Assumption for this blog
You should read my blogs on newGL to gain an understanding of the concepts around newGL. I will repeat some of the concepts only so far as they support the purpose of this blog. For detailed explanation, I would suggest you refer to the blogs on newGL.
Hence, for the purpose of this blog, I will assume you are conversant with newGL features. I will assume you have activated newGL and all features within newGL related to Profit Center Accounting (like document splitting, self-balancing, real time COFI reconciliation).
What am I demonstrating
In this blog, I intend to compare newGL Profit Center Accounting with Classic Profit Center Accounting and thereby glean the benefits accruing to customers by activating newGL Profit Center Accounting.
Generating a full Balance Sheet
Sub ledger Balance Sheet Accounts
Balance Sheet line items cannot derive a Profit Center in real time because they were not posted against cost objects. There is no mechanism to derive the Profit Center from the offsetting line items either. These line items post to GL without Profit Center and do not post to Classic EC-PCA.
At period end, the user has to process two transactions to move these line items to EC-PCA:
- Balance Sheet Readjustment (transaction code F.5D): This transaction assigns Profit Center number to records which have a blank in the Profit Center field (typically a Receivables/ Payables record). The system does this by looking at the Profit Center on the offsetting record. The program identified the source document of these items; then it derived the Profit Center from the Profit Center on the offsetting line item. If the offsetting line item were assigned to multiple Profit Centers, then the program splits the Sub ledger open item into multiple line items based on offsetting Profit Centers.
- In Classic EC-PCA, the user has to execute a program to bring over these open items from Sub-Ledger accounts into PCA
- Transaction code 1KEK “Transfer Payables/ Receivables”
- Transaction code 1KEI “Transfer Assets”
- Transaction code 1KEH “Transfer Material Stocks”
- Transaction code 1KEJ “Transfer Work in Process
When you execute this program, the line items indicator should be turned on and the “degree of detail in log” is set to “2”. This would ensure that the Receivables/ Payables are transferred with sufficient details.
The above mentioned process of document splitting is incorporated into newGL as a part of standard feature and occurs in real time. When a document is posted in newGL and contains a Sub ledger line item, the system reads the (delivered or configured) document splitting rules and splits the sub ledger line item. The system generates a new “view” of the entered document called the “General Ledger view”. In this view you can see the split document i.e. it shows the Sub Ledger line item split and assigned to Profit Centers.
The disadvantage with the Classic EC-PCA process is that the Trial balance by Profit Center could only be reasonably generated at the end of the month after the balances were transferred to Profit Centers. Real-time reporting by Profit Center for balance sheet items is not possible, unless the user manually split the lines during data entry. The process to transfer balances to Profit Center increased the time to close books at end of the month. With newGL, reporting is available real time.
Processing of month end jobs (Classic EC-PCA)
All the above periodic jobs have to be run in periodic sequence. Hence, after processing a transaction for period 010 if the user executes the program for period 008, the data for subsequent periods may not be accurate. The user will have to re-run all periods from 008 to 010.
Table T8A30 and Reconciliation accounts (Classic EC-PCA)
The user should be aware of the implications of maintaining reconciliation accounts in Table T8A30.
- If Payable/ Receivable GL accounts are updated in Table T8A30, the system would post the Payable/ Receivable to the default Profit Center instead of the Profit Center using the “Calculate balance sheet readjustment” process.
- If Stock GL accounts are updated in Table T8A30, the system will post all records affecting material stock accounts, real time, into PCA. In this case, the user need not run transaction 1KEH for periodic updating.
- If Asset GL accounts are updated in Table T8A30, the system will process transaction to PCA real time using the default Profit Center (in the case of asset takeons) or the Profit Center assigned to the asset (in all other cases). If the user processes transaction “Transfer assets” in PCA, the system will overwrite the data transferred real time with the new data processes using this transaction. Hence, in the case of asset takeons, the system will delete the record in PCA where the asset is transferred with the default Profit Center with the correct Profit Center.
In the next blog, I will review the concept of dummy profit center and balancing of profit centers.
After working in Classic EC-PCA for several years, I found newGL very refreshing and easy to use. All the technical and “unexpected” errors with Classic EC-PCA are no longer a worrying factor in month end close. One of the key aims of SAP ECC is to expedite month end close by eliminating some of the technical jobs to synchronise databases. That aim is well achieved with newGL Profit Center Accounting. Most of Profit Center Accounting happens in the background.
For customers who are on Classic EC-PCA and want to migrate to newGL, the process is not very straightforward (unfortunately). You should hire expert consultants in the market; you will also require SAP Support during the migration process. However, at the end of it all, the benefits far outweigh the costs of migrating your business to newGL Profit Center Accounting.
I hope this series of blogs helps you understand the benefits of newGL Profit Center Accounting over Classic EC-PCA. Please do leave your comments below whether this article is helpful; and whether you have any suggestions/ comments; or if you would like to share your experience with Classic or newGL Profit Center Accounting.
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View my newGL presentation on Slideshare
Rajesh is regarded as an authority in optimising and re-engineering Finance processes for his customers. Rajesh has 12 years experience implementing SAP / IT / BPM Finance solutions for several customers; he was involved in two large global rollouts and has a strong focus on Management Accounting and Reporting primarily Product Costing, Profitability Reporting and Material ledger (Transfer Pricing, Actual Costing). 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.