Cost Centre and Account Segmentation

[Former Member]

Dear Experts,

Our client's requirement is to take profitability branch wise, department wise.

Can we use Cost Center or we can enable account segmentation. Which is the best way.

As per SAP notes, it is stated that account segmentation is used for branch wise, region wise, department wise arriving balance sheet, profitability.

Which will be the appropriate way. What is the advantage and disadvantages if we cost center or account segmentation.

Thank You,

Sundaram R

[Former Member · Accepted solution]

Hi Senthil, this is what I have experienced.

Segmentation may be mandatory in USA, for other countries they are optional.

For some who are playing the role of accountant in the company, they find it hard to comprehend the segmentation rule. In which case it is best to convert their current single segment profit center oriented chart of account to map into SAP B1.

Segmentation may be too complicated for smaller companies and one or two ware houses, mainly because to best use the segmentation, the accounts in G/L determination and warehouse determination and item determination need to be configured properly for segmented chart of account. At times the customer will have to choose a segment for manual JE, and it is not that simple if they are not used to the idea of segments.

There will be situations when certain segments do not make sense and yet you need to have them as zeros or something common while implementing it. You may end up creating too many segments or too few at the beginning. If too many it is not a good sight with useless accounts, if too few, they creating new accounts needs planning.

I would leave the option to customer and as consultant it also depends upon your own experience.

Hope that helps.

[msundararaja_perumal]

Hi,

Unless the customer requires balance sheet according to branch wise or department wise don't opt for account segmentation.

As told by one of the forum member it will increase the complexity of the system.

For ex. say you have 2 branches and 2 departments then for a account say Miscellaneous expense you have the option to create 2 x 2 =4 accounts based on the branches and departments.

Your customer may not be in a position to classify this,similarly you have trade debtors where your customers client may be operating for 2 branches then consolidation will be tedious task, unless you create a common entity for branches for consolidation.

Where as if you go for the Profit center you have the option of creating templates to view direct and indirect profit and loss.

Also you can use customized query to pull the data based on the profit centers.

Hope you get an idea!

Note: I guess you know that in sap b1 both profit center and cost center are one and the same.

[Former Member]

Dear Sundaram,

To reach your goal, Account Segmentation is the way to go. Cost Centre is not good enough for the task.

Thanks,

Gordon