From ECC Costing-Based CO-PA to S/4HANA Account-Based CO-PA

When it comes to Profitability Analysis in S/4HANA, the default solution is Account-Based CO-PA and therefore many companies that made the switch from ECC to S/4HANA had to move from a Costing-Based to an Account-Based CO-PA solution.

Here are the main things I have experienced when migrating from ECC Costing-Based to S/4HANA Account-Based CO-PA.

1. Most CO experts are Costing-Based CO-PA experts

Most CO experts have been working with Costing-Based CO-PA for many years, if not decades, and therefore are biased when it comes to understanding the difference between the two solutions.

This is mainly due to the fact that most CO experts are not really familiar with Account-Based CO-PA and are in a hurry, due to project timelines constraints, to come out with the correct Design of a Profitability Analysis solution.

It takes some time for a Costing-Based expert to re-learn and understand the functionalities that Account-Based CO-PA provides in an S/4HANA environment.

2. Understand the main difference between the 2 solutions

Most of the Subject Matter Experts you will talk to are used to use Costing-Based CO-PA concepts and functionalities, from the system they are currently using.

It takes time to explain and help them understand the way Account-Based CO-PA works, and like with everything new, the first reaction is usually rejection.

Once you go through the process of adoption, through understanding of the benefits this solution provides, you usually start working more efficiently in designing an Account-Based solution that fit your business requirements.

3. Value fields versus G/L Accounts

Value fields are a very powerful element of Costing-Based CO-PA as it gives a lot of flexibility in what SD information can be transferred into CO-PA.

But they also have their disadvantages, as they often create reconciliation challenges with Financial Accounting. Therefore, some time and efforts are spent during Financial Period End Closing to ensure that FI and CO-PA are properly reconciled.

With Account-Based CO-PA any value you want to get into ACDOCA must be integrated with Financial Accounting, which means that you will need a separate account.

This might sound like you’re going to have to maintain a lot of G/L accounts, but it also means you will work toward justifying any new G/L account with a solid business requirement.

4. Integration with Product Costing

With Costing-Based CO-PA you use the valuation strategy to move your Product Costing information into CO-PA.

With valuation methods you have the flexibility to transfer any costing strategy you want, and you can transfer the results of Actual Costing run. You can also put any sort of development to get whatever costing strategy you want into CO-PA.

With Account-Based CO-PA the recording of the cost of good sold happens when you post a good issue in your sale cycle. This allow a real-time reconciliation with Financial Accounting. With S/4 HANA it is possible to have a cost component split transferred to Account-Based CO-PA, which was not the case with ECC. Each Cost Component will need to be linked to a specific G/L account.

You can also post the result of Production price variances in Account-Based CO-PA.

5. Transfer of Statistical SD conditions

One the limitation we had in the past, was the impossibility of transferring statistical SD conditions to Account-Based CO-PA.

In S/4HANA this limitation has been removed. It is now possible to transfer any Statistical SD condition you need into Account-Based CO-PA.

This is made possible by the use of extension ledgers in Financial Accounting. All the Statistical SD conditions you need to transfer to Account-Based CO-PA can be posted on a separate parallel ledger and specific G/L account which allow you to still have a direct reconciliation with Financial Accounting while transferring additional information in CO-PA for reporting purposes.

6. Additional quantities

Another limitation of ECC Account-Based CO-PA was the possibility of transferring different type of quantities and Unit of Measure, which was supported by Costing-Based CO-PA.

This limitation has been removed now, as it is possible to transfer 3 additional quantities and Unit of Measure in Account-Based CO-PA.

This requires the activation of a BADI and some ABAP development.

You can use this functionality to transfer gross and net quantity from the billing document, for example. Or you can use it to transfer some quantities in your own reporting Unit of Measure.

7. Derivation of attributed Profitability Segment

A powerful functionality available in Account-Based CO-PA in S/4HANA is the possibility to avoid settlement of CO objects (such as WBS and Orders). If the object has a settlement rule maintained, the CO-PA characteristics can automatically be derived and written to the journal entry.

You can still run a settlement if the settlement rules have changed or have not been maintained before postings occur.

8. Margin Analysis

Margin analysis allows you to get Revenues and Costs information that are always reconciled with Financial Accounting.

This gives you the benefit of having a single source of truth information for Financial data.

This functionality is only available when you use Account-Based CO-PA.

Conclusions:

In S/4HANA, Account-Based CO-PA has been quite improved, and it is slowly providing all the functionalities you could only have with Costing-Based CO-PA but with the benefit of having a direct reconciliation with Financial Accounting.

If you are moving from Costing-Based to Account-Based CO-PA, make sure you go through all the point mentioned in this article and start working on them as soon as possible during your Design phase, as it will take time for your Consultants and Subject Matter Experts to absorb the differences.

You can also opt to use both solutions concurrently for some time as you slowly transition to a full use of Account-Based CO-PA.

At Qualiency, our Experts have been working on such things and they can help get through the challenge of moving your Costing-Based Solution to an Account-Based solution. So, get in touch with us if you want to tap into our expertise.