Is this a Good Practice?
The Most Common Profitability Ratios Consist:-
A) Margin Ratios (profit margin, operating profit margin, net profit margin, cash flow margin, EBIT, EBITDA, EBITDAR, NOPAT, operating expense ratio, and overhead ratio).
B) Return Ratios (return on assets, return on equity, cash return on assets, return on debt, return on retained earnings, return on revenue, risk-adjusted return, return on invested capital, and return on capital employed).
The above ratios make sense when your SAP Modules are correctly configured, maintained, and your reporting is set in real-time to reflect core operations from your business.
The biggest challenge comes around Costing. Rational Product cost is very important for any management accountant. Having a granular approach to cost is the key to profitability for any business. This cost requires a new dimension to investigate.
Imagine a scenario where you have a detailed batch level cost on your screen and in real-time and how impactful this can be in your decision making enabling you to put checks and controls.
Important FICO Areas in SAP
1. Financial Accounting
Your day-to-day business transaction collects and stores data in a way that satisfies the business requirements. The real-time position of financials can be accessed. Configuration of this area by experienced consultants leads to a better predictable system.
Experienced consultants also help you in hand-holding for operational information to assist strategic decision-making within the organization.
2. Asset Accounting
Having a fixed asset accounting process a must for your business irrespective of your geography and industry sector.
Life-cycle management of your fixed assets right from Purchase to Scrapping involves proven and thoughtful process setting from a trusted expert who understands the nuances not just in terms of Finance & accounts but also the supply chain so as to deliver a successful system with the right configurations.
3. Accounts Receivable
4. Overhead Controlling
Having precise control of your product cost can make your profit decision-making smarter. You can specify standards that enable you to control cost and evaluate your actions.
A system where you can make decisions based on analysis of target vs variance to enable board-level decision making.
Imagine a system where you can monitor the cost continuously on a granular level ex. Shop floor level or on the batch level can better lead you to a transparent view in Pricing and Profitability.
Total Cost = Overhead Cost + Direct Cost
In most business scenarios, having control of direct cost is the biggest challenge due to variances in its nature. Hence having better control will lead to better costing and profitability.
Challenges like should we produce our own or outsource? Pricing for Special orders or Export orders can be easily managed by better using your SAP FI-CO Practice.
Are you looking for any FI-CO consultation? Connect with our experts to discuss. Let us know what are your challenges.