How to proactively control EXPENDITURE in SAP

We welcome you to ENTUNE’s sessions on Management Accounting in SAP. With our 20 + years of Consulting experience, intent of the session is to provide the model to maximize the utilization of SAP’s CO Module to realize the envisaged business benefits.
The current blog will explore the design to pro-actively control the expenditure in SAP.

Definition

Expenditure denotes payment to purchase goods or services. There are two broad classifications as mentioned

Revenue Expenditure (Benefit with- in one year)

Fund spend by business or organisation to maintain day-to-day operations of an organisation.

On yearly basis, every company performs budget planning and indent to expend within the planned budget.

Capital Expenditure (Benefit more than one year)

Fund spend by business or organisation to acquire or upgrade Fixed Assets such as Building, Machines, Equipment, Buying property, patent etc.,

On-going basis, based on the capacity expansion or modernisation, Investment plan will be prepared and shall be executed to ensure the completion of project with-in time and budget.

Pro-active budget control

Pro-active budget control increases the cost awareness within organisation. SAP provides multiple options to control at source of expenditure commitment and act swiftly with real-time data. With multiple control tools, expenditure control Managers can pro-actively control their spending and enables to make quick business decisions based on reliable data.

SAP Model

Below chart provides the ENTUNE’s recommended model to achieve pro-active business control.

Expenditure / SAP Module	Cost Center Accounting	Internal Order	Fund Management	Investment Management	Project System
Revenue Expenditure	Reactive Monitoring	Proactive, to capture event-based expenditure	Proactive, with Budget Control	Not Applicable	Proactive, with Budget Control
Capital Expenditure	Not Applicable	Pro-active, applicable for mini projects	Proactive, with Budget Control	Proactive, Investment approval flow and monitoring	Proactive, Budget and Schedule control

For Revenue expenditure, recommend one of the mentioned options
                      • Option 1: Fund management
                      • Option 2: Project system
For Capital expenditure, best model is to adopt Investment Management with Project system.

Envisaged Business benefits
     • Investment Management and Project System

                a. Common platform for

                      – Creation of Investment plan and with budget approval work flow,
                      – Project schedule, Execution and Progress Monitoring
                      – Budget control and Cost monitoring (aid pro-active measure)
                      – Project settlement to Asset / Cost center.

              b. Enable Project-based procurement of Material / Service – (Internal / External)

             c. Enable on-line project review through Project System

                         – Budget Vs Actual Spent
                         – Schedule Vs Actual Monitor
                         – Project Progress.
   • Fund Management

          a. Common platform for
                         – Creation and distribution of budget with approval work flow,
                         – Budget control and Cost monitoring (aid pro-active measure)

        b. Enable Fund Center based procurement for Material / Service – (Internal / External)
        c. Enable on-line Budget vs Actual Spent monitor report.