Company Code, Sales Organization in SAP SD

In SAP SD (Sales and Distribution), the configuration of Company Code and Sales Organization is crucial for managing sales processes. The Company Code is the smallest organizational unit in SAP that represents a legal entity within a company. The Sales Organization represents the sales and distribution structure within a company. These two elements are fundamental for managing the sales order process and integrating with other SAP modules.

What is Company Code in SAP SD?

The Company Code is an organizational unit in SAP that is used to represent a legal entity, such as a company or branch. It is the highest level of the organizational structure where financial accounting is managed. In SAP SD, the Company Code plays a significant role in linking the sales and distribution process with financial accounting.

Each Company Code has its own set of financial data, such as balance sheets and profit and loss statements. In the context of SAP SD, the Company Code is used to manage transactions like billing, payment processing, and revenue recognition.

What is Sales Organization in SAP SD?

The Sales Organization is a key organizational unit in SAP SD that is responsible for selling and distributing goods or services. It is responsible for sales order processing, pricing, and customer service. Each Sales Organization can be linked to one or more Company Codes, and it helps structure the sales process based on regions, product lines, or other business considerations.

Sales Organizations are used to manage various business tasks like order processing, delivery, and billing, and they allow businesses to handle different pricing strategies, customer groups, and sales territories.

Real-World Example: Configuring Company Code and Sales Organization in SAP SD

Let’s walk through a real-world example to understand how Company Code and Sales Organization are configured and how they work together in the SAP SD module.

Step 1: Defining a Company Code in SAP SD

To define a Company Code in SAP SD, you need to follow these steps:

1. Enter Transaction Code OX02: On the SAP Easy Access screen, type "OX02" in the command field and press Enter. This transaction code is used for defining the Company Code.
2. Define Company Code: In the next screen, click on "New Entries" to define a new Company Code. Enter the Company Code (e.g., "1000" for the main company) and a description (e.g., "Main Company").
3. Enter Company Details: Enter additional information such as the Company Name, Country, and City. This data is important for legal and financial reporting.
4. Assign Company Code to Company: After defining the Company Code, assign it to a Company by entering the company name in the appropriate field.
5. Save the Company Code: After entering the required data, save the Company Code configuration by clicking the "Save" button. The Company Code will now be available for use in SAP SD.

Step 2: Defining a Sales Organization in SAP SD

Next, we define a Sales Organization. The Sales Organization is responsible for managing sales processes for a specific region, product, or market. To define a Sales Organization, follow these steps:

1. Enter Transaction Code OX01: On the SAP Easy Access screen, type "OX01" in the command field and press Enter. This transaction code is used for defining the Sales Organization.
2. Define Sales Organization: Click on "New Entries" to create a new Sales Organization. Enter the Sales Organization code (e.g., "SA01" for the main sales organization) and a description (e.g., "Main Sales Org").
3. Assign Company Code to Sales Organization: In the configuration, assign the Company Code (e.g., "1000") to the Sales Organization (e.g., "SA01"). This links the sales and financial processes.
4. Assign Distribution Channel: Assign a distribution channel to the Sales Organization. A distribution channel represents the way products reach the customer (e.g., "01" for retail). This step is important for managing different sales routes.
5. Save the Sales Organization: After entering the required data, click the "Save" button to complete the configuration. The Sales Organization is now defined and linked to the Company Code.

Step 3: Assigning Sales Organization to Company Code

Once both the Company Code and Sales Organization are defined, the next step is to assign the Sales Organization to the Company Code. This establishes the relationship between financial accounting and sales processes.

1. Enter Transaction Code OX19: On the SAP Easy Access screen, type "OX19" in the command field and press Enter. This transaction code allows you to assign a Sales Organization to a Company Code.
2. Assign Sales Organization: In the configuration screen, select the Company Code (e.g., "1000") and the Sales Organization (e.g., "SA01").
3. Save the Assignment: After completing the assignment, click the "Save" button to link the Sales Organization to the Company Code. This ensures that sales activities are linked to financial transactions.

How Company Code and Sales Organization Work Together in SAP SD

In the SAP SD module, the Company Code and Sales Organization work together to ensure that the sales process is properly integrated with financial accounting. Here’s how they work together:

• Sales Order Creation: When a sales order is created, the Sales Organization determines the pricing, shipping, and customer service settings, while the Company Code manages financial transactions, such as revenue recognition and billing.
• Billing and Invoicing: The Sales Organization generates billing documents based on sales orders. These billing documents are linked to the Company Code for financial processing in SAP FI (Financial Accounting).
• Revenue and Accounting: Sales revenue is posted to the appropriate accounts in SAP FI based on the Company Code, ensuring proper accounting for sales transactions.

Conclusion

The Company Code and Sales Organization are key organizational units in SAP SD that help define how sales processes are structured and how they integrate with financial accounting. Configuring these elements correctly is essential for efficient sales order processing, pricing, billing, and financial reporting. Understanding the relationship between Company Code and Sales Organization is fundamental to mastering SAP SD and managing business operations effectively.

In this tutorial, we walked through the steps of defining and assigning a Company Code and Sales Organization in SAP SD. By following these steps, you can set up a robust sales and distribution structure that integrates seamlessly with your company’s financial operations.