SAP’s Profitability Analysis (SAP COPA) module is a powerful tool that provides the tools needed to help companies of all sizes and industries analyze profitability by customer type, product requirements, and other key dimensions.
With COPA, businesses are able to gain more valuable insight into their main profitability segments, allowing them to make informed decisions, identify areas for improvement, and optimize their operations.
This article will explore the main components, features, and benefits of the SAP COPA solution and how it can help businesses drive growth and success, as well as give your team a more in-depth view of where our team of SAP consultants can come in to help.
Read on to learn more!
What is COPA in SAP?
SAP COPA (Controlling-Profitability Analysis) is an application designed to help companies evaluate individual market segments, classified as products, sales areas, customers, orders, and other strategic business units, and report profitability more efficiently across the entire organization.
Types of SAP COPA in S/4HANA Finance
With SAP COPA solutions, business users are enabled to evaluate profit margins across their entire enterprise and gain greater insight into contribution margins by market segments or business units to make better financial accounting decisions.
The SAP CO-PA application is one of the most vital solutions within the SAP Controlling module, providing the functionality needed for managers and other company executives to collect data from different areas of SAP, analyze profitability segments from different perspectives, and make better CO-PA planning decisions in the long run.
There are two different types of COPA that can run simultaneously in SAP, including…
Account-Based CO-PA
Account-based profitability analysis involves collecting sales, marketing, and product management data needed to support internal accounting and decision-making and building reports from such data that are permanently reconciled with financial accounting processes.
With account-based COPA, SAP users are enabled to connect their internal solutions for better collaboration across the entire SAP ERP system, as COGS, or cost of goods sold, is recorded in COPA at the time of billing and revenues and invoices are generated in the SAP Sales and Distribution module.
Account-based profitability analysis enables users to…
- Leverage comprehensive profitability analysis functions to determine the profitability of individual products, customers, and sales channels
- Consolidate information from different data sources, including SAP Sales and Distribution (SD) and Material Management (MM), to gain a better view of overall profitability across the entire enterprise
- Track profitability and growth to identify trends and determine the root cause of any issues with profitability analysis and profit center accounting over time
- Support planning and budgeting activities by creating “what-if” scenarios and evaluating the impact of profit and costing-based decisions across the enterprise
- Improve visibility and accessibility for actual or planning data to improve the speed and accuracy of business decisions
Costing-Based CO-PA
Costing-based profitability analysis is used to group costs and revenues by individual value fields to ensure consistent access to key data, simplifying the process of analyzing cost and revenue elements across business units and completing more accurate and efficient profitability reports.
With costing-based COPA, SAP users are enabled to…
- Determine the profitability of individual customers, products, and sales channels based on actual costs
- Create flexible, intuitive reports to improve decision-making for managers, executives, and other key stakeholders
- Leverage activity-based costing (ABC) to allocate and trace costs to specific activities, products, customers, and channels
- Support multi-level costing functions to calculate the Cost of Goods Sold (COGS) more efficiently and effectively
- Consolidate data from other SAP applications, like Financial Accounting (FI), to provide a more comprehensive view of actual data and improve traceability
Companies can use costing-based CO-PA planning functions to extract COGS directly from the Sales and Distribution module, making it easier to map and control the flow of data across the entire SAP ERP system.
Key Components of the SAP CO-PA Solution
Here are the key components of the Controlling-Profitability Analysis (CO-PA) solution…
1) Characteristics
Characteristics in SAP COPA refer to the elements in COPA that define different segments of an organization in which you want to measure performance. Characteristics and their associated value fields help companies measure, transfer, plan, and report on data in COPA.
There are a few different types of characteristics in SAP COPA, including…
- Fixed Characteristics: Pre-existing characteristics located within an operating concern.
- Profitability Segment Characteristics: Customized combination of selected characteristics included in unique profitability segments.
- Predefined Characteristics: Characteristics already present in the field catalog and added explicitly to a specific operating concern.
- Customer-Defined Characteristics: Characteristics defined in individual field catalogs and included in different operating concerns.
2) Value Fields
A value field is a measurement in which a company can record and assess the profitability of its operations. Value fields, including Cost of Goods Sold, Sales, and more, are only available to users leveraging costing-based CO-PA functionality.
3) Cost Elements
Cost elements refer to general ledger accounts that are used to record and assess profitability within a company’s controlling operations. General ledger accounts and cost elements are merged into one record in SAP S/4HANA to reduce redundancies and eliminate dual maintenance issues across the board.
