In modern enterprise resource planning, financial accuracy and efficient cost centers are essential to the success and stability of any organization.
With versatile application functionality and intricate integration into SAP’s multifaceted ecosystem, internal orders are the linchpin for financial governance, enabling organizations to navigate the complexities of budgeting, settlement rule definition, cost allocation, and precise financial management.
In this article, we’ll discuss the core components and capabilities of internal orders in SAP, how they improve budgeting and spending with availability control features, and where our team of SAP consultants can come in to help.
Understanding the Need for SAP Internal Orders
Internal orders, unassuming yet indispensable elements within SAP’s Controlling (CO) module, form the backbone of cost management, offering a systematic means to track, control, and report on the financial aspects of projects and tasks. SAP users can leverage an internal order in SAP to budget, monitor, and control specific organizational tasks or projects, providing a structured way to track costs and resources associated with internal activities.
What is an Internal Order in SAP?
An internal order in SAP is a flexible tool for cost accounting and budget control in the SAP Controlling (CO) module, allowing users to plan, collect, monitor, allocate, and settle the actual cost of an internal task or time-restricted job.
They facilitate accurate expense tracking, budget control, and reporting, making them essential tools to help companies maintain financial discipline and accountability and improve core business efficiency.
Users can leverage pre-built SAP functionality to control the complete lifecycle of internal orders, from planning to initial creation, posting for actual costs, final settlement, and archiving.
As a collection of costs rather than a full project with WBS and controlled network relationships, internal orders make it easier to improve overhead allocation and settle costs at the end of each accounting period.
Types of Internal Orders in SAP
Here are a few main categories used to group internal orders in SAP:
Investment Orders
Used to monitor costs incurred in producing fixed assets, such as building a new storage facility or conducting regulatory maintenance on existing equipment or machinery.
Accrual Orders
Used to balance postings for costs calculated and accrued in SAP CO with cost object data in a specific cost center within a company’s technical landscape.
Overhead Orders
Used to monitor overhead costs incurred for a specific purpose, including tasks like conducting a trade fair or monitoring costs for repair work.
Orders with Revenue
Used to replace cost accounting aspects of sales orders in SAP Sales and Distribution, allowing users to track costs and revenues in the same place.
Key Characteristics of an Internal Order in SAP
Here’s a closer look at the main features of an internal order for business users:
Cost Tracking:
Internal orders are created to control and monitor investment costs associated with specific projects, activities, or ad-hoc tasks. They allow organizations to track and allocate expenses accurately and leverage cost objects, or “temporary cost collectors,” to meet requirements for short-term projects or events.
Budget Control:
Organizations can assign budgets to internal orders to ensure that costs do not exceed specified limits. By leveraging statistical key figures and improving budget control, organizations can manage expenses, avoid overruns, and improve settlement for fixed assets.
Hierarchical Structure:
Internal orders can be organized hierarchically, enabling the breakdown of more significant projects into smaller, more manageable sub-orders. This structure aligns with the Work Breakdown Structure (WBS) in the Project Systems (PS) module and allows companies to optimize their internal activities.
Cost Allocation:
Costs can be allocated to internal orders from various cost centers, elements, overhead cost orders, and other sources. This allocation allows for accurately attributing expenses to specific tasks or projects, making monitoring overhead costs easier and improving cost element analysis across teams.
Reporting and Analysis:
Internal orders provide a basis for delivering detailed reports and initiating project or task-related cost analysis. SAP’s intuitive reporting tools give organizations insights into cost breakdowns, actual vs. budget comparisons, accrued costs, revenues incurred, and more.
Systems Integration:
Internal orders are tightly integrated with other SAP modules, such as Materials Management (MM), Project Systems (PS), and Financial Accounting (FI). This integration ensures that costs are correctly recorded and accounted for, and internal teams can build stronger relationships with external partners.
Authorization and Security:
The internal order process in SAP allows organizations to define authorization and security roles to control who can create, modify, or access internal orders and related data.
Navigating Internal Order Creation in SAP
The internal order process in SAP supports action-oriented cost planning, allocation, and monitoring across teams, making it easier for organizations to control a specific business object or activity and assign costs to each relevant order.
Companies can create internal orders in SAP to complete the following activities:
1) Use investment orders to monitor internal activities settled to fixed assets.
2) Use overhead orders to monitor internal activities settled to cost centers.
3) Use accrual orders to balance postings of accrued costs calculated in SAP CO.
4) Use orders with revenues to visualize cost-controlling areas of the SAP SD module not affecting current core business functions.
How Can We Help?
Whether you need help navigating costing-based costs debited to specific orders in SAP SD, additional support conducting accrual calculations between expenses to determine profitability, or just an extra hand getting started on your SAP journey, Surety Systems is here to help.
Our senior-level, US-based SAP consultant team has extensive training and accounting experience across various industries to handle your most critical SAP project needs and maximize success.
Partnering with the Best
Interested in learning how SAP internal order monitors critical aspects of costs and revenues and improves period-related accrual calculation across teams? Ready to get started on a project with our expert SAP consultants?
Contact us today for more information!
