Business and Functional Areas in SAP FICO

Business Area

Business area in SAP FICO is nothing but an organizational area of the FI submodule. It is mainly used for external and internal reporting purposes and is derived with the help of master data assignments, balance sheets, profits and loss account statements.

How to define the Business Areas in SAP FICO?

Business Areas are used to differentiate transactions that come from different lines of business in a company.

Example

There is a big company XYZ which runs multiple businesses. Let us assume it has three different domains like manufacturing, marketing, and sales.

Now you have two options −

• First is to create different company codes.
• And the other better option is to create each of these business lines into the business areas.

The benefits of using Business Areas, in this case, are as follows −

• You can use these business areas if other company codes require the same areas.
• It is easy to configure if you use a Business Area, as you just need to attach to the company code and the other details in that business area will get attached automatically.
• By using Business Areas in controlling, you can create Profit and Loss statement, Balance Sheet, etc. for business areas. Hence it is used for management accounting in a few companies.

Note − Business areas are used more in Controlling as compared to Finance Accounting.

How to create a new Business Area in SAP FI?

• Expand Enterprise Structure as mentioned in the previous topic → Definition → Financial Accounting → Define Business Area → Execute → Go to New Entries.
• Enter the 4 digit Business Area code and save the configuration.

Function Areas

The functional area in the SAP FICO is effectively used to organize the cost, sales and accounting of a business in the SAP FI ERP platform. Every functional area such as Production, Sales, Distribution, Administration and Human Resources are defined within this.

Function Areas in finance accounting are used to define the expenses in a company according to individual function units. The most common Functional Areas are −

• Manufacturing
• Sales and Distribution
• Production
• Administration

How to Define a Functional area in SAP FI?

You can define a Functional Area using the T-code FM_FUNCTION (Earlier it was OKBD, but this is obsolete). It will open a new window.

Click on Create Functional Area as shown below and a new window will open.