Introduction

Dick_Westman · ‎2025 Feb 10

Introduction

This blog post continues a series of Controlling related topics, which circle around highlighting new functionalities and comparing functionalities between SAP S/4HANA Public Cloud Edition and SAP S/4HANA Private Cloud Edition (at the time of writing the latest SAP S/4HANA Private Cloud Edition release is 2023). I also cover general topics that should be considered from Management reporting/Controlling point of view when implementing S/4HANA.
Today’s post focuses on two different views on costs that occur in two different companies. The first one is an allocation to Margin analysis (to enable cross-company reporting), while the second one is focusing on cross-company allocations and invoicing of these costs.
- Allocating to Margin Analysis. From an overall point of view, we can have costs incurring in different legal entities, and we want to allocate these to Margin analysis, to have a cross-company view on profitability, without actually allocating across legal entities, this is described in chapter 1. Here there is no major difference between SAP S/4HANA Public Cloud Edition and SAP S/4HANA Private Cloud Edition.
- Allocating between legal entities. Sometimes, you also need to allocate the costs across legal entity borders, e.g. to fulfill statutory transfer pricing or perform recharges (e.g. from subsidiaries or sales entities). In this case it is important that the costs are also invoiced. Chapter 2 continues with how this can be done and highlights differences between SAP S/4HANA Public Cloud Edition and SAP S/4HANA Private Cloud Edition. The focus is on management accounting, but it is worth to notice that trading partner is filled automatically in cross-company transactions, so there are no modifications needed (as was not the case in SAP ECC).

1. Universal Allocation: Allocation to Margin analysis (Cross-company reporting)

Sometimes you do not want to allocate cost from one legal entity to the other, but you are only interested in group level profitability on product, customer, or another important business steering dimension. Some costs can reside in one company while some in another company.
Typically, you capture most of these variances through production order variances (or other cost object, WBS, Internal order, Service order item…) and actual costing, but sometimes there are processes that cause costs, which are outside of the “main” flows. This can be since there is no system integration to generate production orders or the costs for setting up a process are too high compared to the benefits of it (e.g., an exception process, which does not make sense to spend a lot of effort on). Or even, that there is a “supporting” process, with no direct reference to the original sales order process (e.g. marketing costs performed by a separate legal entity in another country).
In these cases, you might end up in a situation where you have sold a product A from in Company 1710 but have costs in a cost center belonging to company code 1010. The below figure describes how you could handle it.

Figure 1. Overview of cost flow with allocation to Margin analysis dimensions.

First an allocation cycle is created with Allocation type Margin analysis. Senders are the specific account(s) and Cost center(s) and received are the relevant fields from Margin analysis (in this example Customer Group Z1 and Product sold groups ZRacing and ZYouth). This would depict an example where marketing is done for these customer groups and products from a different company, than from where the sales are done.

Figure 2. Manage Allocations app, creating the allocation cycle. Selecting the senders and relevant receivers.

Figure 3. Defining receiver bases. You can also upload the percentages from excel.

The amounts from the cost center are split 50% and 50% between the two product sold groups. Notice that these values could also be uploaded/downloaded by excel (and automated if you are using robotics, like BTP Build).

Before running the cycle, we can see that the balance of the selected account and cost center is 18,69€:

Figure 4. Showing cost center balances, before allocation.
Before the allocation is executed, we can also verify that all the revenue & Cogs postings for these two product groups are only in company code 1710 (nothing in 1010).

Figure 5. Market Segments actuals, before allocation.

Then the allocation is executed, and amounts are allocated to the cost center to the receivers in Margin analysis.

Figure 6. Allocation results.

The results of the cost center report show that the full amount of the cost we wanted to allocate is offset by the allocation account (94220000).

Figure 7. Cost center actuals after allocation.
Afterwards, in Margin analysis we can see the costs. You can notice that the costs from the legal point of view, the costs is still in company 1010, however they are now also allocated to the Product and customer groups.

Figure 8. Market Segment Actuals, after allocation, company codes selected.

We can also filter out company code, as the focus was to see the overall profitability of a product, not considering company code borders (figure 9 below).

Figure 9. Market Segment actuals, company codes not selected for display.

2. A) Universal Allocation: Cross-company allocation & Invoicing – S/4HANA Public Cloud Edition

In SAP S/4HANA Cloud Public Edition there are best practices that you can activate and leverage to enable the cross-company cost postings and the required Intercompany invoicing.
For the cross-company cost allocation you can choose between (or use both):

- Universal Allocation (2QL) Process Navigator - SAP for Me

- Intercompany Allocation: Universal Allocation: Cost Center to Cost Center/WBS
o Also possible to do with reassign cost and revenues Fiori app

- 4AU - XX - Intercompany Processes for Enterprise Projects

o Sender/receivers:
• Cost center/WBS to WBS
o Type of costs:
• Activity Allocation
• Time recording
• Post IC expense

To enable the invoicing, you need to activate following best practice:

Intercompany Billing for Cross-Company Cost Accounting Postings (4AN).

