Practical Guide to SAP CO-PC (Product Cost Controlling) in SAP S/4HANA - 2nd edition

2.1 Profit centers

Profit centers represent an organizational unit in the accounting and controlling modules in SAP. They reflect a management-oriented structure of the enterprise for the purpose of internal control. Both expense and revenue postings require a profit center in order to build a profitability view by profit center. Profit centers are created for revenue-generating areas such as product lines, divisions, regions, and functions.

Profit center postings are generated in parallel to postings made in the controlling module, and the results are reviewed in a separate ledger. Configuration for activating profit center accounting is accessed via transaction OKKP or via IMG menu path Controlling • General Controlling • Organization • Maintain Controlling Area.

Profit centers are assigned to balance sheet items such as assets, payables, receivables, and inventory. Profit centers are also assigned to material masters and cost centers in order to derive a profit center on each posting.

Profit centers are created in the Manage Profit Centers Fiori app or via transaction KE51. They are specific to a controlling area and are extended to relevant company codes in the Company Code tab. You can also assign profit centers to company codes en masse using the Manage Profit Centers app or transaction KE56 (see Figure 2.1).

Figure 2.1: Profit center display

A dummy profit center ‘999’ should be created for each company code. The dummy profit center is used as a default profit center when a profit center cannot be determined. The balance in this profit center should be reviewed at month-end and year-end to move any costs that are not properly assigned. Dummy profit centers are created in configuration using transaction KE59, and the dummy profit center indicator is automatically set on the Indicators tab.

A partner profit center is important for profit center consolidations, where costs and revenues result from intercompany or intracompany transactions. Partner profit centers are configured to show the sender/receiver relationship for costs. It can be used in postings resulting from cost allocations or purchases where costs are moved from one profit center to another.

Partner profit centers can be derived from the supplying object if the sender is in the same SAP version. Derivation rules can also be configured if the supplier is not in the same SAP version, using vendor, customer, material, company, etc.

The Person Responsible and Standard Hierarchy Node fields are required fields. You can assign profit centers to company codes on the Company Codes tab. The Address and Communication tabs are optional; the fields on these tabs provide contact information for a profit center owner.

2.1.1 Profit center hierarchy

A profit center hierarchy is required for each controlling area. Within a profit center hierarchy, profit center groups are created to combine similar profit centers for reporting and profit center allocations (if applicable). Typically, senior management determines the hierarchy requirements for grouping profit centers.

You can build the hierarchy with multiple levels in order to achieve the required level of reporting. The profit center group you assign in the profit center master data is the lowest level above the profit center. The profit center hierarchy can be changed or displayed in the Manage Flexible Hierarchies Fiori app or via transaction KCH6N (see Figure 2.2).

Figure 2.2: Profit center hierarchy display

Flexible hierarchies were introduced with S/4HANA in order to solve problems that were previously encountered when trying to reorganize profit centers. Flexible hierarchies enable you to use master data attributes such as country, city, and region, as well as custom fields to build and change hierarchy structures en masse.

Flexible hierarchies are available for profit center, cost center, and company code hierarchies.