Purpose of Defining Internal Orders

An example would help us understand this much better.
Lets say in an organization there are various events such as trade fairs, training seminars, which occur during the year. Now lets assume for a second that these Trade fairs are organized by the Marketing cost center of the organization. Therefore in this case marketing cost center is responsible for all the trade fairs costs. All these trade fairs costs are posted to the marketing cost centers. Now if the management wants an analysis of the cost incurred for each of the trade fair organized by the marketing cost center how would the marketing manager get this piece of information across to them? The cost center report would not give this piece of info

Now this is where Internal Order steps in .If you go through all cost center reports this information is not readily available since all the costs are posted to the cost center.

SAP, therefore provides the facility of using internal orders which comes in real handy in such situations. In the above scenario the controlling department would then need to create an internal order for each of the trade fair organized. The cost incurred for each of the trade fair will be posted to the internal orders during the month. At the month end, these costs which are collected in the internal order will be settled from these orders to the marketing cost center. Thus the controlling person is now in a position to analyze the cost for each of the trade fair separately. Thus internal order is used to monitor costs for short term events, activities. It helps in providing more information than that is provided on the cost centers. It can be widely used for various purposes .

6 replies
  1. dav says:

    another example would be like this: During the trade fair, if someone like the manager paid for the rental fees (or partially paid), you can not record it as company’s cost and post to the relevant cost center. Instead, you can record (post) this cost paid by the manager in internal order as statistical. So during the month end, you can check all the figures. Or, if the payment is reimbursed by the company, then you can make settlement from previous internal order to cost center.
    :) may be not so correct, only my opinion. take it carefully.

  2. eddai says:

    @dav nice to see a visitor’s contributions here:-) thanks for all your additional infos. btw, dropped you an email maybe in ur spam folder. check it plz.
    Cheers~

  3. Dmitri Colebatch says:

    I’ve come across this whilst looking for information on internal orders and have found this a very clear example. However, it raises some concern on a change that our SAP-FI guys are putting in place (at my request) involving internal orders.

    I’m a cost centre manager, so a user rather than a SAP expert. I also have no SAP training. So if it sounds like I’m saying something stupid, feel free to point it out (o: I’m also a former Java developer and am responsible for all Java development in our organisation, so I should be able to understand this stuff, but I don’t have the knowledge.

    We use internal orders to represent line items within our cost centres. Is this a reasonable thing to do, or is there a better solution to the problem of putting line items in a cost centre? The thing that raises my eye is the “settling of internal orders to cost centres”, I would have thought that a cost centre would be made up of line items, but internal orders don’t seem to sum to the cost centre, ditto forecasts against internal orders don’t sum to the cost centre forecast (my understanding).

    Any advice from you guys on how a cost centre should be broken up in the SAP-FI world?

    Cheers,
    Dim

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