Understanding Profit Analyzer – Chapter II

Dear,
When we look at BA-Profit Analyzer it's very important to understand that BA is a piece that must fit in the puzzle of the SAP Management Accounting components.

The objective is having a complete description of the revenues and costs in the Bank, and how to manage them efficiently.

An interesting matter, it’s the concept of Direct and Indirect Costs and Revenues, and how to manage them in BA-Profit Analyzer and SAP Management Accounting.

In AFI and Profit Analyzer (according to the IFMA, Profit Analyzer works as an enhancement of AFI) we calculate and manage direct costs, either because they're really direct (for instance, write-offs, or funding costs of a Loan) or we have “made them direct” by using a Tariff (standard costs in general; for instance, process costs).

Consequently, the costs and revenues managed in Bank Analyzer exist because the Financial Transaction (or Financial Instrument) linked to them exists. Obviously I cannot write-off the interests of a non-existing loan.

This is clear for the direct costs and revenues, but a little bit confusing for standard costs (like process costs); for analyzing them we can take advantage of SAP integrated vision. Let me explain it with an example.

Taking advantage of the multidimensional approach of the Bank Analyzer Financial Database, we build a cost object (combination of RDL Characteristics) which will collect the costs and revenues calculated by AFI and Profit Analyzer.

This combination of characteristics (or a subset of them) will be transferred to the General Ledger, through the General Ledger Collector, building the Operating Segment for reporting, required by IFRS 8.

http://www.ifrs.org/news/press-releases/Pages/iasb-issues-convergence-standard-on-segment-reporting.aspx


When we say that the process costs of a current account are 1$/month, we're making a hypothesis; actually we're saying that a fair distribution of all the indirect costs necessary to process and maintain the account (Human Resources, IT Amortization costs, Real
Estate Costs, Electricity, Telephone, etc.) will give us as a result, 1$/month.

Those costs are not direct, as they will remain even when the Loan is fully repaid and not-active anymore (obviously, we're not firing any employee when a current account is closed).


The question is; what’s the validity of that tariff, if we don’t reconcile it with the fair distribution of the real costs? And then, what's the validity of the costs analysis?


If we transfer the costs and revenues of the Operating Segment of the General Ledger (coming from BA) in the Profitability Analysis module, we'll have a full Profit and Losses representation (including the process costs calculated with tariffs in BA) by Operating Segment.

On the other hand, the real Process Costs, which have been posted on the Cost Objects of the SAP-ECC Management Accounting Module (Cost Centers, Internal Orders, etc.), will be finally posted in a PA Object through flows of Settlement and Distribution Cycles.

If we define smartly a common subset of characteristics in the Operating Segment and the SAP-ECC Operating Concern, we will be able of comparing and reconciling the hypothetical process costs that we used for defining the process costs tariff in BA-Profit Analyzer, with
the real costs collected by the integrated model of the ECC-Management Accounting Model.

The integrated vision of SAP is offering us amazing opportunities of managing the banks resources efficiently, but we need a clear and robust architecture definition for supporting this integrated vision.

Looking forward to read your comments.
K. Regards,
Ferran.