SAP HANA Finance and Controlling (FICO) overview

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 SAP FICO - Overview
SAP FI is a module used for reporting both externally and
internally. The objective is to record all financial transactions that
are posted by an entity and produce financial statements which
are accurate at the end of the trading period. This tutorial is going
to explain the major functionalities with SAP FI module.

SAP FI is made up of sub modules. The sub-modules that are often

used are accounts receivables, accounts payables, asset
accounting, general ledger Accounting and bank accounting.

All the sub modules are interlinked and integrate in real time. A
trial balance can be extracted at an time and it will always
balance because all the sub modules are connected. The diagram
below shows the the integration between SAP FI modules.

General ledger accounting

All general ledger accounts that are used for reporting are
managed through general ledger accounting. In SAP a set of all
general ledger accounts used by a company or a group of
companies is called a chart of accounts. These are the accounts
that will be used for the preparation of financial statements. Most

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of the transactions are recorded in sub modules and they are
reconciled with the general ledgers in real time. Transactions that
can be done in direct in general ledgerAccounting include journal
vouchers which are posted to adjust or correct transactions.
Reversals can also be done from general ledger accounting.
Balances in general ledger accounts can be displayed and trial
balances extracted from the system.

Accounts receivables
Accounts receivables is a sub module that captures all
transactions with customers and manages customer accounts.
Separate customer accounts will be maintained and when
transactions are posted in customer accounts, reconciliation
accounts in general ledger are updated with the figures in real
time. Transactions in accounts receivables include invoice posting,
credit memo posting, down payments, invoice payment, dunning
and executing customer reports.

Accounts payables
Accounts payables is a sub module that captures all transactions
with vendors and manages vendor accounts. Separate vendor
accounts are maintained and when transactions are posted in
customer accounts, reconciliation accounts in general ledger are
updated with the figures in real time. Transactions in accounts
payables include invoice posting, credit memo posting, down
payments, invoice payment, automatic payment program and
executing vendor reports.

Asset accounting
Asset accounting manages all transactions realted to assets for an
entity. When transactions are posted in asset accounts
,reconciliation accounts in general ledger are updated in real
time. Transactions in asset accounting include asset acquisition,
asset retirement, asset sale, asset transfer, asset revaluation and
asset depreciation.

Bank accounting
Bank accounting captures all transactions with the banks. Bank
reconciliation is done to reconcile all transactions recorded on
bank statements comparing them to transactions in the system.

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All SAP FI sub-modules are integrated and transactions are
updated in real time which means accurate financial statements
can be extracted from the system at any time.

Chart of Account
This is a step by step tutorial to help you create Chart of Accounts
in SAP FI. Before we begin let’s discuss,

What is a Chart of Account?

In SAP, the Chart of Accounts (COA) is defined at the client level

and assigned to each company code. It is a list of General Ledger
account’s master data that fall under different account groups of
a company code. This grouping mechanism helps to develop
better financial reports.

Types of Chart of Accounts

There are three types of Chart of Accounts, viz

1. Operating chart of accounts: They are used to post daily

expenses. The accounts in Operating Chart of Accounts
could be either expense or revenue accounts, and the
information is shared by Finance as well as Controlling
modules.

2. Group Chart of Accounts: These are accounts used by the

entire corporate group. They help in generating reports at
the corporate

3. Country-specific chart of accounts: This Chart Of Accounts

help meet country-specific legal requirements

Account Receivable
Accounts Receivable is a submodule of SAP FI used to manage
and record Accounting data for all the customers. It handles
customer invoices, approvals, payments and other allied
activities.

Any postings made in Accounts Receivable is updated in General

Ledger G/L as well. The Accounts Receivable submodule has tons

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of reports and forecasting features to track customer/vendor
outstanding and payments.

The chief processes covered in the sub-module are

 Maintain Master Data

 Credit Management

 Invoice Processing

 Cash Receipts and Payments

 Accounts Analysis and Reconciliation

 Reports

Account Payable
Accounts Payable is a submodule of SAP FI used to manage and
record Accounting data for all the vendors. It handles vendor
invoices, approvals, payments and other allied activities.

Any postings made in Accounts Payable is updated in General

Ledger as well. The Accounts Payable submodule has tons of
reports and forecasting to features to track vendor outstanding
and payments.

The chief processes covered in the sub-module are

 Maintain Vendor Master Data

 Invoice Handling

 Payments

 Account Analysis of Reconciliation

 Reports

Foreign Currency Revaluation in SAP: Month

End Closing
Before creating Financial Statements , we have to perform
Foreign Currency Valuation for the Transaction done in
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Foreign Currency .

