Brief about SAP:

 SAP stands for System Applications and Products in Data Processing.

 SAP is the most widely used enterprise resource planning (ERP) software, centralising
data and facilitating efficient communication between different business departments
thereby reducing errors and increasing overall efficiency.

For now , we will limit our focus on the below major SAP Modules.

SAP Finance and Controlling | SAP FICO Module and Sub-

Modules

SAP FICO (Financial Accounting and Controlling) is an integral module within the SAP
ERP (Enterprise Resource Planning) suite that enables organizations to manage their finances
effectively and make informed decisions. SAP FICO plays a pivotal role in helping businesses
streamline their financial processes, gain insights, and ensure compliance. In this blog, we will
understand the key aspects of SAP FICO and explore how it contributes to financial excellence.

What is SAP FICO?

SAP FICO is a core functional module in SAP ERP that facilitates organizations to manage their
financial data, generate financial statements, and analyze reports. SAP FICO comprises two core
modules – Financial Accounting (FI) and Controlling (CO).

Here SAP FI focuses on accounting and financial reporting whereas the SAP CO module is
focused on monitoring costs. Let us discuss these modules in detail,

Financial Accounting (SAP FI):

The SAP finance module is dedicated to the generation and management of financial statements
and reports. The SAP FI module has several sub-modules as discussed below,
 1. General Ledger: The general ledger module in SAP FICO acts as the central
component for financial reporting. It integrates various accounting transactions
that are recorded in sub-modules and provides a comprehensive overview of an
organization's financial status in a chart of accounts.

These charts are used for the preparation of financial statements by reconciling
the transactions in sub-modules with the general ledger in real time.
2. Accounts Payable: The accounts payable module is involved in managing
invoices, payments, automatic payment programme, reports, and other vendor
transactions. Automation of these processes enhances efficiency and reduces
errors.
3. Accounts Receivable: SAP FICO manages the entire accounts receivable
processes, from invoice creation to payment receipt. The accounts receivable
modules manage customer accounts and transactions including invoices, credit
memos, customer reports, and so on.
4. Asset Accounting: The SAP asset accounting module allows organizations to
manage their fixed assets, including land, equipment, and property. This
module contains transactions related to retirement, depreciation, revaluation,
and so on.
5. Bank Ledger: The bank ledger module comprises transactions related to the
company’s bank account data. This module reconciles the bank statement
transactions with the transactions in sub-modules of SAP.

Financial Controlling (SAP CO):

The SAP controlling module focuses on monitoring and reporting the costs of business
operations. The SAP CO module has several sub-modules discussed below,

1. Cost Element Accounting: The cost element accounting module tracks costs
and revenues associated with different business activities, providing detailed
insights into cost structures and facilitating cost control. The module
determines the specific costs incurred by the company based on its financial
statements, income statements, and other sources.
2. Cost Center Accounting: The cost center accounting module enables
organizations to allocate costs to specific cost centers, aiding in the monitoring
and optimization of departmental expenses. This module focuses solely on
costs associated with the company’s internal operations.
3. Profit Center Accounting: The profit center accounting module allows
businesses to analyze profits and losses at the level of individual business units
or profit centers, providing a granular view of financial performance. This
module evaluates both expenses and revenues related to the company’s lines of
business.
4. Internal Orders: This module facilitates the monitoring and management of
internal projects, ensuring that costs are controlled, and resources are utilized
efficiently.
The SAP FICO module has pre-built integration capabilities with the following modules
to further integrate and optimize operations within the SAP business systems:

 Sales and Distribution (SAP SD)

 Plant Maintenance (SAP PM)
 Materials Management (SAP MM)
 Quality Management (SAP QM)
 Production Planning (SAP PP)
 Extended Warehouse Management (EWM)

MM-FI Integration

MM stands for Material Management, FI standard for Financial Accounting, SD

stands for Sales and Distribution.

These two modules FI and SD is very much integrated with MM modules. As we are
in MM module, we should know about the integration point.

We know MM modules means procure to pay process, FI module means financial

statement and payment process, SD module means sale to customer process.

Most of the manufacturing business logic is stands for 3 things BUY-MAKE-SALE

It means an organization buy a raw material/product from a vendor, then he converts

this raw material/product to finished material/product, then he sells the finished
material/product to a customer.

In this scenario, the 3 module are integrated with each other.

--->When the organization buy a raw material/product then its coming into
warehouse stock, which is goes to MM modules. And because of the organization
has buy something from a vendor, he has to pay for this to the vendor, which id goes
to FI modules.

--->When the organization make the raw material to finished material, at that time the
organization needs a subcontractor vendor, who will make the subcontracting
process. Then process from raw material to finished material, it goes to MM module.
And the organization has to pay the subcontracting vendor, this will goes to FI
module.

--->When the organization sale the finished material to customer, They have to
proceed the sales process (Like as sales order, delivery, billing etc), its goes to SD
modules. At the time finish goods stock is decreased from warehouse, which is goes
to MM module. We sale the finished material to customer, so customer will pay for
this finish material, the payment terms goes to FI modules.

SD-FI Integration

In this part, we learn about SD and FI integration point.

Whenever we sale a finish material to customer, then the customer have to pay for
that. We send a bill to customer.
In that position all billing document which is happens to sales and distribution module
will be posted into FI module.

The account entry of respect to the billing always have two sides

One side is Customer account and other side will be revenue account.

AS per SD module, the customer account will be picked from customer master data,
which is maintained from SD module.

We just need to configure the revenue account and if there any discount and
surcharges account.

We have to do that via access sequence, access sequence is just a SAP

terminology to determine the G/L accounts.

SAP provides 5 ways to determine G/L account in SD modules.

These are

1 Cust.Grp/MaterialGrp/AcctKey

2 Cust.Grp/Account Key

3 Material Grp/Acct Key

4 General

5 Acct Key

The assigned G/L accounts are used to post the discount and revenue and any kind
of surcharges.

First system checks the first table entry Cust.Grp/MaterialGrp/AcctKey. If any G/L
maintained then system will go to the transaction and the particular billing
document, then system search the combination of customer group and material
group. If system will find any G/L, then system will go through the G/L, if system
doesn't find the G/L, then it will search the next table.
Customer group is maintained in Customer master Data, Material Group is
maintained in Material Master Data, Account key is maintained for condition type in
pricing procedure.

Its important to maintain One G/L account for material group and account key
combination.

Whenever system search the table and find the combination for transaction, then
system will debit customer account and credit to the account.

In this way SD and FI are integrated each other.

In a Nutshell,

In conclusion, SAP FICO is an integral SAP module that empowers organizations to achieve
financial excellence by effectively managing their accounting and controlling processes.

From ensuring compliance to providing real-time insights, SAP FICO plays a crucial role in
enhancing financial management and contributing to the overall success of businesses. The
module enables organizations to navigate the complexities of the financial landscape with
confidence and precision.