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SAP Enterprise Structure

Updated: Feb 7, 2022

SAP defines the Enterprise Structure as “the definition of specific organizational units that together represent a company’s business units and divisions". SAP Enterprise Structure is the fundamental key to any project . It is system representation of an organization. When a project is considered or initiated , it starts with analyzing the business structure and processes in a company and then mapping them to the SAP structures.

Enterprise structures are the bedrock of the SAP FI solution; without them, you couldn’t integrate and configure your program. SAP has a number of organizational unit elements that help you portray the Accounting, Logistics, Sales & Distribution and Human Resources structure of your company. Org Units are: Client, Operating Concern, Controlling area, Company code, Sales Organization, Purchasing Organization, Plant, Business area ,Segment, Profit Center, Cost Center, etc.

a. Client- It is the highest node in the system. It is a subdivision of the system, enabling separate independent organizations to use SAP system installation. Client is an independent unit that contains separate master records, a set of tables, and data. In business terms, the client level corresponds to a corporate group or a group of affiliated companies. At least one client in SAP needs to be defined under which all organizational units are to be configured. Client name is a three character key ,which has to be used during login. Data can be moved from one client to another via Transports Request(TR). Every client has a specific purpose/function and has its ways of achieving it.

2. Operating Concern- Operating Concern is the highest organizational structure in SAP Controlling(CO) module if you COPA i.e Controlling & Profitability is implemented. It helps in analyzing multidirectional profitability i.e. profits arising from different segments like production, marketing, sales etc.

3. Company code- A company code represents an independent legal accounting entity, such as a company, with independent accounts within a corporate group. Financial statements required by law are created at the company code level. The company code is the minimum structure necessary in the SAP ERP Financials solution. In an international business, operations are spread across different countries. The governments and tax authorities of each country require that these activities be represented by a separate legal entity. In such a situation, a separate company code is created for each country. For every organization that has a financial statement and a profit and loss (P&L) statement, a company code is created and stored in the SAP application. It is a 4-digit alpha numeric key.

4. Controlling Area- The controlling area is the most important organizational element in Controlling. A controlling area identifies a self-contained organizational structure for which costs and revenues can be managed and allocated. It represents a separate unit of cost accounting. More than one company code can be assigned to a single controlling area. This enables cost accounting across the assigned company codes. The company codes within a controlling area must all use the same operational chart of accounts and fiscal year variant. Controlling Areas are assigned to one Operating concern.

4. Plant - It is an independent and highest organizational unit in MM module. Plant is a physical location of company, manufacturing unit or a sales branch of an organization. Plant is responsible for planning, procurement, distribution of goods & services to customers or other resources of an organization. One company code can have one or more Plants.

5. Purchase Organization- The purchasing organization is an organizational unit which procures articles and negotiates general purchase price conditions with vendors. It is responsible for all purchasing transactions in the company. If the company want to purchase material for multiple plants, than the cross plant purchase organization will be involved. One purchase organization can be assigned to only one company code. One company code can have one or more purchase organizations as per requirements of client.

6. Sales Organization- A sales organization is responsible for the sale and distribution of goods and services. It represents the selling unit as a legal entity. Each business transaction is processed within a sales organization. It can be subdivided into several distribution chains which determine the responsibility for a distribution channel. Each sales organization is assigned exactly one company code for which you enter all accounting details of the sales organization.

7. Profit Center- A profit center evaluates the success of independent areas that are responsible for costs and revenues within a company. The division of a company into profit centers makes it possible for management responsibility to be delegated to these local organizational units i.e internal reporting. They allow better controlling because you can follow the money in each unit and assign responsibility in accordance with results. Likewise, profit centers that are doing poorly are easier to identify and correct because their inefficiencies aren’t easily masked by the surplus of a well-performing group.

8. Segment- A segment is a division of a company for which you can create financial statements for external reporting. Certain accounting principles, for example U.S. GAAP (SFAS 131) and IFRS (IFRS 8), require companies to perform segment reporting. Profit Centers are assigned to a segment.

9. Company- Financial Accounting records are consolidated at the level of the company. A company can be assigned one or more company codes, which are then taken into account for

consolidation. A consolidation parent can allocate company IDs to its subsidiaries. Eg Alphabet is a parent company of Google and Calico. This is the highest level of organization for accounting.

10. Functional Area- Functional areas allow you to assign costs to specific areas within the business—things like administration, sales, production, and so on. Used to produce what SAP calls Cost of Sales Accounting. From there, it’s easy to create profit and loss statements for each aspect of the business, allowing you to dig in and figure out where costs are bleeding and where you can make more.

11. Business Area- A business area represents separate areas of operation within an organization and can be used across company codes. A business area is a balancing entity that can create its own set of financial statements, which can be used for internal or external purposes. You can save and evaluate transaction figures for each business area.

*Reference taken from- www.help.sap.com , www.blogs.sap.com

Happy Learnings...

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