How to Design and Develop Flexible Month-End Financial Allocation Solutions

  • by SivaKumar Bhagavatula, BI Technical Architect, Chevron
  • July 8, 2011
Find out about best practices and performance improvement tips for designing and developing month-end financial allocations using a combination of Business Planning and Simulation, Integrated Planning, ABAP function modules, and SAP NetWeaver BW.
Key Concept
The allocation process is performed in two steps, high level and low level. During the high-level allocation, finance data at the company code level is allocated down to the strategic business unit level. During the low-level allocation, data that was generated on a high-level is allocated down to a customer and product level.

Management profitability analysis reporting requires allocation of financial data such as supply and delivery freight costs at a detailed customer and product level, compared to a much higher level such as company code and strategic business unit (SBU). Management profitability analysis is similar to profitability analysis (CO-PA). It is a BI-based solution that provides complete customer and product level profitability analysis via allocation of financial data (i.e., expenses) that lives outside of the sales and distribution (SD) module. This reporting requires that the higher level financial data be allocated down to a customer and product level based on percentages of quantity or volume by the customer and product sales and distribution data.

The business runs a suite of reports and management dashboards on this allocated data with visibility at all levels of the organization (from the company level to product lines to individual customers and products) facilitating the ability to make better decisions related to customer pricing and product mix. The model provides a consistent profit distribution to allow comparison across regions, strategic business units, and product lines with the ability to drill down to sales orders, deliveries, and billing documents.

At my company we developed several allocation processes with complex functionality using the custom approach described in this article, as the standard functionality didn’t meet the requirements. I selected the simplest of all those allocation processes we developed and explain it in detail. 

SivaKumar Bhagavatula

SivaKumar Bhagavatula is a BI technical architect at Chevron. He is an SAP NetWeaver BW-certified consultant and is heavily involved in collaborating with business partners to convert requirements to optimal technical solutions. He has more than 14 years of development and global consulting experience with SAP, Enterprise, and Internet technologies. At Chevron he is responsible for researching new technologies that are applicable for the needs of energy business. He thanks his colleagues, Archie Roberts and Clabaugh James, and his mentor, Anupam Gupta, for their support, guidance and encouragement.

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