Why A Profit Center is Required
The Primary objective of Profit Center is to represent an independent organizational subunit that operates practically independently in the market, bears responsibility for it’s own costs and revenue , and can be expanded to become an investment center or can be treated as a Company within a company.The Profit center approach embodies the increasing re-establishment between internal and external accounting, functioning as a connecting link between two accounting concepts.Profit Center Accounting helps in answering the following questions :
- How much is the revenue?
- How much is the cost of goods manufactured?
- How much is the contribution margin?
- How much is the administrative and sales costs?
- How much is the operating profit?
ROI , EVA and cash flow analyses are possible at profit center level.
Creation of Profit Center
Enter Transaction code KE51 in the SAP Command Field
In the next screen , Enter the controlling area in which the Profit Center is to be created
In the next screen, Enter a unique Id for the Profit Center
In the next screen, Enter the Following
1. Enter the name of the profit center
2. Enter a short description of the profit center
3. Enter the person responsible for the profit center
4. Enter the profit center group for which the profit center belongs to.
Press ‘Save’ button , for saving the profit center from the SAP Standard Toolbar
The Profit is saved in the inactive mode
Press the ‘Activation’ Button for the activation of the profit center from the Application Toolbar
Check the Status bar for the status of creation of profit center.
Profit Center Group
Enter Transaction Code KCH1 in the SAP Command Field
In the next screen , Enter the Controlling area in which the profit center group is to be created
In the next screen, Enter a unique Id for the Profit center group to be created
In the next screen, Enter a short description for the Profit center group
Press ‘Save’ button , from the SAP Standard Toolbar to create the profit center group
Check the Statusbar for the creation of the profit center group
Profit Center Planning
Planning Process is not a one-time activity, but rather an iterative process, which is usually performed in several steps.Profit center planning is an integral part of your overall company planning. The integral character of business planning is particularly apparent within the context of Profit Center Accounting, as the planning data used here is largely created in other applications (such as Cost Center Accounting) and can be supplemented or changed in Profit Center Accounting. Profit center planning is part of shortterm business planning and thus encompasses a span of one fiscal year. During the profit center planning process, Individual planning areas are combined into an integrated planning network. We can use various plan versions in order to depict various planning Profit center planning offers us the following methods of planning:
- Copying existing plan or actual data to a plan
- Posting plan data by period or simultaneously by transaction from other applications
- Manual planning of profit centers
- Distribution and Assessment of data between profit centers
- Various plan reports for comparison of different plan versions