Accurate Global Product Profitability in 2015 (with SAP BPC)

Blog /Accurate-Global-Product-Profitability-in-2015-with-SAP-BPC

Are stakeholders questioning global product margins?  Are you experiencing swings in profitability that don’t make business sense? Has trust been lost in the financial data used to track performance?

If you’ve answered ‘yes’ to any of these questions, don’t worry. You are not alone. In fact, we see it frequently -- companies struggling (and failing) to systematically calculate global profitability at the product level.

Here’s the root cause of your problem: those responsible for management reporting don’t understand the underlying accounting principles, and the accountants aren’t involved in the management reporting!

More specifically, inter-company profit (IC Profit), which is eliminated for audited financial statements, is probably not being eliminated at the product level in management reporting, a common misstep that greatly skews profitability!

In this article we’ll show you how the SAP Business Planning and Consolidation application (SAP BPC) can help you achieve accurate global product profitability reporting!

The SAP Business Planning and Consolidation application (SAP BPC) can help you achieve accurate global product profitability reporting, and I’ll show you how.

First, let’s take a good look at SAP BPC.

Why SAP BPC Now

Spreadsheet sprawl can be a death knell for growing businesses. As can dependence on disjointed, homegrown legacy systems. Both increase the likelihood of budgeting fiascos and/or extended close cycles, and both signal your business’ need and readiness for the SAP BusinessObjects Planning and Consolidation (SAP BPC Leaving the Site Icon) solution.

The bottom line is that businesses need a proven, easy-to-use tool for streamlining financial reporting and forecasting processes -- one that delivers rapid ROI and measurable business value, and SAP BPC, the centerpiece of SAP’s EPM portfolio, is the best tool for the job.

Available in versions for both the Microsoft and SAP NetWeaver platforms, SAP BPC combines planning, budgeting, and forecasting capabilities with management and legal consolidation functionality in a single application, providing business users with the intuitive, role-based tools, structured processes and centralized data they need to integrate corporate and departmental planning, shorten budget cycle time, close the books faster and ensure compliance with regulatory and financial standards.

In March 2012, SAP launched SAP BPC on HANA (version for SAP NetWeaver), turbo-charging this already proven and popular solution and delivering speed improvements on big-data reporting of up to 200x.

Top reasons why companies adopt SAP BPC:

  • Familiar, easy to use - enables rapid adoption by leveraging native Microsoft Office tools (e.g. Excel) and web browsers accessing a central database.
  • Unified planning and consolidation in one product - single application reduces maintenance, improves data integrity, and simplifies deployment while enabling flexible planning & consolidation functions.
  • Owned and managed by business users - business users manage processes, models, & reports, with little IT dependence.
  • Business process centric - configurable business process flows guide users and drive process consistency.
  • An open, adaptable application - extends the value of your investment in both SAP and non-SAP environments.

For more on SAP BPC, read “BPC: SAP EPM’s Rising Star

SAP BPC for accurate global product profitability

Here is the use case for utilizing SAP BPC to eliminate IC Profit at the Product Level in management reporting.

If you work at a global company, this scenario likely applies to you. 

A producing company sells an expensive “hand bag” to the selling entity in January.  The producing entity books a sale of $500 and mark up of $100.  The sale will be eliminated when reporting on at the total company level.  But if the external sale is not made that same month, the mark up must also be eliminated else profits and margins will be grossly overstated. If the entry is not made, January “hand bags” would have a margin of $100 with no sales -- completely overstating profitability for that month and understating for the month the actual sale is made. 

Here’s the fix:

  1. 1Produce GL reporting to capture the change in IC Profit in Ending Inventory – at the Product level!
  2. 1Utilize BPC to capture these changes and automate the required accounting entries

Voilà  -- Accurate global product profitability reporting!

NTT DATA’s EPM Solution team has the experience to bring accurate profitability to your company. 

Contact us today, and we’ll help you drive greater insight into product profitability across all your legal and manufacturing entities.

Post Date: 1/9/2015

default blog image Jonathan Essig

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