Introduction to Document Splitting in new GL
Blogs on Document Splitting
In my series of blogs on document splitting, I intend to explain and elaborate the concepts behind Document Splitting and highlight using examples how document splitting can be achieved for various complex business processes. I use Profit Centre as a “scenario” to explain the functionalities; however all processes that apply to Profit Centre also apply to the other scenarios (Segment, Business Area).
To identify the series of blog, I have categorised the blogs under SAP > Document Splitting. If you have questions/ comments/ suggestions, please send me your comments in the form below. Sharing your questions and experience using comment box below will help other readers to gain additional knowledge involved in this functionality.
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General Ledger before newGL
Financial postings in SAP automatically generate values for certain characteristics (like Profit Centre) on the document. This generation of characteristic value is derived from characteristics already input by users (for example, Profit Centre is derived from Cost Centre) and triggered either by a code inherent in SAP or due to user-defined derivation rules (for example, Profit Centre is derived based on default value per Balance Sheet GL account).
However, certain lines items in the financial posting (like Payables, Receivables) would not generate any value for Profit Centre. There was an apparent conflict between the requirements for accounting and the requirements for reporting of financial transactions.
- For the purposes of accounting, the Vendor line item belongs to the legal entity (or company code) that is responsible for the accrual of expense/ Vendor dues.
- For the purposes of reporting, a Vendor line item could belong to multiple Profit Centres depending on which Profit Centre bought goods/ services from it
All financial postings catered to accounting requirement of the posting. This meant that Vendor, Customer line items did not post to Profit Centre. At the month-end, users could manually execute a series of steps to transfer Vendor, Customer, Asset and Inventory balances to Profit Centres. During this transfer, the outstanding balance at the time of transfer would be split by Profit Centre and post to respective Profit Centres.
The disadvantage with this process was that the Trial Balance by Profit Centre could only be reasonably generated at the end of the month after the balances were transferred to profit centres. Real-time reporting by Profit Centre for certain balance sheet items was not possible, unless the user manually split the lines during data entry. The process to transfer balances to Profit Centre increased the time to close books at end of the month.
New GL in SAP ECC
Document Splitting functionality in new GL performs an automatic split in real-time of the line items on a financial document for the user-selected characteristics (called “scenarios”) like Profit Centre, Segment. SAP delivers pre-configured splitting rules that can be used to perform the online document split. SAP customers can configure the rules to suit their business processes if the pre-configured rules do not satisfy their business requirements.
The document splitting functionality was delivered with another useful functionality: zero/ self-balancing. This functionality enables SAP customers to produce a complete AND a balanced balance sheet and Profit & Loss by Profit Centre.
Functions of Document Splitting in new GL in SAP: Active Split
The amounts on the line items that do not have Profit Centre will be split in the ratio of the amounts on the base line items. The identification of the line item to be split and the base line item can be configured by users.
Example of Document Splitting during Vendor Invoice processing (Active Split)
Active split occurs when the amounts on the line items that do not have Profit Centre are split by the system based on preconfigured splitting rules.
Let us look at an example of a Vendor Invoice posted in new GL. The Vendor Invoice is posted to expense accounts for costs belonging to two Profit Centres. There is an input tax posted as part of this transaction. This view is called the “data entry view.” The Vendor Account is credited with AUD 440.00; this is the amount that is relevant for accounting (i.e. payable to vendor).
SAP will split the document in the background based on pre-configured splitting rules. The split document (based on standard splitting rules) is reflected in the “General Ledger view” will look as below:
The amounts on the Vendor line and the amounts on the Tax line are split to the Profit Centres in the ratio of the amounts of the expense lines. This is a reporting view of the same financial document; the Vendor payable is AUD 440 in accounting view but is split by Profit Centre in the reporting view.
Functions of Document splitting in new GL in SAP: Passive Split
Passive split occurs when the amounts on the line items that do not have Profit Centre are split by the system based on the preceding processes. This split is defined within SAP code and cannot be configured. An example is when the Vendor Invoice is paid, the Vendor line items on the payment document are split in the ratio of the original split in the preceding Vendor Invoice document.
Example of Document Splitting during Vendor Payment processing (Passive Split)
Let us look at passive split in a business process when the above Vendor Invoice is paid in full. The accounting document in data entry view is as below:
SAP will carry over the split on the Vendor line item from the preceding process (Vendor Invoice process) and will split the Vendor line in the payment document in the same ratio. The split document is shown in the General Ledger view:
Functions of Document splitting in new GL in SAP: Self-balancing
Document splitting functionality in new GL allows the users to produce a balance sheet by Profit Centre. However, in some cases, the Balance Sheet is not a balanced Balance Sheet. If you notice in the “data entry view” document below, the total of Profit Centre 1100 is in the credit of $30 and the total of Profit Centre 1000 is in the debit of $30.
The Profit Centre Managers do not have enough information in their respective Balance Sheets to analyse the cause of the difference or which Profit Centre is owing/ in debt to their own Profit Centre.
The self-balancing functionality in new GL will produce additional entries in General Ledger view to offset the balance in each Profit Centre in the document. This process will normally occur when:
- multiple Profit Centres have been derived on all lines of the financial document, and hence, active document splitting was not required; AND
- the total amount on all lines for any given Profit Centre is not zero
As in the previous example, the self balancing entry is automatically posted based on configuration settings.
In the self-balancing clearing entry below, you will notice that the line item has also populated a partner Profit Centre. This will allow Profit Centre Managers to analyse the clearing account by Profit Centre owing/ owed.
Document Splitting functionality provided in new GL in SAP is a very powerful feature of the new SAP version. It allows business users to generate trial balance by Profit Centre in real-time. This also makes redundant the month end processes to transfer Balance Sheet balances to Profit Centres – another feature of new GL – thereby enabling faster month end close.
I hope this blog has helped you understand the configuration behind Document Splitting. Please do leave your comments below whether this article was helpful; and whether you have any suggestions/ comments; or if you would like to share your experience with document splitting.
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View my presentation on Slideshare
Index of my blogs on Document Splitting in new GL in SAP ECC
Rajesh has implemented new GL and Document Splitting for several customers. Rajesh has 12 years experience implementing SAP / IT / BPM Finance solutions for several customers globally; he also has 7 years experience working in the business in Finance and Accounting functions. His business process knowledge combined with his IT expertise enables him to provide his customers with best-of-breed advice on business process / IT implementations.