4) Operating Concern
An operating concern refers to the organizational unit in which the list of characteristics and value fields for the SAP COPA model. Operating concerns not only act as the primary data model for SAP COPA data, but they also define boundaries for different COPA data sources.
Operating concerns are typically the highest organizational unit in which companies can report profitability and store valuable data for reporting purposes.
Absorption Costing vs. Variable Costing
Variable (direct) and absorption (full) costing refer to two separate methods of applying production costs to products or services to maintain accurate and efficient financial accounting processes across the entire enterprise. Absorption and variable costing methods are only present in costing-based profitability analysis functions across the SAP CO-PA solution.
Let’s take a closer look at the key features and capabilities of each method…
What is Absorption Costing?
With the absorption costing method, production costs for each product or service are determined by assigning a certain portion of the total fixed product manufacturing costs to each unit of the product. Under absorption costing, fixed manufacturing costs are expensed during the period they were incurred.
This way, the total cost of goods sold not only includes direct costs associated with making each product but also fixed and variable overhead manufacturing costs across the entire production process.
What is Variable Costing?
Under the variable costing method, only variable manufacturing costs are included in the total cost of goods sold, rather than including both fixed and variable manufacturing costs. With variable costing, fixed manufacturing costs are expensed only when the product is sold.
With this, only the costs of direct labor, direct materials, and variable manufacturing costs are incurred to produce a certain product, making it easier for companies to keep track of total costs and balance the ratio of variables .vs. fixed manufacturing costs more evenly.
Controlling & Profitability Analysis Functions in SAP COPA
Let’s take a closer look at a few of the main controlling and profitability analysis capabilities included in the SAP CO-PA solution…
1) Record Posting
SAP CO-PA provides the functionality needed to help organizations migrate actual or planning data from sales orders, billing documents, and other important business documents from SAP Sales and Distribution to SAP Controlling-Profitability Analysis in real-time.
Posting capabilities also enable users to transfer cost data from cost centers, revenues from direct postings, and other relevant cost or revenue data from the SAP Controlling application to the Profitability Analysis section of the COPA solution.
2) Profit Planning
Both account-based and costing-based profitability analysis functions in SAP COPA allow users to receive important profit data in parallel, however, the solution does not allow for a single, comprehensive source of data for all planning data.
The planning function allows business users to create a defined sales and profit plan, making it easier to display planning screens, create planning forecasts, and manage reference data across each different area of the organization.
3) System Management
With a functional information system, organizations are enabled to leverage advanced drill-down functions to collect and analyze planning, costing, and profitability data from a different perspective.
From navigating through multidimensional data cubes with hierarchies and other data management functions to using fields and accounts to display data in a more organized manner, and everything in between, SAP COPA simplifies system and data management.
Main Advantages of CO-PA Reporting in SAP
Here are the main advantages of Controlling and Profitability Analysis (CO-PA) in SAP…
Benefits of Account-Based COPA
- Integrated data transfer from SAP Financial Accounting (FI) with cost and revenue-related data elements
- Mapping of costs in general ledger accounts and Sales and Distribution (SD) condition types using specified value fields
- Allows cost-component split data to be easily sent to and integrated with SAP COPA
- More compatible with updated business functions in SAP S/4HANA
- Guarantees group costs and revenues related to value fields are accessible at any time
Benefits of Costing-Based COPA
- Costs to general ledger accounts and SD condition types are mapped with value fields
- Data within SD condition types is used to analyze data for anticipated sales and profit
- Greater planning flexibility and support for extra planning mechanisms not supported by account-based COPA functions
- Easier access to both estimated and statistical values within SAP COPA
- Guarantees value fields can be accessed at any time
- Greater control over definitions for specific value fields within SAP CO-PA
How Can We Help?
Whether you need help implementing a new SAP Controlling-Profitability Analysis (CO-PA) module across your organization, an extra hand defining an allocation or PA transfer structure for a specific set of value fields, or additional support helping your product management and corporate planning departments optimize their SAP solutions, we’re here to help.
Surety Systems provides comprehensive SAP consulting services catered to your unique needs to help your organization successfully (and efficiently) implement new SAP solutions (like COPA) and make the most of your technological investment in the long run.
Our team of senior-level SAP consultants has the technical skills, functional expertise, and real-world experience needed to lead you to success, regardless of the complexity of your organizational structure or the nature of your project needs.
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