For further details on resource related billing please check this blog:New Resource-Related Intercompany Billing in SAP S... - SAP Community.Following links give also a good insights, New Resource-Related Intercompany Billing in SAP S/4HANA Cloud & Intercompany Cost Allocations in S/4HANA Cloud – By Stefan Walz. The new resource related intercompany billing is only available in SAP S/4HANA Cloud Public Edition, as of time of writing this blog. Please note that in In SAP S/4HANA Cloud Private Edition, you need to activate function module FINS_CO_ICO_PROC_ENH_101 to enable to use the granular cost rates, and the new posting logic for cross company time bookings (shown in table 2), in case you do cross-company activity confirmations.

2.B) Universal Allocation: Intercompany allocations & Invoicing – SAP S/4HANA Cloud Private Edition

In SAP S/4HANA Cloud Private Edition, there are not the same best practice available as in SAP S/4HANA Public Cloud Edition, except for Universal Allocation (2QL). The purpose of this chapter is to give a high-level overview of how you can set it up. Please note that there are many details, and not all will be covered here, e.g. Accounts payable posting is not in scope.
Figure 10 below gives an overview of the process.

Figure 10. Overview of process flow with cross-company allocation and intercompany invoicing.

Configurations required

1. Start with creating configuring the new cross company accounts and creating the intercompany allocation cycles, see e.g. this SAP Blog Link by Dick Westman or the best practice Universal Allocation (2QL). You will also need other master data, like cost centers and WBS.

2. Setting up the Sales and Distribution, including DIP (Dynamic Item processor) profile:

The table below includes a summary of steps required in sales and distribution side to enable billing, please note that it is summary. Additionally, there is a need to configure the Intercompany invoicing, to trigger the IDOC that posts the Accounts payable in the receiving company code (not part of this blog posting). You will also need material master (service material) and business partners for the invoicing.

Configuration Path/Transaction	Description
Sales and Distribution->Sales->Sales Documents->Sales Document Header->Define Sales Document Types	Create a new sales order document type, e.g. by copying a previously existing. One for intercompany sales order (the “internal sales order”, created in the step “Create IC sales order”). A second document type is also needed (unless you use an already existing one), for the debit memo request (copy control from the IC sales order). This second document type should be assigned in the DIP profile (in the Usage and sales doc. Type field)
ODP1 – Create/ Edit DIP profile (ODP2 can be used to check consistency of the DIP)	Create a new DIP profile, with the sources and setup. The Dip profile should be linked to the used item category.
ODP4 – Assign cost condition	The EK01 cost condition needs to be assigned to the sales document types.
SAP Customizing Implementation Guide->Sales and Distribution->Sales->Sales Documents->Sales Document Item->Define Item Categories	Create a new item category by copying an existing (or use an existing if you have one you can use).
SAP Customizing Implementation Guide -> Sales and Distribution -> Sales -> Sales Documents -> Sales Document Item -> Define Item Category Groups	Create a new item category group, which you can assign in the service materials you use.
Sales and Distribution->Sales->Sales Documents->Sales Document Item->Assign Item Categories	Map your item category to item category group and sales order types.
Sales and Distribution->Sales->Copying Control for Sales Documents->Set Copying Control: Sales Document to Sales Document	Copy an existing copy control to your newly created sales document type. Source should be your IC sales order type and target the debit memo request.
Sales and Distribution->Basic Functions->Pricing->Pricing Control->Define And Assign Pricing Procedures	Assign sales order document type to set pricing procedure determination. EK01 pricing condition needs to be in your pricing procedure.
Sales Document Header--> assign sales Area to Sales Document Type (OVAZ)	Assign your sales document to the sales area.

Table 1. Overview of the main Sales and Distribution related configurations.
A DIP profile needs to be configured and linked to the order type to enable the resource related billing. Simplified, the DIP profile defines the sources and the determination of costs and how they will be linked to the invoicing and material determination. Within the characteristics you need to select all that are relevant ones for you and whether they are used in material determination. When setting up the DIP profile, you need to select which sales document type is used for debit and credit memo’s. Following note contains a lot of details and an attachment regarding DIP profile configuration 301117 - Enhanced documentation for dynamic item processor (DIP) - SAP fo...

Figure 11. DIP profile configuration, Characteristics.

