SAP CO Cost Center Accounting: What It Is and Why Businesses Use It

If you have ever reviewed the corporate budget and thought to yourself “Where did a million dollars go?” then you’re not alone! Managing large scale organizational finances can be like putting together a puzzle that keeps changing shapes. Enter SAP CO Cost Centre Accounting (CCA), which can assist you with using your business expense management in order to effectively measure operational expenses. Instead of seeing a total amount of “Operational Expenses,” with CCA, you can apply each dollar back to a certain department, team or project. Whether you are just starting yourSAP Training or an executive who is trying to make the greatest use of financial resources at your organization, grasping the SAP CCA module will give you more clarity on your organization’s finances than you ever thought possible.

What Exactly is SAP CO Cost Center Accounting?

CO (Controlling) is SAP’s module that provides internal management reporting. While Financials (FI) is stored in external records, Cost Center Accounts depict the “internal” events that occur within the company. The definition of a Cost Center is a defined part of your company; it incurs costs, does not directly produce revenue, e.g. departments such as HR, IT, Maintenance, or Security. Even though they don’t “sell” products to customers, they all help keep the company running.

SAP CCA modules provide the ability to:1) Track expenses in real time, 2) Create a budget for each department, 3) Perform variance analysis against what you planned and what you actually spent.

Why Do Businesses Use It?

Every business wants to maximize profit and to be able to do that you need to know where your overhead is leaking. That is why many companies will look to hire professionals who have a SAP Certification in this area. Here are three reasons an organization would choose to prioritize hiring SAP Certified professionals when it comes to their financial accounting organization:

1. Increased Accountability 

When department heads are accountable for their “Cost Center”, they become more aware of their spending. With CCA in place, if a department has an increase of 40% in an area such as the “Supplies” Account each month, this becomes apparent very quickly. The accountability created drives a culture of fiscal responsibility.

2. Accurate Product Costing 

You can’t price your products right until you know how much they cost to produce. With CCA, you can use indirect costs from several different areas such as the utilities that run your building, floor supervisor salary and apply them directly to the products your company manufactures.

3. Better Decisions 

Should we outsource our IT department? Is our Marketing department overspending on travel? SAP CCA will give you the analytics to answer these types of questions using data from your company’s historical trends. Management can utilize these trends to make educated decisions regarding whether to keep or kill certain business activities.

Key Features of the CCA Module

You may learn about three important areas of SAP functionality in an SAP course on the following topics.

• Cost Element Accounting- Classifies the grouping of costs (e.g., wages; electricity; raw materials).
• Cost Centre Planning – Planning of future (fiscal) budgets through “dry run” budgets from managers.
• Allocations and Assessments – The ability to allocate costs from each cost centre that is a source (ex. Cafeteria) and the total dollar amount for the transfer of those costs to each destination cost centre based on the level of use of that service by the destination.

How to Get Started in This Field

Expert SAP consultants are considered critical to many Fortune 500 companies, so the need for individuals who can efficiently navigate the Controlling module is tremendous. Completing a structured SAP training course is the best method for gaining expertise in this very complex area of SAP configuration.

You won’t just be learning about how to use SAP during your SAP Training, but rather you’re learning how to evaluate and interpret the financial condition of a company worth multiple billions of dollars. A SAP Certificate is an indication of your ability to manage complex cost transactions from end-to-end, and it will make you a valuable financial asset to any organization.

Conclusion

SAP CO Cost Center Accounting provides the framework for understanding costs—namely mapping expenses as they relate to line of business activity and clearly defining how much something costs. By becoming an expert in SAP CO Cost Center Accounting, you will be positioned at the crossroads of technology and finance, opening many possibilities for your career.

When you’re ready to take the next step in your career and learn more about SAP, Nextnow offers full service training that will take you from novice to certified SAP professional. With our comprehensive training solutions, you’ll develop the necessary skills to be successful in today’s data-driven economy.

FAQs

What is the primary purpose of a Cost Center in SAP? 

Think of a cost center as having specific departments/areas (marketing, HR or production) with associated costs. The objective of the Cost Center is to make it easy for managers to see who is spending and thus be accountable to their budget.

How does CCA help with Under or Over-absorption? 

In simple terms, this states we have spent either more or less than projected. CCA is used by businesses to compare both actual costs and budgeted amounts. For example, if $50,000 has been spent by your Marketing department but was only estimated at $40,000 on the budget, CCA would immediately show this difference.

Why use CCA instead of just looking at the General Ledger (FI)? 

The financial accounting (FI) reports the purchases (e.g., electric utility) but the cost center accounting (CO-CCA) reports where the purchases were utilized/used. Therefore, CO-CCA provides the internal details for an organization that external tax reports do not require but an organization’s internal management wants to see.

Can I track “non-money” items in a Cost Center? 

Yes! This is done using Statistical Key Figures (SKF). For example, if you want to track how many employees are in the HR department or the square footage of the Warehouse, you enter that data here. SAP then uses those numbers to “fairly” split costs like rent or electricity across departments.