These transactions can be bills receivables or bills payable

or might be inter company money transfers which involves
G/L Accounts , Customer or Vendor.

The Line items can be open or cleared .

For the Line items which are cleared the exchange rate
would be that of the date on which it is cleared .

For Open Items which are not yet cleared the exchange rate
may be considered as the current rate or can be considered
as month end exchange rate and can be carried out as a
monthly closing activity .

So at the year end ,there could be some revenue or expense

due to exchange rate fluctuations which will be reflected in
the Financial Statements.

Dunning
It is the process of Correspondence with the Customer/Vendor
about pending bills ( in sap as we call it open items). In SAP we
can schedule the Dunning Process and maintain different Dunning
Levels for Dunning run.The Dunning process involves the
following steps:

1. Entering Parameters in the dunning program.The parameters

of old dunning run can be copied and dates can be adjusted.

2. The Dunning run selects the accounts, examines them for

overdue items, checks if they have to be dunned, and
assigns dunning levels to them.All dunning data is stored in
a dunning proposal.

3. The Dunning Proposal can be edited ,deleted and recreated

as often as necessary until the dunning clerk is satisfied with
the result.

4. If desired ,this step can be skipped and the dunning run can
be followed directly by the printout of dunning notices.

5. In One Click,Dunning notices are printed and dunning data is

updated in the master records and associated documents.
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Correspondence
There are various standard correspondence types available like
invoice print, account statement etc. Custom correspondence
types can also be created.

Correspondences can be created at the time of particular

business transaction processing or at a later stage for already
created transaction postings.

Correspondence can be sent to customer/ vendor in various

formats like email, and fax. Correspondence is basically letters
etc. which is sent from SAP to vendor/ customer etc.

Correspondence can be created individually or collectively, ad-hoc

or via automated batch job.

Why Internal Order is Required?

Internal orders describe individual jobs within a controlling area.
Orders support action-oriented planning, monitoring, and
allocation of costs. You can use internal orders to:

1. Monitor internal jobs settled to cost centers (overhead

orders)

2. Monitor internal jobs settled to fixed assets (investment

orders)

3. Offsetting postings of accrued costs calculated in CO

(accrual orders)

4. Display the cost controlling parts of Sales and Distribution

customer not affect the core business of the company
(orders with revenues)

We can use overhead orders for detailed controlling for a

particular object or activity. All costs related to this object or
activity are assigned to the relevant order. We can use orders as
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internal cost objects.

For example if the company participate in 2 trade fair to target

new clients .

Without Orders , we post costs for the two trade fairs directly to
the cost center responsible for supporting these events. As
external costs and internal activities have the same cost elements
on the same cost center, we cannot easily determine which event
created which costs.This means that we cannot make any further
analyses for comparison purposes.

A further advantage is the wide variety of planning and budgeting

functions provided for orders.

As With Orders , each event receives its own overhead order, the
costs are collected separately. The settlement function allocates
the order costs to the cost center responsible for supporting the
trade fairs, which provides you with the organizational view of the
costs. This enables us to analyze and compare the results of the
trade fairs, even after the settlement has been made.

Why A Profit Center is Required?

The Primary objective of Profit Center is to represent an
independent organizational subunit that operates practically
independently in the market, bears responsibility for it's own costs
and revenue , and can be expanded to become an investment
center or can be treated as a Company within a company.The
Profit center approach embodies the increasing re-establishment
between internal and external accounting, functioning as a
connecting link between two Accounting concepts.

Profit Center Accounting helps in answering the following

questions :

1. How much is the revenue?

2. How much is the cost of goods manufactured?

3. How much is the contribution margin?

4. How much is the administrative and sales costs?

5. How much is the operating profit?

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ROI , EVA and cash flow analyses are possible at profit center
level.

Compare Cost center, Profit center and

Internal order
Profit center:

1. Profit center is an organizational unit in Accounting that

reflects a management-oriented structure of the
organization for the purpose of internal control.

2. Profit Center Accounting evaluates the profit or loss of

individual, independent areas within an organization.

3. These areas are responsible for their costs and revenues.

Cost Center:

1. Cost Centers are the organizational units within a controlling

area that represents a location where costs occur.

2. Organizational divisions can be done on the basis of

functional, settlement-related, activity-related,
region/section/department related, and/or responsibility-
related, to monitor actual and plan figure standpoints

3. Where cost is captured.

Internal Order:

1. An internal order is used to accumulate cost for a specific

project or task for a specific time period.

2. An internal order is therefore used for a short period with a

specific deadline.

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