Apr 22, 20214 min read

SAP Controlling (SAP CO) - An Overview

Updated: Jan 19, 2023

SAP CO module is part of SAP Finance in the ERP system. While SAP CO is an independent module ,it is often referred as SAP FICO( Financial Accounting & Controlling). It provides organizations with a method of slicing and dicing data to view costs from an internal management perspective and provide a view of profitability beyond that of basic financial reporting.

Business Process associated with CO Module

Controlling provides you with information for management decision-making. It facilitates coordination, monitoring and optimization of all processes in an organization. This involves recording both the consumption of production factors and the services provided by an organization. Main task of Controlling is PLANNING. The controlling module helps one to schedule, monitor, execute, and report on costs. Controlling involves managing and configuring typical master data such as cost elements, cost centers, profit centers, internal orders, functional areas, and many more. In brief CO module allows an on organization to :

Plan and track overhead costs within the company’s specific organizational structure.
Track costs related to specific projects or events and either capitalize those costs or charge them to appropriate departments upon completion.
Perform “Activity Based Costing”.
Perform Product Costing, measuring production cost and variances.
Report sales and gross profitability by external measures such as market segments or customer groups.

Integration- FI & CO

Controlling (CO) and Financial Accounting (FI) are independent components in the SAP system. The data flow between the two components takes place on a regular basis. During allocations in Controlling, most of the postings created do not affect Financial Accounting. These postings do not update any G/L account transaction figures; they are postings within Controlling. If, however, an allocation in Controlling leads to a change in the functional area or any other characteristic (such as Profit Center or Segment) that is relevant for evaluations in Financial Accounting, a shift occurs between the affected items in the profit and loss statement. For this reason, this information has to be transferred to Financial Accounting.

Universal Journal contains not only from SAP FI, but also CO

This reconciliation between Controlling and Financial Accounting takes place by means of real-time integration. As a result of real-time integration, all Controlling documents that are relevant for General Ledger Accounting are transferred from Controlling to General Ledger Accounting in real time. This means that Financial Accounting is always reconciled with Controlling. A document is created in Financial Accounting for each posting in Controlling. This means that the detailed information contained in the CO documents is always available in reports in New General Ledger Accounting.

Components of SAP CO:-

The SAP S/4HANA Controlling module (CO) is one of the most critical modules in SAP. The SAP CO module is compromised of many sub-components, such as:

Cost Element Accounting (CO-OM-CEL)- Cost Element component includes the analysis of both the company's costs and profits based on reports of profit and loss statements. Cost elements represent their matching cost and revenue element accounts in the General Ledger component of the FI module. Cost element accounting defines the costs' origin and the cost components incurred by the company.
Cost Center Accounting (CO-OM-CCA)-The Cost Center Accounting component is related to the cost of internal divisions such as the production of materials, sales, marketing, or human resources. It is useful for a source-related assignment of overhead costs to the location in which they occurred. It mainly focuses on expenses rather than revenue.
Activity Based Accounting (CO-OM-ABC)-Activity-Based Costing analyzes cross-departmental business processes. The goals of the whole organization and the optimization of business flows are prioritized.
Internal Orders (CO-OM-OPA)- Internal orders are normally used to plan, collect, and settle the costs of internal jobs and tasks. The SAP system enables you to monitor your internal orders throughout their entire life-cycle; from initial creation, through the planning and posting of all the actual costs, to the final settlement and archiving.
Product Cost Controlling (CO-PC)- Product Costing Controlling manages the cost data required to generate the products and services of the company. Detailed analysis of product costing helps control production costs, which, in turn, drives company profitability. It enables you to calculate the minimum price at which a product can be profitably marketed.

6. Profitability Analysis (CO-PA)-

Profitability Analysis (CO-PA) 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, with respect to your company’s profit or contribution margin. The aim of the system is to provide your sales, marketing, product management and corporate planning departments with information to support internal accounting and decision-making.

7. Profit Center Accounting (EC-PCA)- Profit Center Accounting evaluates the profit or loss of individual, independent areas within an organization. These areas are responsible for their costs and revenues. Profit Center Accounting is a statistical accounting component in the SAP system. This means that it takes place on a statistical basis at the same time as true accounting. In addition to costs and revenues, you can display key figures, such as, return on investment, working capital or cash flow on a profit center.