Profit Center Update

A profit center is an organizational unit that reflects a management-oriented structure of the company and for which an individual period result can be determined. The division of a company into profit centers makes it possible for management responsibility to be delegated to these local organizational units and enables these organizational units to be self-controlled. In this way, a profit center acts like a company within the company.

Note Note

The manager of a profit center is responsible for costs and revenues, whereas the manager of a cost center deals with the units in which capacity costs arise.

End of the note.

With Profit Center Accounting, you determine internal operating profit for a profit center using either period accounting or cost of sales accounting. You can also draw up balance sheets for profit centers and output financial key figures (such as return on investment, cash flow, or sales per employee). For this, you convert the profit center into an investment center.

Implementation Considerations

You want profit center accounting to be integrated in the General Ledger Accounting application component as opposed to using the classic Profit Center Accounting application component (in Enterprise Controlling) in parallel to General Ledger Accounting.

Note Note

It is not useful to activate classic Profit Center Accounting alongside the Profit Center Update scenario, especially since this would increase the data volume.

If you already use classic Profit Center Accounting and would now like to perform profit center accounting in General Ledger Accounting, you can continue to run classic Profit Center Accounting in parallel to the Profit Center Update scenario in General Ledger Accounting during an interim phase. Nevertheless, we would advise against using this parallel setup in the long term due to the effort required for reconciliation and the increased volume of data. (See also SAP Note 826357 and the restrictions described therein.)

End of the note.

Performing profit center accounting within General Ledger Accounting offers the following advantages:

You can use document splitting. By using document splitting, you can display payables and receivables specific to the profit centers where they occurred and, if desired, you can also create balance sheets at the profit center level.
For more information, see Document Splitting.
There is no need for any reconciliation tasks between General Ledger Accounting and Profit Center Accounting.

For more information on customizing Profit Center Accounting, see the documentation in the Implementation Guide (IMG) under Start of the navigation path Financial Accounting (New) Next navigation step General Ledger Accounting (New) Master Data Profit Center End of the navigation path .

Integration

If you want to display payables and receivables specific to the profit centers where they occurred, you have to use document splitting.

If you use the Segment Reporting scenario with the Segment characteristic, you also need to activate the Profit Center Update scenario.

In Profit Center Accounting, you can use period accounting and/or cost of sales accounting. If you want to use cost of sales accounting, you must additionally activate the Cost of Sales Accounting scenario and make the corresponding settings for Cost of Sales Accounting.

Features

Determining the Period Result and Creating a Balance Sheet

The main aim of profit center accounting is to determine the period result for each profit center. The SAP system allows you to portray the period result according to both period accounting as well as cost of sales accounting.

By assigning different balance sheet items (such as fixed assets, payables and receivables, material stocks, and work in process) to profit centers, you can also output your company’s fixed assets by profit center. In this way, you use your profit centers as investment centers. This also makes it possible for you to determine a number of financial key figures by profit center, including return on investment, working capital, and cash flow.

Goods movements between profit centers can be valuated either at external prices, group-internal prices, or specially defined transfer prices. For more information, see Transfer Prices in New General Ledger Accounting.

Organization

You can divide up your company into profit centers in the following ways:

By product (product lines, divisions)
By region (locations)
By function (production, sales)

Profit Center Accounting can thus be used by companies in all sectors of industry (machinery, chemicals, services, and so on) and for all forms of manufacturing (such as repetitive manufacturing, make-to-order production, or continuous flow production).

The assignments of all profit-relevant objects to profit centers play an important role. These determine how your business is divided up into areas of responsibility. You make these assignments in the master data of the original objects (such as materials, cost centers, orders, projects, sales orders, assets, cost objects, or profitability segments).

Every profit center is assigned to the controlling area organizational unit. All profit centers of a controlling area are assigned to a profit center standard hierarchy that reflects the organizational structure of profit center accounting in your company.

Actual Postings

For manual G/L account postings in General Ledger Accounting, you can specify the profit center or partner profit center. In the case of primary cost elements, the profit center or partner profit center is derived automatically from the cost-relevant account assignment. For payables and receivables as well as for automatically generated posting items, yon cannot enter the profit center manually. If you use document splitting, the system can provide these items with a profit center.

Data from Upstream Applications

Data from upstream applications (such as Logistics) generally already contains a profit center or a partner profit center as a result of the assignment of objects (such as material or sales order) to a profit center. In some business transactions, the profit center or partner profit center is determined for selected items (such as payables or receivables) during document splitting.

With the standard settings, the system updates to new General Ledger Accounting any additional lines created for goods movements between profit center boundaries when the following prerequisites are met:

You use transfer prices.
You use the profit center valuation approach.
You have assigned as a parallel currency the currency type and valuation type of the profit center valuation to the leading ledger as well as to the other relevant ledgers.

If you do not use the profit center valuation approach in the system, you can use the Business Add-In (BAdI) Update of Internal Revenues Between Profit Centers (FAGL_INTERNAL_ACCOUNTS) to activate the update of additional lines created in the legal valuation view. In such cases, the system updates the additional lines in all ledgers in new General Ledger Accounting.

Planning

You can perform planning at the profit center level.

For more information, see Integrated Business Planning for SAP Simple Finance Add-On for SAP Business Suite powered by SAP HANA.

Reporting

The Reporting tool offers flexible analysis options for analyzing plan and actual data that has been posted. The reports in the standard delivery represent a simple information system for controlling profit centers. In addition, you can use various tools to create your own reports to tailor them to your individual requirements.

Tools

General Ledger Accounting provides a range of tools, such as validation, substitution, archiving, and Application Link Enabling (ALE).

Constraints

Profit Center Accounting is always performed within a controlling area. SAP does not support profit center accounting that is performed across all controlling areas.

More Information

SAP Note 826357