Planning and Budgeting for Investment Controlling with SAP S/4HANA

Investment programs describe the organization’s targets in terms of capital investment projects to replace production equipment, prepare new products for launch, or undertake major repair work.


There’s a link to the cost center plan in the sense that the same organizational structure (generally the cost center hierarchy) is often used to structure the investment program. In this type of plan, however, the controller plans the investment needed to ensure the cost center output in the long term, rather than the costs of providing the output in the immediate future. This plan is subject to much greater variability than the annual operating plan. Although the costs incurred by a cost center in any period should be relatively stable, building a new production line is an inherently different undertaking.


Because of the variability in spending, it’s common to set a budget as a ceiling for the allowed capital expenses. Variability also means that a plan can’t be considered to represent a standard. This means that the variance analysis available for investment projects and orders is limited to a line-by-line comparison of the plan and budget against actual costs and commitments.


SAP currently offers two approaches to investment planning:

  1. Classic planning of overall costs with detailing by cost element: This option relies on the legacy tables (tables COSP and COSS) and is only available in on-premise SAP S/4HANA. Planning content is available in SAP Analytics Cloud for project planning and budgeting, but the investment program is not covered.
  2. SAP Analytics Cloud includes dedicated planning stories for investment planning: This option can be used in both SAP S/4HANA and SAP S/4HANA Cloud.

Once we cover the planning process, we’ll walk through budget management. To begin, let’s check the budget settings.


Project Planning for Capital Expense Projects

Investment planning generally starts with the items of the investment program. These items provide the framework for the planning activities. But if you don’t use investment management, you can simply track your planning progress against a list of investment projects and orders and perform the same planning tasks on the individual objects. Before you start, check the budget settings for your program by going to Transaction IM03 or Accounting > Investment Management > Programs > Master Data > Investment Program Definition > Display and entering the program (Inv. program) and Approval year, as shown in this figure.


Settings for Investment Program


Linking Investment Program Budgets and the Underlying Orders/Projects: In the context of investment budget planning, it’s a good idea to select the Budg.distannl (budget distribution annual) checkbox so that any orders or projects assigned to the program position do not receive more annual budget for the fiscal year than is available for the program position to which they’re assigned. This makes it easy to ensure that each project manager keeps to his or her allotted budget during the planning process.


Overall Plan

The high-level goals for investment planning are determined by the ability of the organization to fund the investment at all. For this reason, an overall plan exists as a form of preplanning for orders and projects, but not for cost centers, for which the planning is inherently more predictable. The overall plan documents the high-level goal, such as the planned spending for a single project, and its refinement to a level of detail appropriate for project approval. This documents the progress toward the final project structure, breaking down the total values to the individual WBS elements, and toward an understanding of the timing of the expenses: the years in which the costs will be incurred.


To create an overall plan for a project, use Transaction CJ40 or follow menu path Accounting > Investment Management > Investment Projects > Planning > Overall Values > Change. The transaction has been removed from the Project System menu in SAP S/4HANA, but it can still be used, as explained in SAP Note 2270407.


Enter the Project Definition, the Currency, and the Version. If you already know which level of the project hierarchy interests you in a large project, you can also enter a WBS element. The figure below shows a sample overall plan. You can toggle between this view (the element view), in which the leading column shows the WBS elements, and the annual view, in which the leading column shows the year, by clicking on the Annual Overview button. You can perform the following types of planning:

  • Top-down planning: The process of breaking down the project plan structurally and across the time dimension is generally known as top-down planning. The Distributable column gives an overview of the costs awaiting distribution to the lower levels. The costs that have been distributed are shown in the Distributed
  • Bottom-up planning: Alongside this process, you’ll often find planned data being entered for individual WBS elements when the details are known (contracts with a supplier, agreements on the level of work required to perform the task, etc.). These are shown in the Planned total column and aggregated in a process known as bottom-up planning. At some point, the two value flows should meet, but the essence of the planning application is in matching the detail against the target and understanding where compromises will be needed.

We’ll use this overall plan to prepare the budget for the project later.


Overall Plan for Project


Cost Element Planning

The overall plan also aggregates any other known planning data available for the project. Where assets under construction have to be capitalized for the project, it’s important to distinguish the types of costs in the project (direct, indirect, material, etc.). This forces the controller to plan at the same level of detail as the inputs in the cost center.


To access the planning application shown in the next figure, choose the Annual Overview button shown in the above figure and then click the Primary Costs button. This takes you into the form-based cost element plan, where you’ll see a line for every cost element in your chart of accounts. The next figure shows the planning screen. This behaves the same way as cost element planning on cost centers or on internal orders.


Cost Element Plan for Project


Including Your Own Planning Layouts in Project Planning: If you click the Primary Costs button, a standard planning layout will be used that can’t be switched once you’re in the planning transaction. If you want planners to be able to jump to the primary costs from the overall plan but use a different planning layout, refer to the instructions in SAP Note 47207 for details on how to change the planning layout. Alternatively, use Transaction CJR2 with layout 1-701 or follow menu path Accounting > Investment Management > Investment Projects > Planning > Cost and Activity Inputs > Change. Again, Transaction CJR2 is no longer part of the menu for Project System but continues to be available in SAP S/4HANA. Enter the project definition, the currency, the version, and the cost element group or interval. If you choose this route, you can choose between free planning (where you’ll only see data for the cost elements you’ve already captured) and form-based planning (where you’ll see an empty line for every cost element in the group or interval you entered in the initial screen).


Alongside the primary costs (the purchased materials and contract work) that are required to complete the project, you can also plan the work required to complete the project in the form of activity input.


If these projects are assigned to an investment program when you finish the detailed planning, you can roll up the values captured on the assigned orders and projects by going to Transaction IM34 or Accounting > Investment Management > Program Planning > Default Plan Values. The next figure shows the result of rolling the plan values captured for the project assigned to the research and development node into the investment program.


