Difference between Internal Order & Cost Center

1) Cost Center we used to capture only Expneses not for Revenue ( you can
capture the revenue at cost center also but that is only Static Value)
Internal Order you can capture the Expness & Revenue as well

2) After completation of the project or a event that project needs to close, At that time all the cost contained in the Order need to settle to Cost Center & Revenue needs to settle recenue cost object, such as GL Account, Sales Order or WBS etc.,


Internal Order

1. What is IO?

IO is a cost object that collects costs for the management information system and, in some instances, revenues for an organization. IOs can be used to:

■ Monitor the costs of short-term measures

■ Monitor the costs and revenues related to a specific service

■ Monitor ongoing costs

2. IOs are divided according to function into the following categories:


Overhead Orders—Overhead orders monitor subareas of indirect costs arising From short-term measures. They can also be used for detailed monitoring of Ongoing plans and actual costs independent of organizational cost center structures and business processes.

Capital Investment Orders— Capital investment orders monitor investment costs, which can be capitalized and settled to fixed assets.

Accrual Orders— Accrual orders monitor period-based accrual between expenses Posted in FI and accrual costs in CO.

Orders with Revenues— Orders with revenues monitor the costs and revenues arising from activities for partners outside the organizational boundaries, or from activities not belonging to the core business of the organization.


3. What is order type? What are the parameters it controls for IO?

An order type contains many kinds of control information important for managing orders. This includes many default values that can be called upon when you create a new order with this order type. You must assign each order to an order type that transfers specified parameters to the order.

The order type is client specific, which means that an order type can be used in all controlling areas.

The order type controls/determines the following fields for an order:

■ Order Category

■ Number Assignment

■ Control Indicator

■ CO Partner Updating

■ Order Classification

■ Commitment Management

■ Revenue Posting

■ Integrated Planning

■ Settlement Profile

■ Planning Profile

■ Budget Profile

■ Status Management


4. What is an order category?

An order category is a technical classification criterion for IOs. The order category determines the SAP application to which an order belongs, and controls the functions with which an order can be processed. The standard order categories are:

■ 01—IO (CO)

■ 02—Accrual Calculation Order (CO)

■ 03—Model Order (CO)

■ 04—CO Production Orders

■ 05—Product Cost Collector


5. What is a settlement profile?

In a settlement profile you will specify a range of control parameters that define how the order will be settling to other cost objects. You must define the settlement profile before you can enter a settlement rule for a sender. In a settlement profile, you define the following parameters:

■ Permitted settlement receivers (such as cost center or asset)

■ Default values for the settlement structure and the PA transfer structure

■ Allocation bases for defining the settlement shares (using percentages and/or equivalence numbers)

■ Maximum number of distribution rules

■ Retention period of the settlement documents

■ Document type for settlements relevant to accounting, or, more specifically, to the balance sheet

■ Definitions for the settlement of actual costs or the cost of sales

6. What is a planning profile?

A planning profile contains parameters and default values for overall planning. You can also assign an order type to the planning profile at a later date. You need planning profiles for the following planning methods:

■ Overall planning for IOs

■ Hierarchy cost planning for projects

■ Preliminary costing for production orders that do not have a quantity structure (CO production orders)

■ Cost planning for investment programs or investment measures, and for appropriation requests

■ Financial budgeting

7. What is a budget profile?

Budgeting within SAP solutions provides the user with enhanced project management capabilities not provided by IO planning. Where an IO planning is an estimate of expenditures made at the beginning of the fiscal year, a budget represents the actual approved amount of funding for a given order. Because the budgeted amount is maintained separately you have an opportunity to do plan versus budget comparisons. This profile contains parameters and default values for budgeting. You can also assign an order type to a budgeting profile at a later date.


8. What are reference orders and model orders?

A model order is not a real order in the commercial sense. It is customized with certain default values to reduce time and effort while creating real IOs. Model orders contain default values for the orders in an order type. You need to enter the model order as the reference order in the order type. When you create a new order, all of the active fields in the relevant order type are copied from the model order to the new order. Model orders make the work of entering new orders considerably easier. The data that recurs in orders from a particular order type is already defined. This reduces the likelihood of errors.

9. What is a settlement rule?

The settlement rule determines what portions of a sender’s costs are to be settled to which receiver(s). You specify this by assigning one or more distribution rules to each sender. Typically there is one distribution rule for each receiver. This is carried out at order level.

10. What is availability control in IO?

Availability control is a process where users of IOs will issue a warning when the order cost reaches a particular stage. The idea behind availability control is that the SAP solution should alert you when you are about to exceed some predefined percentage of the budgeted amount. This activity is carried out through the establishment of spending tolerance levels associated with each budget profile/controlling area relationship.

11. What is a budget manager?

A budget manager is a person who will be informed when an IO reaches a particular spending level. When you are maintaining the action setting for availability control, you are given a choice of whether to return a warning with

or without an email message. If you have chosen a warning with an email, you must have established the proper budget manager setting before the email process will work.

12. What is IO status management?

Status management is an act of determining and managing which transactions are valid for an order at any given time within its life cycle. In SAP solutions, the term life cycle refers to an order’s fluid existence, moving from one phase to another until it is closed. There are two types of status management available:

(1) General status management

(2) Order status management.

13. What settlement types are available for IO?

IO may be settled to other CO objects and/or to G/L in the following ways:

■ 100% validation

■ % settlement

■ Equivalence number

■ Amount settlement

14. Define statistical IOs.

A statistical IO can be defined to collect costs for informational purposes only and therefore needs a real cost assignment (e.g., to a cost center) at the same time. The costs posted to a statistical IO are not settled.