Preparation for Profit Center Consolidation

Preparation for Profit Center Consolidation

Preparation for Profit Center Consolidation
When cross-company deliveries and services occur within a corporate group, internal business volume and intercompany profits arise. These are eliminated in SAP Consolidation in order to allow a cross-company display of results to profit centers.
For these eliminations, you need the partner information at the profit center level. In Customizing for Profit Center Accounting, you have two ways of ensuring that the system finds the right partner profit centers during cross-company-code processes:
• Derivation of the partner profit center
• Reading the partner profit center
If the affected companies are stored in distributed SAP systems, the system can only determine the partner profit centers using derivation.
If the affected companies are stored in a central SAP system, the system can determine the partner profit centers using derivation or by reading them. When reading the profit centers, the system accesses the origin documents and therefore supplies the exact partner information. However, this method can have a negative effect on performance. For information on how this program functions,
We can use both procedures at the same time. To start with, the system will try to determine the partner profit center using the read program. If it cannot find a partner profit center in this way, it will find one using the derivation rules.
Using the partner profit center, the system also finds the partner company and the customer or supplier master record and updates this in Profit center Accounting. This makes this information available for profit center consolidation.

Prerequisites
You are using the SAP components Sales and Distribution (SD) and Materials Management (MM).
If you are not using these modules, you have to transfer the partner profit centers from your systems to Financial Accounting in the SAP system.
If you want to use SAP Consolidation, make the settings for finding partner information in Customizing for Profit Center Accounting, under Preparations for Consolidation.

The settings must have been made when the relevant postings are made. The partner information cannot be found retrospectively.
For more information about the settings that you have to make, see the Implementation Guide (IMG) for Profit Center Accounting, under:
Derive Partner Profit Centers in Purchasing
Derive Partner Profit Centers in Sales
Identify Associated Companies for Reading


Profit Center Accounting (EC-PCA)

Profit Center Accounting (EC PCA) lets you determine profits and losses by profit center using either period accounting or the cost of sales approach. It also lets you analyze fixed capital and so called “statistical key figures” (number of employees, square meters, and so on) by profit center. Consequently, you can calculate all key figures commonly used in cost accounting (return on investment, cash flow, sales per employee, and so on).
A profit center is a management oriented organizational unit used for internal controlling purposes. Dividing your company up into profit centers allows you to analyze areas of responsibility and to delegate responsibility to decentralized units, thus treating them as “companies within the company”.
The essential difference between a profit center and a business area is that profit centers are used for internal control, while business areas are more geared toward an external viewpoint.
The profit center differs from a cost center in that cost centers merely represent the units in which capacity costs arise, whereas the person in charge of the profit center is responsible for its balance of costs and revenues.
EC-PCA is a part of the Enterprise Controlling (EC) module and is integrated with new General Ledger accounting (FI-GL).

Features
The main aim of Profit Center Accounting is to determine profit for internal areas of responsibility. It lets you determine profits and losses using either period accounting or the cost-of-sales approach.
By assigning balance sheet items (asset portfolio, payables and receivables, material stocks, work in process) to profit centers, you can analyze your fixed assets by profit center, thus using them as investment centers. This makes it possible to expand profit centers to investment centers. This also makes it possible for you to analyze a number of key figures by profit center, including return on investment, working capital and cash flow.
EC PCA lets you set up your profit centers according to product (product lines, divisions), geographical factors (regions, offices or production sites) or function (production, sales). You need to make the settings in Basic functions to divide the company into internal areas of responsibility. You divide you business into profit centers by assigning the profit centers to the various master data that is relevant for profits (materials, cost centers, orders, projects, sales orders, assets, cost objects and profitability segments). This lets you set up Profit Center Accounting in a way that meets your company’s requirements regardless of what sector of industry your company is in (machinery, chemicals, services, and so on) or what form of manufacturing you employ (repetitive manufacturing, make to order production, continuous flow production).
Every profit center is assigned to the organizational unit Controlling area. The profit centers in a company code belong to a standard profit center hierarchy that is also assigned to the controlling area.
All profit relevant business transactions are updated in the profit center hierarchy according to G/L account at the same time they are processed in the original module of the SAP system. This ensures that the entire flow of goods and services within a company is transformed in goods and services relationships between profit centers. This is true both with actual postings and in planning.
You can also transfer the balances and balance changes of certain balance sheet accounts to profit centers in real time or periodically.
Goods movements between profit centers can be valuated either at external prices, group internal prices or specially defined transfer prices.
The Information System provides a user-friendly tool for evaluating your plan and actual data. Because results are stored by G/L account, you can reconcile the data with data in Financial Accounting at the cost element level. The reports contained in the standard SAP system represent a simple information system for analyzing areas of responsibility. In addition, different tools are available which let you create your own reports to further meet the needs of your company.
To call up the application menu for Profit Center Accounting, choose Accounting ® Enterprise Controlling ® Profit Center Accounting from the SAP Easy Access screen.
Profit Center Accounting also features tools such as Validation, Substitution, Archiving and ALE.

The profit center master data contains the structural concepts according to which you can post and subsequently analyze the data that is relevant for Profit Center Accounting.

Structure
Profit center master data includes the following objects:
• Profit Centers.
• Standard hierarchy of the profit centers
• Dummy profit center for non-assigned postings
• Alternative profit center hierarchies (if required)

A profit center is an organizational unit in accounting that reflects a management-oriented structure of the organization for the purpose of internal control.
We can analyze operating results for profit centers using either the cost-of-sales or the period accounting approach.
By calculating the fixed capital as well, we can use your profit centers as investment centers.
The master data of a profit center includes the name of the profit center, the controlling area it is assigned to, and the profit center’s period of validity, as well as information about the person responsible for the profit center, the profit center’s assignment to a node of the standard hierarchy, and data required for communication (address, telephone number and so on).
Every profit center is assigned to the controlling area organizational unit. This assignment is necessary because Profit Center Accounting displays values in G/L accounts.
The system transfers all the data to Profit Center Accounting together with the G/L account to which the data was originally posted. You can only aggregate data that shares the following:
● Same chart of accounts
● Same fiscal year variant
● Same currency
Time-Based Master Data
Like cost centers, profit centers are valid for a specific time period. This has the following advantages:
● No complicated activities are necessary when a new fiscal year begins.
● we can enter future changes to the master data in advance.
Profit centers are time dependent in two ways:
● First, we can enter a period during which actual or plan data can be posted to the profit center.
● Second, we can define time-based fields when you customize Profit Center Accounting.
Time-based fields let you change information in the profit center master record, such as the person responsible for the profit center, at a specific point in time without having to create a new profit center and without losing any information about the previous person responsible.
The Standard Hierarchy

To ensure that your data in Profit center Accounting is consistent with that in other areas, you must assign each profit center to the Standard hierarchy .
The standard hierarchy is used in the information system, allocations, and various planning functions. You can also assign your profit centers to alternative hierarchical structures, called Profit Center Group.
Copying Cost Centers
If the profit centers in your organization are closely linked to your cost centers, you can simply copy your cost center master data to create your profit centers. For more information on this function, see the Implementation Guide (IMG) for Profit Center Accounting, under Master Data.
A profit center group is a hierarchical structure of profit centers.

Profit center groups are used for reporting, allocations or in various planning functions, where it is not desirable to enter or display data at the lowest level (with a high level of detail).
The standard hierarchy is a special form of a profit center group. It has to contain all profit centers belonging to the controlling area and reflect the organizational structure of Profit Center Accounting.
For more information on the standard hierarchy, Standard hierarchy for classic Profit Center Accounting or Standard hierarchy for new General Ledger Accounting.