Sources. Here you need to consider what dimensions you will use in the source determination. In this example the sending cost center, Object number of original object and account was used for selecting the source, meaning the original allocated cost that we want to include into our invoicing.
Source is Intercompany line items in universal journal.

Figure 12. DIP profile configuration, Sources.
For each of them you need to create a set. Below is an example of the object number of the original object (in transaction GS03). This number is the object number of the receiving WBS element.

Figure 14. Example showing WBS and object number link.
Depending on combinations of cost centers, accounts, WBS’s and materials you might need to have different sources and/or material determinations. You might also opt for having multiple DIP profiles (e.g. per “sending company code <-> Receiving company code”-combination), this you can e.g. change in the IC sales order when you create it (see example in the below figure).

Figure 15. The default DIP profile can be changed under the Sales B-tab in the Sales order.

System example:

Intercompany allocation. First, we create allocation, where sender is a cost center in company code 1010 and receiver is a WBS element in company 1710. In this simplified example a fixed amount of 2000 is allocated, but you can use posted amounts or any of the other standard sender bases.
This allocation could be scheduled as a monthly allocation (or as per your requirements).

Figure 16. Sender amount of 2000€ from a cost center (here you can also use other sender factors, like posted amounts).

Figure 17. Receiving WBS number.
The allocation is executed, and two documents are posted:

Figure 18. Allocation results, showing the generated financial documents.
In sender company (1010):

Figure 19. Journal entry from IC allocation in sending company.

Notice that in both postings trading partner data is available, to be utilized in financial consolidation. As well other partner dimensions like profit center and cost objects. Below is the posting in receiver company (1710):

Figure 20. Journal entry from IC allocation in receiving company.

Intercompany sales order. A sales order is created, which will be referenced by the resource-related billing (DP93). In this sales order, which we have created in company and sales organization 1010, we are using the customer number (business partner) for company code 1710. We have also inserted in the line item the material number, which was also maintained in the DIP profile. This sales order could be a one-time task.

Figure 21. Intercompany sales order "Internal sales order".

In the next step we want to transfer the costs and create a billing memo request. This is done with the Fiori app Resource-Related Billing Between Company Codes (or DP93 transaction). The previously created sales document is used in selection and appropriate period is selected.

Figure 22. Resource related billing, referencing the IC sales document.
After executing we can see the amount to be billed:

Figure 23. Showing the amount to be billed (same as the allocated).
By clicking on the item we see the source, which are same as what we had setup in our DIP profile.

Figure 24. Details of the line item to be billed.

When saving the billing request (debit memo request 532870) is generated and then we can generate the billing document (Accounts receivable in company code 1010). The revenue account is posted with on a profitability segment.

Figure 25. Accounts receivable posting.

Figure 26. The second line item in Accounts receivable posting.
After this we should still trigger the Accounts payable in company 1710, generated by the intercompany invoicing (IDOC), this part of the demo is left out.
Overview of accounting documents:

Figure 27. T-Account view of postings (Display Journal Entries in T-account view).

Account determination for the Intercompany accounts

For someone who is familiar with cross company postings from previously in SAP, you might be familiar with the so called “OBYA”-setup, where you have a pair of clearing accounts that go to zero in the IC process. See below table 2 below.

Table 2. Overview of "OBYA" accounting postings (not used in this demo).

The Intercompany allocation with Universal allocation, relies on a different setup (for details see e.g. Intercompany Allocations, using the Universal Allocation), where the intercompany accounts are set up as non-operative accounts and are part of the Profit and loss for the company codes. The cross-company accounts need to be configured. You control also with configuration which company code combinations are allowed to have cross company postings (e.g. to prevent cross company allocations for companies where it is not allowed). The accounts will not be cleared, like in the “OBYA” example, but remain with balance. See below table 3.

Table 3. Overview of accounting with the new account determination logic.

Additional information

There are many details to this process, and if you are interested you can find more information from following links and SAP notes:

Conclusion

This blog presented two different approaches for cross company costs, one with reporting them only in margin analysis, the second one with cross company allocation and invoicing. Creating an overview of what should be considered when setting these up and providing additional sources of information, for the ones that are interested.

- What are your experience in allocating to margin analysis or cross-company allocations?

Deep-Dive: Cross-Company Topics In Controlling

Introduction

1. Universal Allocation: Allocation to Margin analysis (Cross-company reporting)

2. A) Universal Allocation: Cross-company allocation & Invoicing – S/4HANA Public Cloud Edition

2.B) Universal Allocation: Intercompany allocations & Invoicing – SAP S/4HANA Cloud Private Edition

Configurations required

System example:

Account determination for the Intercompany accounts

Additional information

Conclusion