Lesson 4 of 5
Settlement
11 min
Listen to this lesson
An internal order is a temporary home for costs. Settlement moves the costs from the order to their final receivers and credits the order by the same amount. After full settlement the order's balance is zero, and the costs show up where management and the financial statements expect them: on cost centers, on fixed assets, on G/L accounts or in margin analysis.
Settlement rule and distribution rules
Each real order has a settlement rule, made of one or more distribution rules. Each distribution rule names a receiver, a share, and a settlement type. Shares are entered as percentages, equivalence numbers or amounts; one rule cannot mix amounts with percentages or equivalence numbers. Distribution rules can change over time only by giving them different validity periods, which keeps earlier settlements explainable.
| Element | What it decides | Fleet Expo example |
|---|---|---|
| Receiver | Where the costs go | Cost center for Detroit marketing; cost center for Chicago marketing |
| Share | How much each receiver gets | 70% Detroit, 30% Chicago |
| Settlement type | Periodic (this period only) or full (everything up to the settlement period) | Periodic each month while the event runs |
| Validity | From which period the rule applies | From period 3 of the current fiscal year |
The settlement profile behind the rule
The order type points to a settlement profile. It decides whether settlement is required, optional or not allowed, which receiver types are permitted, and default settlement parameters. Behind it sit three structures: the allocation structure maps the original cost elements to settlement cost elements; the source structure lets different groups of costs go to different receivers; the PA transfer structure maps costs to value fields when settling to costing-based profitability analysis. With margin analysis, which is what Contoso uses, settlement to a market segment simply posts journal entry lines by account with the market segment attached, so no value field mapping is needed; the PA transfer structure matters only where costing-based CO-PA is still active.
Internal and external settlement
Settling to another controlling object, such as a cost center or WBS element, is internal settlement and uses settlement cost elements of category 21. Settling to an asset or a G/L account is external settlement, uses category 22, and also updates financial accounting. Every settlement creates a settlement document and a controlling document; an external settlement also creates a financial accounting document. The original costs stay visible on the order, with the settlement credit next to them.
Investment orders follow a two-step path. Periodic settlement sends capitalizable costs to an asset under construction while the work goes on; when the Chicago test bench is finished, full settlement moves the balance to the final fixed asset, where depreciation begins. Non-capitalizable costs, such as staff training on the new bench, settle to a cost center instead.
Running settlement
In SAP GUI, KO88 settles one order and KO8G settles many in one run, usually with a selection variant by order type. Always run a test run first and read the log: it lists every receiver and amount, and every order that could not be settled. Settlement runs per period; to correct a closed period you reverse the settlement in that period, fix the rule, and settle again. Settlement is normally scheduled in the period-end close after allocations that send costs to orders, and before allocations that use the receivers' totals.
- Check rulesEvery order with costs has a valid settlement rule
- Test runRead receivers, amounts and error messages
- Live runSettlement document, controlling and FI documents created
- ReviewOrder balance zero for full settlement; receivers debited
| Task | Classic SAP GUI | SAP Fiori |
|---|---|---|
| Create, change, display orders | KO01 / KO02 / KO03 | Manage Internal Orders |
| Original budget, supplement, return | KO22, KO24, KO26 | Budget tiles in the launchpad (GUI-based in many releases) |
| Actual and commitment line items | KOB1 / KOB2 | Journal entry and order line item analytics |
| Settle one order / many orders | KO88 / KO8G | Settlement scheduled as an application job |
| Reverse a settlement | Reversal in KO88 / KO8G | Reverse from the job or the settlement document |
Internal order tools in SAP S/4HANA 2025 Private Edition. GUI transactions remain available there; Public Edition uses the Fiori apps. Confirm app names for your release and roles.
What would you do?
The test run for period 6 shows that 14 marketing orders cannot be settled because the receiving cost center for Chicago was locked for primary postings last week. What should Dan's controller do before the live run?
- Settlement moves costs from the order to receivers and credits the order.
- The settlement rule holds distribution rules: receiver, share, settlement type and validity.
- The settlement profile on the order type sets allowed receivers and the structures behind settlement.
- Internal settlement uses category 21 cost elements; external settlement to assets or G/L accounts uses 22 and posts to FI.
- Always run settlement in test mode first and read the log.
Check your understanding · not graded
Lesson check
1. What is the difference between periodic and full settlement?
2. Which settlement updates financial accounting with its own FI document?
3. Where does an investment order typically settle while the work is still in progress?
4. What does the allocation structure in the settlement profile do?