1. Initialization

One method of management reporting is the profitability section. It assists management in making decisions based on the various reports offered by COPA and aids in enhancing company performance by identifying the organization’s weaknesses and strengths. Sales planning is a crucial component of controlling because it enables management to forecast anticipated sales for the upcoming fiscal year using various financial modules or through trend analysis. Planning for production, raw materials, and manufacturing activities follow from this. Calculating the profit margin is the second crucial component. It shows how profitable various products are. The difference between “Sales Revenue” and “Cost of goods sold” is the profit margin. The management can decide which items to make more of in order to boost the bottom line of the company by using the gross margin calculation to determine which products are more profitable for the company.

COPA has the capability to assess the profitability at incredibly fine details, or to analyse the profitability at a variety of characteristics. For instance, COPA can be used to examine the profitability of a certain product in a particular geographic area from a single consumer. The COPA reports offer a more thorough study of profitability, allowing for the identification of weaknesses, whether they stem from a particular customer, a particular material, or a particular geographic area. I’ll be concentrating on how to use COPA to plan sales and calculate gross margins for various characteristics in this paper.

2. Planning Sales

Revenues forecasting is a part of an integrated business process that uses previous data and historical trends to estimate sales for the following fiscal year. It begins with a product’s current sales in a certain market location and projects future sales of the same product in the same region based on organisational or industry trends. For instance, if the company has seen five percentage growth on average over the previous five to seven years, we can predict that the growth will continue the following year and that the sales plan for the following year will be five percentages greater than the sales for the current year. It is up to management to determine the pattern or driver of sales growth, but SAP offers the capability to forecast sales using a standard ratio calculation. Here, we can design and maintain the standard ratio that aids in forecasting the sales plan for the following year based on either the actual data from the prior financial year or the plan data from the preceding period. One restriction of COPA is that the ratio will be applicable to all products during the full fiscal year. However, it may not be realistic to assume that all products would experience the same growth rate over the entire fiscal year because some items may have seasonal demand duration or occurrence of a specific event. It may be possible that some products are high value but are less frequent in the market, while other products are low value but are more frequently available. In order to make better decisions, growth should be based on product category or customer and it should not be applied to all products at the same rate. In order to apply the growth rate based on product category, the same plan’s prediction should be created outside of COPA and then uploaded straight into COPA for further cost of goods sold estimation. I’ll follow suit in this case study. I’ll enter the sales plan for a particular product into COPA, calculate the cost of goods sold, and then calculate the profit margin.

3. Estimating profit margin

Analysis of From a management perspective, gross profit is the most significant factor. It shows whether a product will be profitable. It is not always the case that a product with a higher selling price will also be more lucrative, and vice versa for a product with a lower selling price per unit. We must consider profitability for decision-making but not sales pricing in order to make better choices.

We may perform the profit planning in COPA directly in SAP. In order to calculate profitability, we can now add the standard cost of finished goods to sales. The process of standard cost calculation is carried out in product costing in controlling, which can be connected to COPA by connecting costing variant to costing key and/or by defining costing sheet in COPA. As a result, it is possible to relate the cost of finished goods from product costing to COPA, which may subsequently be used to calculate profit margin.

Applying the cost of finished items to revenue using the valuation method is required for calculating profitability in COPA, which results in profitability calculations for various COPA characteristics.

4. Benefits of implementing COPA for sales planning

  • COPA is a management decision-making tool that offers a variety of reports to assess an organization’s performance at a detailed characteristic level.
  • It aids in the prediction of profitability at various characteristics, such as the capacity to assess profitability in a business in a particular locale from a certain client for a particular material.
  • The minutes’ specifics aid in making better decisions.
  • The information that COPA received came from many modules, including actual sales volume from SD, cost from controlling, non-productive charges from finance, production variance from product costing, etc.

5. Configuration is necessary

5.1. Versions for Planning

Controlling -> Organization -> Maintain versions Controlling -> General (OKEQN)

Versions reflect a draw from SAP that contains actual or planned data. Versions, which are used in COPA planning, essentially reflect multiple plan possibilities. This implies that depending on the planning assumptions, we can retain various versions in COPA for planning.

Version “000” typically contains all of the actual posting from the Finance and other modules. It is generally desirable to preserve only version “000” for recording actual dates, thus if we construct a version specifically for COPA planning, we should only enable “Plan” in that version, as seen in the screen below.

We can attach a new planning version to an operational concern once it has been made. The following information must be defined before assigning to an operating concern.

  • Type of exchange rate: exchange rate The system will verify the calculation’s intent and
  • Currency type: Here, we specify the type of currency in which the data will be kept.

5.2. Creation of the condition and costing sheet

Controlling -> Profitability Analysis -> Master Data -> Valuation -> Create Conditions and Costing Sheets -> Create Condition Types and Costing Sheets (8KEV)

To compute various cost or revenue components, COPA allows us to establish conditions and costing sheets. It aids in calculating or forecasting figures based on several other factors, such as “Sales Quantity,” “Sales Revenue,” or “Cost of Materials,” etc., that are crucial for examining contribution margin. These values are unknown at the time the original document was posted; for instance, the values that can be determined from the condition and costing sheet include the cash discount, sales commissions, freight expenses, etc.

I am not putting together a condition or costing sheet for the purposes of this essay. To take into account every cost component of a product cost from cost estimates stored in Product Cost Controlling, I will be using “Valuation using Material Cost Estimate.”

