FICO Configuration Series – Part 9
Define Business Areas (click here for short version with screenshots)
Enterprise Structure >> Maintain Structure >> Financial Accounting >> Maintain Business Area
Transaction code: OX03
The function of a business area is to create balance sheets and profit and loss statements below the company code level. Some common uses of business are to produce divisional financial statements or SEC segment-level reporting. It is important to note that business area functionality can be duplicated using profit center accounting. The decision to use or not to use business areas should be made early on in the design phase of your project. Many new projects are leaning away from business areas and towards profit centers, but ultimately, the decision is an individual project decision based on what fits in the overall system design of the project implementation. Some of the deciding factors are the need to report business lines across company codes, the need for full balance sheets at the divisional or business line level, as well as the cost and the benefits of business areas versus profit centers.
Business areas are independent of any other FI enterprise structure. Therefore, business areas are designed to cut across company codes. A common mistake that some companies make is to force one-to-one relationship defeats the entire purpose of business areas. The purpose of business areas is to be able to report on similar activities that occur across company codes. There is no residual benefit to configuring business areas in that manner. As a matter of fact, it often causes a lot of reconciliation problems because business areas are not linked to company codes in standard configuration.
In this screen enter Alphanumeric identifier for the business (up to 4 char) are and description
Saks Apparel has decided to use three business areas. The CFO has determined that he would like a cross-company balance sheet for both the apparel and textile industries in which Saks Apparel conducts business activity. In order to better track non-value-added administrative assets and expenses, the services business area was created. The new shared services department that provides centralized administration functions for the organization is being implemented as part of the business process reengineering effort portion of the SAP project implementation. It is important to remember that the idea is for all company codes to share all the business process reengineering effort portion of the SAP project implementation. It is important to remember that the idea is for all company codes to share all the business areas. The one exception is that the accounting department wants to ensure that postings one particular company code are only posted to one particular business area.
Although Business Areas are not linked to any other FI Enterprise Structures, they can be linked to other organizational elements in the system. Some of them are listed below:
Why is this linked to the Business Area?
Plant/Valuation Area & Division
Very useful to link Business area to plant/valuation area and division because single plants usually produce products for one Business Area
Plant & Division
Similar to previous. The decision whether to link or not is taken by the MM team
In sales organizations which sell a single grouping of products, business areas are linked to sales areas to ensure revenue postings are made to correct business area
Sometimes, it makes sense to map business areas to cost center
In the company code, if the Business Area Balance Sheet indicator is enabled, business area becomes a required field fixed asset class module
Consolidation Business Areas
Consolidate business areas for reporting purpose