Define a Company | Create company code | Assign company code to company | Define Business Area | Define credit control area | Assign company code to credit control area
Hierarchy in SAP:
COMPANY is the highest level in the organizational unit. Under COMPANY comes the ‘Company codes’ and under ‘Company Codes’ we define Branches/Functional Areas. Here is an example:
‘Adidas Global Germany’ is a Company headquartered in Germany. Therefore in SAP “Adidas Global Germany” would be the ‘COMPANY’
Let’s assume this company has three subsidiary companies with different warehouses, different offices and at different locations perhaps.
- Adidas footwear, 2. Adidas Apparels and 3. Adidas Sports Materials
In our example these three subsidiaries in SAP become ‘Company codes’. You can create as many Company Codes as you want. Entries are posted under company codes.
The first step in creating a company in SAP is to ‘define a COMPANY’:
1. Define a Company:
- SPRO > SAP Ref IMG >Enterprise Structure > Definition > Financial Accounting > Define Company
- Click on ‘New Entries’
- Enter 6 Character (Alphanumeric) ID for the new company (in our eg: ADIDAS)
- Enter the company name “Adidas Global Germany”
- Detailed information: Street, PO Box, Postal Code, City, Country (IN), Language Key (EN), Currency (USD)
2. Create Company Code:
There are two ways to create a company code:
- By copying an existing Company Code: This is a ready to work configuration for a specific country. Alternatively, you can also manually create a company and copy-save it as a different company and start working with it.
- By creating a Company Code manually: Here we configure each setting manually to fit our special needs.
Steps for Manual creation of Company Code:
- SPRO > SAP IMG > Enterprise Structure > Definition > Financial Accounting > Edit, Copy, Delete Company Code
- Double click on ‘Edit Company code data’ and select ‘New Entries’
- Enter 4 Character company code (in our example: ADFW), Company name, city, country, currency and language
- Update Address and SAVE
Note 1: Company code ADFW in this case stands for Adidas Footwear line
Note 2: In this example I have defined ‘IN’ (India) as the country and ‘USD’ as the currency. While practicing SAP chose the ‘Country’ field wisely as SAP has few default parameters kept aside for each country. You might face problem if you chose a country for which you have little or no knowledge on its accounting standards.
Note 3: The currency that you chose here will be your base/default currency. No matter in which currency you post entries you will still see your reports in your base currency by default.
Steps for Copying an existing Company Code settings:
- SPRO > IMG > Definition > Financial Accounting > Edit, Copy, delete, check company code > Copy, delete, check company code: TC: ECO1
- Click on the Copy As icon > From company (ADFW) > To company (ADSM)
- Copy All GL account = YES
- Currency = INR and ENTER
Note 1: Company code ADSM in this case is for Adidas Sports Materials (our second Company Code).
Note 2: In SAP you can either navigate through standard menus or you can use the Transaction Code (TC) to get straight to where you want to go. To copy existing company code you can simply type ECO1 in the command prompt to reach to the configuration area.
Once we copy configuration of one company to another, we now change company address:
- Double click on the newly created company Id
- Here, change Company Name and additional data
- Click on ‘Address Button’ and update address for the newly copied company
- SAVE! – New company code created successfully
3. Assign Company code To Company
- SPRO > IMG > Enterprise Structure > Assignment> Financial Accounting > Assign Company code to Company >> TC: OX16
- Click on POSITION
- Enter Company Code (ADFW) and press enter key
- Select/type company name (ADIDAS) and SAVE
4. Create/Define ‘Business Area’
In SAP two or more Company Codes can share the same Business Areas. Financial statements can be created for each business area separately. These reports are mainly used for internal purposes by area bosses to know their area performance. Business Areas are not assigned to ‘company codes’.
- SPRO > IMg > Enterprise structure > Definition > Financial Accounting > Define business area : TC: OX03
- New Entries
- Enter 4 chrt ID for each Business Areas: Eg: EURO, AFRC, ASIA, AUST, AMRC
5. Define Credit Control Area
Credit Control is used to check credit limits to customers. One or more Company codes can use the same Credit Control area. This is defined at the Company/Client level and not at the Company code level.
- SPRO > IMG > Enterprise Structure > Definition > Financial Accounting > Define Credit Control Area: TC: OB45
- Click on New Entries
- Enter 4 chrt Credit Control Area ID (Eg: CCAR), Currency (INR), Credit limit (9999999) and SAVE
That is the maximum credit limit a customer can get. We can either assign this rule to all of ADIDAS Company Codes or assign different rules to different Company Codes.
6. Assign Company Code to Credit Control Area
- SPRO > IMG > Enterprise Structure > Assignment > Assign Company code to credit control area
- Enter Company Code: ADFW Press OK
- Assign Credit control Id (CCAR) and SAVE
- One credit control area can be assigned to n number of company codes
- One company code can only have one credit control area
- All Company codes assigned to a Controlling area must use the same operating chart of accounts
- Company code under same controlling area must use the same fiscal year variant