Written by Tsujita — Paddy & Water Inc. / Supply Chain

Project System — Standard Functions, FI/CO Integration, and the Percentage-of-Completion Method

Chapter 1 What Is SAP PS?

SAP PS (Project System) is the project management module within SAP S/4HANA. It is used across a wide range of industries that must manage both schedule and cost, including construction, plant engineering, IT system development, and make-to-order manufacturing.

A defining characteristic of PS is that it breaks down and manages projects using a hierarchical structure called the WBS (Work Breakdown Structure). Budget, actual cost, and sales revenue can be aggregated at each WBS element, and the module is tightly integrated with FI, CO, MM, PP, and SD.

1-1 Industries and Business Processes Covered by PS

Industry	Representative Projects	Role of PS
Construction & Civil Engineering	Bridges, buildings, road construction	Construction cost management and percentage-of-completion support
Plant Engineering	Factory construction, equipment installation	Integration with material procurement and production orders
IT System Development	Core system implementation	Phase management and personnel cost aggregation
Shipbuilding & Aircraft	Manufacture of made-to-order products	Integration with production-lot (serial number) management and parts procurement
Public Works	Infrastructure development	Subsidy management, budget management, and settlement reporting

1-2 Basic Configuration Objects of PS

Object	Description	Main Transaction
Project Definition	Header information for the entire project	CJ01/CJ20N
WBS Element	Work unit created by hierarchically dividing the project	CJ01/CJ20N
Network	Scheduler that manages the sequence and duration of work (activities)	CN21/CJ20N
Activity	Individual work unit within a network	CJ20N
Milestone	Key completion event (e.g., billing trigger)	CJ20N

It is common practice to design WBS elements so that their functions are divided among “billing elements,” “cost-accrual elements,” and “planning elements.” In particular, the billing element (Account Assignment Element) functions as the posting target for FI/SD.

Automatic Journal Entry Generation, Inventory Movement, and Workflow

PS consistently controls the generation of FI journal entries across the entire lifecycle — from the incurrence of project costs through revenue recognition and asset capitalization. Monthly WIP calculation, CJ88 settlement processing, and milestone billing automatically generate FI journal entries, reflecting project profit and loss in the financial statements in real time.

PS Process	Automatically Generated FI Journal Entry	Related Tx
Cost Incurrence (procurement, labor cost, travel expenses, etc.)	Expense account ← accounts payable / accrued expenses; cost posted to WBS (aggregated on the CO side)	MIRO/FB60/CAT2
Monthly WIP Calculation (CJKA/CJ9BS)	Work in progress (WIP account) ← cost account; automatically posted to FI at month-end (KKAF)	KKA2N / KKAF
Milestone Achieved → Automatic Billing	SD invoice automatically created (VF01 integration); accounts receivable ← revenue journal entry automatically generated	VF04 / milestone settings
Project Settlement (CJ88)	Costs settled and posted to fixed assets (AA), cost centers, or product costs (final transfer of project costs)	CJ88 / settlement rule configuration
Project Completion (TECO/CLSD)	Settlement entry for remaining WIP; finalization of fixed-asset capitalization	CJ02 / KO88

▌ Workflow: Budget Approval, Status Management, and Milestones

・Budget overrun detection workflow: When the actual cost of a WBS element approaches the approved budget (e.g., reaching 90%), an automatic warning notification is sent to the PMO. ・Additional budget approval: When a budget overrun is anticipated, a budget revision request is raised from PS (CJ30/CJ36) and routed through a workflow of supervisor approval → management approval. ・Project status change workflow: Internal controls can be configured to require PMO leader approval when the status changes (e.g., OPEN → TECO). ・Milestone achievement approval: For milestones that require customer approval, the workflow automatically controls the sequence of achievement confirmation → customer sign-off → SD billing trigger.

Chapter 2 WBS Design and Project Management

2-1 Basic Philosophy of WBS Design

The WBS is the skeleton that makes visible “when, where, and how much it will cost.” The quality of its design determines the overall quality of project management.

• Level 1: The entire project (e.g., A-PROJ)

• Level 2: Phase / work section (e.g., A-PROJ-01 Basic Design, A-PROJ-02 Detailed Design)

• Level 3: Deliverable / work type (e.g., A-PROJ-01-01 Creation of the requirements document)

• Level 4 (optional): Work package

[Design Point] By assigning the billing, cost, and planning attributes to different WBS levels, highly accurate plan-vs-actual management becomes possible. It is common practice to set the billing element at Level 2 and perform cost aggregation at Level 3.

2-2 Project Schedule Management

By combining networks with WBS elements, schedule management equivalent to a Gantt chart can be achieved. When resources (work centers, personnel) are assigned to an activity on the network, costs are automatically posted to the WBS.

Function	Description	Use Case
Earliest/Latest Dates	Forward and backward pass calculation using the CPM method	Identifying the critical path
Baseline Schedule	Approved planned schedule	Analyzing deviation from actuals
Forecast	Replanning of future processes	Projecting the outcome when a process is delayed
Milestone	Contractually significant completion date	Trigger for billing and settlement

2-3 Project Budget Management

There are three types of budgets for a WBS element: the “original budget,” the “current budget,” and the “supplementary budget.” Availability checks in the event of a budget overrun are realized through PS-FI integration.

