¶ Cost Allocation and Settlement in SAP ECC
In SAP ECC, managing costs effectively is crucial for controlling expenses and optimizing resource utilization. Cost Allocation and Settlement are core controlling processes within the Controlling (CO) module that help organizations distribute costs accurately across various cost centers, internal orders, projects, or profit centers. These processes ensure that costs are recorded in the right place, providing clearer insights into cost drivers and profitability.
Cost allocation refers to the process of distributing costs from one cost object (such as a cost center or internal order) to one or more receiver cost objects. This is essential for reflecting the true cost of products, services, or departments and helps in budgeting, reporting, and decision-making.
- Assessment: Allocates primary and secondary costs from a sender to multiple receivers based on a predefined allocation method.
- Distribution: Distributes primary costs from sender cost centers to receiver cost centers using cost elements.
- Statistical Key Figures: Used as allocation bases, such as square meters, headcount, or machine hours.
Settlement is the process of transferring costs from a sender object, typically an internal order, project, or cost center, to receiver objects such as cost centers, profitability segments, or fixed assets. It “settles” the incurred costs to their final cost objects for accurate cost tracking and financial reporting.
- Internal Orders
- WBS Elements (Project System)
- Cost Centers (in some cases)
- Service Orders
- Cost Centers
- Profit Centers
- Fixed Assets
- General Ledger Accounts
- Sales Orders
¶ Key Components and Terms
| Term |
Description |
| Sender Object |
The original cost collector (e.g., internal order) |
| Receiver Object |
The target cost object receiving allocated costs |
| Cost Element |
Categorizes costs for allocation and settlement |
| Allocation Cycle |
Defines the rules for cost distribution or settlement |
| Settlement Rule |
Specifies receivers and allocation percentages for settlement |
- Create allocation cycles in transaction KSU1.
- Assign sender and receiver cost objects.
- Specify allocation method (assessment or distribution).
- Define statistical key figures if needed.
¶ 2. Maintain Sender and Receiver Assignments
- Assign cost centers or internal orders as senders and receivers.
- Specify cost elements involved in allocation.
- Run the allocation cycle using transaction KSU5.
- Review results in KSB1 (Cost Centers: Actual Line Items).
- Use transaction KO88 to create settlement rules.
- Assign receiver objects and specify settlement cost elements and percentages.
¶ 2. Maintain Sender Objects
- For internal orders or projects, maintain relevant master data and assign settlement rules.
- Run settlement via KO88.
- Costs are transferred from the sender to the receivers.
- Review settlement results in S_ALR_87012993 (Settlement: List of Settled Orders).
- Financial Accounting (FI): Settled costs impact the General Ledger and financial statements.
- Project System (PS): Projects use settlement to allocate costs to WBS elements or networks.
- Asset Accounting (AA): Settlement posts costs to asset accounts for capitalization.
- Controlling (CO): Provides the framework for managing internal costs and allocations.
¶ Best Practices for Cost Allocation and Settlement
- Regularly review and update allocation cycles and settlement rules.
- Use statistical key figures that accurately reflect cost drivers.
- Schedule allocation and settlement runs to align with financial periods.
- Monitor allocation results and adjust for anomalies.
- Train users on interpreting allocation and settlement reports.
Cost Allocation and Settlement in SAP ECC are vital processes that ensure accurate cost distribution and financial transparency within an organization. By effectively implementing these processes, companies can gain deeper insights into cost behavior, improve budgeting accuracy, and make informed business decisions. Leveraging SAP’s powerful CO tools helps streamline controlling functions and enhances overall financial management.