Investment Program Planning


Investment Planning using SAP Analytics Cloud

If the screens we’ve looked at so far seem very tactical, you may prefer the approach to investment planning delivered as a planning story in SAP Analytics Cloud. Here you’re also looking at the expenses to buy, maintain, or improve fixed assets, such as buildings or land, but the focus is on the accounts and the profit centers rather than on the individual projects as in the previous sections.


First select Menu > Browse > Files > Public; then, for investment planning, choose the SAP_FI_BPL_IM_CAPEX_PLANNING story. The following figure shows the SAP_FI_BPL_IM_CAPEX_PLANNING planning story, in which you’re working in company code 1710 and the Bike Parts profit center and have copied the expenses for property, plant, and equipment for the Buildings and Machinery & Equipment general ledger accounts from the previous year. These can be adjusted as required to reflect the capital expenses expected in the next year by overwriting the figures to reflect the differences expected in this year.


Planning Story for Capital Investments


The next stage is to use the rules defining the percentage depreciation to be applied to each asset class to perform the calculations shown in the next figure, where we’ve calculated the Depreciation Expense for Buildings and Machinery & Equipment. These rules support both straight-line depreciation, where the value of the asset is reduced uniformly in each period until the end of its useful life, and accelerated depreciation, where the value reduction is higher in the early phases of the asset’s life than the later phases.


Planning Story, Showing Calculated Depreciation


The rules to calculate the depreciation shown above are defined in a planning story for the administrator (SAP_FI_BPL_IM_CAPEX_PLAN_ADMIN) that determines the percentage to be applied in each case and the depreciation method to be applied. The next figure shows a depreciation of 6% being applied to Buildings and 12% to Machinery & Equipment and shows that straight-line depreciation is to be used for Buildings and accelerated depreciation for Machinery & Equipment. As a controller, you might set your own depreciation percentages here to be used by the planners.


Parameters for Depreciation of Capital Expenses


With the plan in place, we’ll now look at how to set the budget in each case.


Budget Management and Availability Control

If you now assume that the project plan has been approved, the next task is the creation of the budget. The original budget is created using the approved plan as a guide. The budget is more than just a plan. It’s an agreement with the organization about proposed spending levels. Changing circumstances can render this ceiling inappropriate. At this stage, you can either create a return to give back some of the original budget or a supplement to document the assignment of an additional budget.


If you use investment programs, it makes sense to start your budgeting process at the highest level—namely, in the investment program. You can prepare the budget using Transaction IM32 or by following menu path Accounting > Investment Management > Programs > Budgeting > Edit Original and entering data in much the same way as for the overall plan, as described earlier. If you’ve already prepared plan data for the investment program, you can copy this data by selecting Edit > Copy View, as shown in this figure.


Copy View


You can then choose the types of values that you want to copy, as shown in this figure.


Change Investment Programs


Once you’ve used the copy function to set the rough values for the items, adjust these to meet your needs by selecting Edit > Revaluate. When you’re satisfied with your budget at the program level, you can ensure that the budget set can’t be exceeded on the associated WBS elements, orders, and appropriation requests by using Transaction IM52 or by following menu path Accounting > Investment Management > Programs > Budgeting > Budget Distribution > Edit. Remember here the setting that we mentioned at the beginning of the chapter to ensure that the budget for the assigned items doesn’t exceed the total for the year.


The next figure shows the original budget for a WBS element. You can enter the budget for a project using Transaction CJ30 or by selecting Investment Management > Investment Projects > Budgeting > Original Budget > Change. Notice that some of the lines in the Budget column don’t allow entry. This is because we assigned the WBS elements to an investment program position and specified that the budget for the investment program shouldn’t receive more annual budget for the fiscal year than is available for the program position by selecting the Budget Distribution Annual checkbox for the investment program. If you want to check the connection between the WBS element and the investment program during budgeting, simply select Extras > Investment Program.


Original Budget by Project


With the budget in place, you can perform availability checks for the projects. The next figure shows the creation of a purchase order for the purchase or a material that will result in the budget on WBS element T-20301 being exceeded and the resulting warning message. The budget check shown here uses the legacy tables BPGE for overall values and BPJA for annual values. Each time the budget is used to cover a purchase or other posting, the consumption is updated until the full budget is finally used up.


Budget Check on Purchase Order


Note: The budget approach just discussed is not available in SAP S/4HANA Cloud.


Now that you’ve planned your overall values and broken them down per year, you may wonder what happens as you go into the next fiscal year. In investment management, you need to ensure that a new approval year is created and the budget from the old year carried through into the new. To open a new fiscal year, use Transaction IM27 or follow menu path Accounting > Investment Management > Programs > Periodic Processing > Fiscal Year Change > Open New Approval Year. You can then copy the existing program structure and carry forward the planned values, budget values, and measures (orders and projects).


Carrying Forward a Budget: Remembering what you need to do to correctly move an investment program into the next fiscal year can be tricky. SAP Note 444444 tells you exactly how to proceed and how to avoid any pitfalls.


Editor’s note: This post has been adapted from a section of the book Controlling with SAP S/4HANA: Business User Guide by Janet Salmon and Stefan Walz.


Controlling with SAP S/4HANA: Business User Guide
Controlling with SAP S/4HANA: Business User Guide

SAP S/4HANA brings change to your routine controlling activities. Perform your key tasks in the new environment with this user guide! Get click-by-click instructions for your daily and monthly overhead controlling tasks, and then dive deeper into processes such as make-to-stock/make-to-order scenarios, margin analysis, and investment management. Finally, instructions for intercompany transactions and reporting make this your all-in-one resource!

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