Capture Costs Correctly and Ensure Follow-On Data Integrity

  • by Ashim A. Nanda, Managing Consultant, Global Business Services, IBM
  • February 26, 2010
Understand the limitations of SAP validation and substitution functionality to ensure correct data capture and learn how to complement them using proactive formula builder functionality in a Business Add-In and a periodic reactive method of report automation.
Key Concept
Various business transactions feed data into the SAP system. Ensuring data quality results in more meaningful reporting. This can aid in managerial decision making. The SAP system provides tools for checking the value to ensure that only valid information is entered into the system. Identifying incorrect data at the source is the key to a cleaner system.

Companies focus on cost leadership to maintain an edge over the competition. Organizations take multiple measures in cost identification and proper allocation for effective optimization of resources to remain competitive. SAP ERP systems are designed to help organizations achieve this goal. However, all downstream SAP ERP analysis that guides decision making depends on the integrity of the data fed to the system. Transactional data is usually fed to the system by shop floor managers, retailers, and procurement managers who work under time constraints and service-level agreement (SLA) boundaries. This transactional data can sometimes be incorrect due to functional myopia – in other words, a shop floor manager who is in charge of a smooth-running production line may not be aware of margin-based pricing, while that is the concern of a marketing manager.

Many times organizations use multiple systems for shop floor, warehouse, procurement, and sales, which consolidate data into the SAP system for management and external reporting. This again introduces a threat to data integrity. The SAP system provides control measures that, coupled with proper accounting processes, can capture the cost correctly.

There are two ways to capture costs correctly: the proactive method or the reactive method. I’ll discuss SAP’s standard controls and checks to prevent incorrect postings proactively, such as validations and substitutions and Business Add-Ins (BAdIs). I’ll also discuss the limitation of standard SAP validation and substitution rules and customization that can complement them. Businesses usually also use reactive methods during period end to allocate cost correctly from dummy cost buckets to correct cost centers via allocations using various cost drivers and reports. I’ll also go over report automation for financial analysts to ensure reactive correction at period end.

The key to effective cost capture is to catch the inaccuracy at the earliest stage possible. However, financial documents are generally created halfway through capturing the business process in the SAP system. For this reason, companies using SAP Warehouse Management use free text fields in transactions such as transfer requirement or transfer order creation to capture cost objects and apply business rules to them.

Ashim A. Nanda

Ashim A. Nanda is a managing consultant in SAP FI/CO working with IBM Global Business Services. He has more than eight years of experience with implementation, global rollout, and maintenance projects for clients in the pharmaceutical, telecommunication, automotive, and high-tech industries. Ashim holds an MBA in finance and systems from Xavier Institute of Management, India, and a degree in electrical engineering from University College of Engineering, India.


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