Skip to main content

Organizational Structure in SAP

Organizational structure in SAP contains the elements necessary to manage and control the business. These organizational elements represent the legal, physical or managerial structure of a company. How we use SAP depends on underlying organizational structure.

The organizational structure provides SAP hierarchy, which is the backbone of SAP system. SAP hierarchy is linked to every transaction and master data element.

We will take a look at important organizational elements.

Chart of Accounts

The Chart of Accounts contains the list of all General Ledger account master records.

Depending on legal and reporting requirements, multiple Charts of Accounts can be defined.

Chart of Accounts can have 3 different functions

  1. Operating Chart of Accounts – Main COA used for daily activities and is a link between FI and CO module.

  2. Group chart of accounts – used to provide report for a corporate group

  3. Country-specific chart of accounts – used to meet country specific legal requirements

Master data at the Chart of Accounts level includes the account name and number, maintenance language and control indicators specifying account type (Balance Sheet or Profit and Loss).

Block indicators can be set at the Chart of Accounts level to prevent the creation of additional master records.

Company Code

Each Company Code represents an independent accounting unit. Financial statements required by law are prepared at the Company Code level. The business transactions relevant to FI are entered at company code level.

Each Company Code has a country and language key and a local currency indicator.

Company Code is required for all financial transactions.

Controlling Area

Controlling area is the highest organizational unit in Controlling.

Controlling Areas can be considered as internal structure of an organization. They contain the operational results from the associated company codes. That is why all operational postings within a company code must be assigned to a controlling object (e.g., cost center, Internal Order etc.). Controlling Area contains a hierarchy of controlling objects to collect and report operational information (e.g., Cost Center hierarchy, Profit Center hierarchy). Multiple hierarchies or groups can be created to support various reporting requirements.

When multiple Company Codes are assigned to a Controlling Area, all Company Codes must use the same Operational Chart of Accounts.

Operating Concern

Operating Concern Represents the highest reporting level in Profitability Analysis.

Operating concern contains a multi-dimensional data structure to allow for complex analysis of operational results. For example. we may want to analyze results by product, customer, geographical region. By examining costs against revenue, operating profit can be calculated for individual market segments.

Operating concern cane be considered enterprise structure from sales point of view.

Cost Center

Cost Center represents smallest area of responsibility within a company’s overall organizational structure.

Cost Centers collect direct and indirect charges from financial postings or internal allocations.Only costs are collected in Cost Centers; Revenues are not collected.

Cosct Center must be assigned to a standard hierarchy structure. You can define alternative hierarchy structures to support various reporting requirements.

Each Cost Center is assigned to a Company Code, and Profit Center.

Profit Center

Profit Center is a business unit which monitors both costs and revenue and behaves as an independent operating unit. Profit Centers can be viewed as companies within a company.

Profit Centers determine internal Profit and Loss for specific areas of responsibility. Profit Centers can divide a company code or multiple company codes according to criteria such as functions, regions or products. Balance sheet items can also be assigned to profit center to enable analysis of key figures like return on investment.

Planned data can created at profit Center level.

Purchasing Organization

Purchasing Organization is a business unit which can divide a company according to purchasing requirements.

Purchasing organization is the unit responsible for purchasing material and external services from vendors.

Purchasing Organization can take different forms

  • Corporate-group-wide –One purchasing organization responsible for all company codes

  • Company-specific – One purchasing organization responsible for only one company code

  • Plant-specific – One purchasing organization responsible for only one plant

Purchasing organization is assigned to Company Code.


Plant is a business unit which divide company from production, procurement and material planning standpoint.

Plant can have different roles like manufacturing plant, maintenance plant, retail or wholesale site.

Plant is assigned to Purchasing Organization.

Storage Location

Storage Location is business unit which allows differentiation of material stocks within a plant.

Storage location is hierarchically located between plant and Warehouse number.

Sales Area

Sales Area is a combination of Sales Organization, Division and distribution channel.

Sales Organization

Sales Organization is a business unit which can divide a company from sales point of view.

Sales Organization is legally responsible for all aspects of selling e.g. product guarantees. It is responsible for selling products and services.The Sales Organization must be specified in all sales documents.

Sales Organization is always assigned to one company code.


Popular posts from this blog

14 Free Keyword Research Tools for Perfect Keyword Ideas (Updated)

Finding right keywords for your article is the key first step if you want to perform well in search engine. These free keyword research tools will help you find the perfect keyword/phrase for your next article.

26 Proven Work at Home Business Ideas You Can Run Part Time

If you are looking for work at home business ideas, then this list can help you. All of these can be done as part-time business, so you don’t have to leave your job until you are confident of making full time income from your Work at home business.

Enterprise Digital Transformation: Top 10 Posts from Month Ending 7-Jan-2018

Is Bitcoin revolution real or fad? What did 2017 brought to India in terms of Bitcoin and Blockchain adoption? How did Air Canada analyze and revamped customer service? What is growth rate of digital transformation spending? What can companies learn from GE’s digital transformation journey? – We look at answers to these questions and much more in the monthly coverage of enterprise digital transformation posts.