Investments are a key factor in company management. In times of sanctions and supply shortages. Although, investments are associated with risks, they are crucial for smooth and long-term production. The SAP IM module could offer a secure and flexible solution.
SAP Investment Management is valuable support for investment controlling
Investments are the key to the targeted conversion of capital into assets and are therefore a central aspect of company management. Investment management involves planning, implementation and control of investment decisions. This also includes expenditure on property, plant and equipment, maintenance, research, development and employee development. For manufacturing companies, investments in the procurement and maintenance of production facilities are imperative. Bad investments can have financial consequences that threaten the existence of a company.
However, in order to keep track of investment objects, set priorities and respond to changes in the global economy, many companies use software such as SAP IM investment management.
SAP-Investment Management
The SAP IM module supports users at every step of planning, implementing and controlling company investments. The module’s services include the operational and financial assessment of the investment, checking the feasibility of investment projects, providing the methodological and technical infrastructure for investment support and providing information for reporting purposes to company management.
Investment programs
Investment controlling is often faced with the challenge of optimally implementing the concept of planning and budgeting. In order to present the planned and budgeted costs clearly, the SAP IM module offers the option of setting up a program structure. This forms the basis for optimal and integrated investment planning right up to the activation of the fixed assets, including annual financial statements
Program structure
Program structures can be defined independently of organizational units such as business areas, plants, etc. For this purpose, various structural levels are set up. The first structural level, also called the top position, is created in the first step and all other program positions are created afterwards.
The following rule of thumb applies to the structure of the program structure: A simple program structure enables efficient planning and reporting.
Planning and Budgeting
In most cases, a limited amount of capital is available to implement an investment project or an investment program. As a result, it is necessary to allocate budgets to the various projects, which is called budgeting. The main goal of budgeting is to ensure that investment projects are prioritized in such a way that they can make the greatest contribution to achieving the company’s goals.
There are essentially two approaches to budgeting investment projects. The first approach is based on a fixed budget that has already been defined in advance. As a result, projects must be prioritized according to the available financial resources.
The second approach aims to optimize the investment program and the investment budget simultaneously. This approach takes into account the interactions and dependencies between investments and financing. This makes it possible to allocate funds more flexibly, which in turn makes it possible to increase the overall profitability of the investment portfolio. The appropriate approach is selected taking into account the specific circumstances and goals of the company.
Both approaches have advantages and disadvantages, and that is why the decision should be based on a careful analysis of the company’s financial situation and strategic objectives.
Planning
Planning can take place at different levels, for example at the program position or at the corresponding measure request. When choosing the right object at the time of planning, the following aspects should be considered:
- Planning with reference to a specific measure -> WBS elements or CO internal orders
- Planning without reference to a measure -> IM program position
- Planning with reference to a measure -> measure request
However, a planning mix is also conceivable.
The “small solution”
Planning with reference to a specific measure is simplified investment management based on a leaner architecture which is often referred to as the “small solution”. It focuses on basic functions that are sufficient for smaller organizations or less complex investment projects. For simple cost monitoring, the measures and projects are mapped in the Controlling module (CO). Cost centres and internal orders are used for cost control. The internal orders initially serve as cost collectors.
Budgeting
After the program structure has been set up and planning has been carried out on the relevant object, budgeting can take place. The budget is distributed from top to bottom, whereby the planned values can be corrected if necessary. The budget values can of course be maintained accordingly. Investment management offers you a transparent overview of all planned and already used budgets.
Interesting facts
It is beneficial to familiarize yourself with the approval year. In practice, investments are often planned over several years. In order to make the best use of the planning concept, the approval year is used. The approval year is clearly assigned to an investment program by name and assignment. This means that the values that were approved in this or other years can be reflected in the program.
Various scenarios are plausible for this:
- The values of a measure that have been planned for an approval year can be returned to the program and used at a later date.
- It is also possible to retain the budget of the measure and distribute the budget within the measure at a later date.
Conclusion
Investments are crucial for every company. Effective investment controlling is therefore essential. SAP Investment Management (IM) makes a significant contribution here, as the entire process can be mapped in a fully integrated manner. There are two approaches to budgeting available: a fixed budget or simultaneous optimization of the program and budget. The choice depends on the company’s goals and conditions. SAP Investment Management enables an optimal comparison of planning and budget, so that investments can be strategically managed, and the company’s long-term success secured.
The SAP IM module is an essential support for companies in investment management. It enables the entire process to be mapped in a fully integrated manner. Depending on the company’s goals and conditions, either the fixed budgeting approach or the simultaneous optimization of the program and budget can be selected.