5.3. Setup of Valuation Using Material Cost Estimate

Controlling -> Profitability Analysis -> Master Data -> Valuation -> Set Up Valuation Using Material Cost Estimate -> Define Access to Standard Cost Estimates (KE40)

By adding the cost of items manufactured to the material cost estimate from Product Cost Controlling, we can use COPA to determine the value of a sales document. We must first define “Costing key” in order to accomplish this. A costing key must be connected to a costing variant, which in controlling represents a material cost estimate.

We must define the following terms while defining a costing key:

a. Which Product Cost Planning cost estimate should the system read? (by linking Costing variant to Costing key)

b. When should the cost estimate be taken into account?

Once the costing key has been established, it can be connected to a specific product or material type. If we don’t assign a costing key to any particular material type, the same costing key will be utilised for all materials with cost estimates. Then, the same costing key will be taken into consideration for that specific material or product.

I’ve paired pricing key “BBB” with costing variant “PPC1” in the screen above. When doing a cost estimate in COPA, the costing key BBB will check to see if a standard cost estimate has been provided for the item. If one has not, the system will display the message “No Cost estimate detected.”

5.4. Identify and allocate a Valuation Strategy

Master Data -> Valuation -> Valuation Strategies -> Define and Assign Valuation Strategy -> Controlling -> Profitability Analysis -> Valuation -> Valuation Strategies -> (KE4U)

The process of determining the value of value fields in COPA is represented by the valuation strategy. Based on the rule outlined in the valuation approach, it determines the various values. In this case study, I’m defining the valuation strategy “BBB” for the annual sales budget. For this strategy, I’ve turned on “material cost estimate,” which will treat sales volume as a quantity field, and I’ve given it the plan version “GGG” for both manual and automatic planning.

5.5 Assign Value Fields:

Controlling -> Profitability Analysis -> Master Data -> Valuation -> Set up valuation using material cost estimate -> Assign Value fields (KE4R)

Here, we can assign the cost component structure’s individual value fields of operational concern. This assignment is required because a value field in the costing-based COPA represents groups of cost elements. We must assign each cost component to its appropriate value field in order to obtain the cost from the cost estimate using the costing key; otherwise, the data in COPA will not be comparable, and we will experience errors while attempting to perform valuation in COPA.

5.6. Assign Quantity Fields:

Controlling -> Profitability Analysis -> Planning -> First Steps -> Assign Quantity Fields (KE4M)

Sales and distribution both employ quantity fields, which COPA’s value file must be allocated to. Here, we must assign each value field that we wish to transfer from the SD module to COPA. Using the sales unit or the stock keeping unit, we can transfer billing quantity COPA. This assignment will be valid for both the COPA plan and actual data. The system uses this information to automatically calculate the sales quantity needed to manually plan the sales of each individual product.

5.7. First-step Planning

The structure for each company code or sales organisation that must be employed for the purpose of sales and revenue planning is defined at this stage. (Acquisition: KEPM)

a. Establishing Planning Levels

A planning level is essentially a synthesis of various planning packages. It is the culmination of COPA’s planning process. Planning packages must be defined at the planning level. At the planning level, planning cannot be carried out. Here, we must assign the characteristic that will be used for planning sales and income.

b. Specify the Planning Packages

In essence, a planning level’s sub-part is represented by the planning package. All of the qualities are defined in the planning package. For instance, the planning package needs to specify for which company code and for which time we wish to do the sales planning. Only planning packages, not planning level, would implement planning methodologies.

c. Outline Planning Techniques

The various COPA methods offered for the purpose of a sales plan are represented by planning methods. It comprises the main techniques, such as:

  • Entering planning data allows us to define manual sales plan data.
  • Display planning data: This feature shows the manually entered sales plan data from the planning package.
  • Forecasting the sales plan using real data from the most recent financial year or plan data from a specified time period is helpful.
  • Valuation: To perform a cost estimate, the valuation technique needs to be defined.
  • Deleting the plan data entered in planning packages is helpful.

Other planning software programmes are available. But for this article, submit planning information first, followed by valuation.

d. Provide planning information

I have a sales plan for one material in enter planning data approach for testing purposes. You may see the specifics from below. The planning in this instance has been kept in mind for factors like Company area, Company code, Period, Customer, Product, and Profit centre. We can examine the profitability of the company at any set of chosen features after finishing the appraisal in COPA.

e. Valuation

Assign the valuation technique developed for planning version “GGG” in valuation. Here, we are using the cost estimate from the costing key, which is connected to the costing option. Execute the value after assigning a valuation strategy.

Implementing valuation

If you didn’t get an error notice, valuation was finished, and the profit margin was determined.

6. Report KE30:

Now, the COPA report allows users to view the sales forecast and profit margin. similar to KE24 or KE30. Cross-checking the cost of manufactured goods using product costing (CK13N). I’ve constructed a report in COPA to serve as a means of displaying the outcome and allowing for cross-verification. The profitability of the material is shown in the screen shot below, and the cost of the material is estimated using CK13N.

7. The Verdict

We must first plan the Sales figures at the many characteristics provided in the Planning package in order to use the functionality of COPA to analyse profitability at numerous characteristics. COPA provides the functionality to analyse the profit at extremely minute details. For instance, COPA can be used to examine the profitability of a certain product in a particular geographic area from a single consumer. The COPA reports offer a more thorough study of profitability, allowing for the identification of weaknesses, whether they stem from a particular customer, a particular material, or a particular geographic area. I have attempted to demonstrate how we can accomplish sales planning and profit margin in COPA with the aid of this paper. To demonstrate how the scenario functions, an example for one material has been provided here. This can be utilised for better decision-making and can be applied to any materials.