and dates for assemblies, as well as defining the strategy for planning and producing/procuring a finished product.

Dependent Requirements

Dependent requirements are caused by higher-level dependent and independent requirements when running MRP. Independent requirements, created by sales orders or manually planned independent requirement entries in demand management, determine lower-level dependent material requirements.

Detailed Reports

Detailed reports display cost element details of manufacturing orders and product cost collectors. You can drill down on cost elements to display line-item reports during variance analysis.

Distribution Rule

You maintain distribution rules in settlement rules in manufacturing orders and product cost collectors.

Event-Based Processing

As of SAP S/4HANA release 2022, event-based processing is available, where goods movements and confirmations represent events that trigger the calculation of overhead according to the costing sheet. Then, depending on the status of the order, this triggers either the posting of a journal entry for the work in process (WIP) or the cancellation of any existing WIP and the calculation of production variances.

External Processing

External processing of a manufacturing order operation is performed by an external vendor. This is distinct from subcontracting, which involves sending material parts to an external vendor who manufactures the complete assembly via a purchase order.

Goods Issue

A goods issue is the movement (removal) of goods or materials from inventory to manufacturing or to a customer. When goods are issued, it reduces the number of stock in the warehouse.


GR/IR is the SAP process to execute the three-way match- purchase order, Material Receipt, as well as vendor invoice. You use a clearing account to record the offset of the Goods Receipt (GR) and Invoice Receipt (IR) postings. As soon as completely processed, the postings in the cleaning account balance.

Internal Order

An internal order monitors costs and revenue of an organization for short- to-medium-term jobs. You can carry out planning at a cost element and detailed level, and budgeting at an overall level with availability control.

Long-Term Planning

Long-term planning allows you to enter medium- to longer-term production plans, and simulate future production requirements with long-term MRP. You can determine future purchasing requirements for vendor RFQs, update purchasing info records, and transfer planned activity requirements to cost center accounting.

Margin Analysis

Margin Analysis is the refined version of Account-based COPA. The Universal Journal combines financial and managerial accounting and directly records all dimensions, including custom fields. Margin Analysis provides consistent financial information without any reconciliation needs along with a financial audit trail. All innovations developed for the Universal Journal are immediately available within Margin Analysis. A consistent approach ensures common usage of ledgers, currencies, valuations, predictions, and simulations, as well as their availability in planning and reporting.

Master Data

Master data is information that stays relatively constant over long periods of time. For example, purchasing info records contain vendor information such as a business name, which usually doesn’t change.

Material Master

A material master contains all the information required to manage a material. Information is stored in views, each corresponding to a department or area of business responsibility. Views conveniently group information together for users in different departments, for example, sales and purchasing.

Process Order

A process order is a manufacturing order that is used in process industries. A master recipe and materials list are copied from the master data to the order. A process order contains operations that are divided into phases. A phase is a self-contained work-step that defines the detail of one part of the production process using a primary resource.
In process manufacturing, only phases are costed, not operations. A phase is assigned to a subordinate operation and contains standard values for activities, which are used to determine dates, capacity requirements, and costs.

Procurement Alternative

A procurement alternative represents one of a number of different ways of procuring a material. You can control the level of detail in which the procurement alternatives are represented through the controlling level. Depending on the processing category, there are single-level and multilevel procurement alternatives. For example, a purchase order is single-level procurement, while production is multilevel procurement.

Production Order

A production order is used for discrete manufacturing. A BOM and routing are copied from master data to the order. A sequence of operations is supplied by the routing, which describes how to carry out work-steps.
An operation can refer to a work center at which it is to be performed. An operation contains planned activities required to carry out the operation. Costs are based on the material components and activity price multiplied by a standard value.

Product Drilldown Reports

Product drilldown reports allow you to slice and dice data based on characteristics such as product group, material, plant, cost component, and period. Product drilldown reports are based on predefined summarization levels and are relatively simple to setup and run.

Production Variance

Production variance is a type of variance calculation based on the difference between net actual costs debited to the order and target costs based on the preliminary cost estimate and quantity delivered to inventory. You calculate production variance with target cost version 1. Production variances are for information only and are not relevant for settlement.

Production Version

A production version determines which alternative BOM is used together with which task list/master recipe to produce a material or create a master production schedule. For one material, you can have several production versions for various validity periods and lot-size ranges.

Purchase Price Variance

When raw materials are valued at the standard price, a purchase price variance will post during goods receipt if the goods receipt or invoice price is different from the material standard price.

Profit Center

A profit center receives postings made in parallel to cost centers and other master data, such as orders. Profit Center Accounting (PCA) is a separate ledger that enables reporting from a profit center point of view. You normally create profit centers based on areas in a company that generate revenue and have a responsible manager assigned.

Profitability Analysis

Costing-based profitability analysis enables you to evaluate market segments, which can be classified according to products, customers, orders (or any combination of these), or strategic business units, such as sales organizations or business areas concerning your company’s profit or contribution margin.

ME20 Subcontract Stock Overview

Transaction ME20 ia a subcontract stock overview and requirments list. You enter a material or vendor and you will see the stocks and the requirements. Based on this info you can create deliveries to supply stock to the vendor as needed.

Purchasing Info Record 

A purchasing info record stores all of the information relevant to the procurement of a material from a vendor. It contains the Purchase Price field, which the standard cost estimate searches for when determining the purchase price.

Purchase Order

A purchase order is a legal contract which binds the supplier to supply materials or services and the purchaser to pay after receiving the materials or services.

Purchase Requisition

A purchase requisition is a request or instruction to Purchasing to procure a quantity of a material or service so that it is available at a certain point in time. There is no legal requirement to carry out the purchase until a purchase order is created. You can record the purchase requisition in commitment management because it may lead to actual expenditure in the future.

Procurement Type 

The procurement type in the MRP 2 view defines the material as assembled in-house, purchased externally, or both:

  • E: In-house production  A cost estimate will search for a BOM and routing.
  • F: External procurement  Results in the system searching for a purchasing info record price.
  • X: Both  A planned order can be converted into either a production or purchase order.

The special procurement type can be used to override the procurement type.

Special Procurement Type 

The Special Procurement Type field found immediately below the procurement type in the MRP 2 view is used to more closely define the procurement type. For example, it may indicate if the item is produced in another plant and transferred to the plant you are analyzing. Special procurement type 30 indicates the material is procured by subcontracting.

Standard Hierarchy

A standard hierarchy represents your company structure. A standard hierarchy is guaranteed to contain all cost centers or profit centers because a mandatory field in cost and profit center master data is a standard hierarchy node.

Standard Price

The standard price in the Costing 2 view determines the inventory valuation price if price control is set at standard (S). The standard price is updated when a standard cost estimate is released. You normally value manufactured goods at the standard price.


You supply component parts to an external vendor who manufactures the complete assembly. The vendor has previously supplied a quotation, which is entered in a purchasing info record with a category of subcontracting.

Target Costs

Target costs are plan costs adjusted by the delivered quantity. For example, if the quantity delivered to inventory is 50% of the plan quantity, target costs are calculated as 50% of the plan costs.

Valuation Variant 

The valuation variant is a costing variant component that allows different search strategies for materials, activity types, subcontracting, and external processing. For example, the search strategy for purchased and raw materials typically searches first for a price from the purchasing info record and then Planned Price 1.

Variance Analysis

Variance analysis involves comparing actual with target costs and dividing the balance into variance categories.

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