CJ30 :

Project Budget Registration

CJ32 :

Supplementary Budget

CJ40 :

Cost Planning (Bottom-Up Buildup)

S_ALR_87013558 :

Plan-Actual Variance Report

Chapter 3 PS-FI Integration

3-1 Integration Structure Between PS and FI

In SAP PS, costs and revenues are posted to FI (Financial Accounting) G/L accounts via WBS elements. In S/4HANA, CO and FI are integrated through the Universal Journal (the ACDOCA table), so postings to a WBS element are reflected in real time in the G/L account and profit center as well.

PS-Side Object	FI-Side Posting	Posting Timing
WBS Element (Cost)	Debited to expense account (G/L)	At purchase order, production order confirmation, or time entry
WBS Element (Revenue)	Credited to revenue account (G/L)	At invoice issuance (VF01)
Milestone	Trigger for invoice creation	When milestone achievement is confirmed
Project Settlement (CJ88)	WIP → expense transfer	At monthly and period-end closing

[Universal Journal] In S/4HANA, FI and CO are integrated into the ACDOCA table, so postings to a WBS element are simultaneously reflected in the G/L account, profit center, and cost center. Note that this mechanism differs from CO-PA postings in the ECC era.

3-2 Revenue Recognition and the Percentage-of-Completion Method (POC)

Under Japan’s revenue recognition accounting standard (equivalent to ASC 606/IFRS 15), performance obligations satisfied over a period of time require “revenue recognition based on progress.” In the construction and engineering industries, this is applied as the percentage-of-completion method.

In SAP, this is implemented by combining the “Revenue Recognition” function with the DIP (Dynamic Item Processor).

3-2-1 Percentage-of-Completion Process Flow

Step	SAP Process	Transaction
① Sales Order Entry	Register the sales order (specify the WBS element as the account assignment)	VA01
② Progress Measurement	Calculation of revenue earned to date (cost-to-cost method or physical progress method)	CN47/external input
③ DIP Configuration	Calculate the billable amount using the Dynamic Item Processor	DP90
④ Invoice Creation	Project invoice (milestone or progress billing)	VF01
⑤ Revenue Recognition Posting	Allocate and post revenue across accounting periods	VF44/VF47
⑥ Monthly Closing	Transfer the WIP balance via CJ88 (cost absorption)	CJ88

3-2-2 Role of the DIP (Dynamic Item Processor)

The DIP is an engine that reads the actual costs aggregated at the WBS element and automatically calculates the billable amount (= revenue). Under the cost-to-cost method, it calculates “(cumulative actual cost) ÷ (budgeted cost to complete) × contract amount.”

DP90 :

Creation of Cost-Reimbursable Project Invoices (via DIP)

VF01 :

Invoice Issuance

VF44 :

Execution of Revenue Recognition

⚠ If the DIP profile settings (on the SD module side) and the cost-element group settings of the WBS element are not aligned, the billable amount will not be calculated correctly. Detailed testing is required during implementation.

3-3 Milestone Billing

Milestone billing, as opposed to the percentage-of-completion method, issues invoices in conjunction with contractually defined completion events (milestones). A milestone reference is set in the billing plan of the sales order (VA01).

Contract Condition	SAP Setting	Behavior
30% Billing at Commencement	Milestone 1: Commencement confirmation	Milestone achieved → immediately billable via VF01
40% at Interim Acceptance	Milestone 2: Interim acceptance	Same as above
30% at Delivery Completion	Milestone 3: Final acceptance	Same as above

CJ20N :

Set Milestones on the WBS Element

VA01/VA02 :

Set the Milestone Reference in the Sales Order’s Billing Plan

VF01 :

Issue the Invoice After the Milestone Is Achieved

Chapter 4 PS-CO Integration

4-1 Relationship Between PS and CO

CO contains objects such as CCA (Cost Center Accounting), internal orders, and CO-PA (Profit Center Accounting), but the WBS element in PS functions as a “cost-collector object” equivalent to a CO internal order.

CO Object	Characteristics	Usage Guidance
Cost Center	Fixed, ongoing departmental cost aggregation	Departmental management of personnel and indirect costs
Internal Order	Temporary, one-off cost aggregation	Repair work, small-scale projects
WBS Element	Hierarchical, long-term project cost aggregation	Large-scale projects; projects subject to the percentage-of-completion method
Profit Center	Profit-and-loss management by business unit	Aggregated alongside all other objects

[Usage Criteria] Projects with a short duration and small budget (as a guideline: less than six months and under 10 million yen) are typically managed using internal orders, while larger projects generally use WBS elements. However, a WBS element is mandatory for projects subject to the percentage-of-completion method.

4-2 Cost Allocation from Cost Center to WBS

The labor cost of engineers working on a project is normally aggregated in a cost center first. It is then posted to the WBS element through activity confirmation (time entry) or allocation (KSV5/KSU5).

• Method 1 Activity confirmation (time entry): CN25/CATS → posted to the WBS element as hours worked × activity-type rate

• Method 2 Allocation cycle: KSU5/KSV5 → bulk allocation from cost center to WBS element on a monthly basis

• Method 3 Manual transfer: KB11N → posted individually

CATS :

Attendance and Time Entry (Time Sheet)

CN25 :

Project Activity Confirmation (Time Entry)

KSV5 :

Execution of the Allocation Cycle (Cost Center → WBS/Internal Order)

4-3 Planned Cost and EVM (Earned Value Management)

SAP PS supports Earned Value Management (EVM) and can calculate the following metrics as standard.

Metric	Formula	Meaning
PV (Planned Value)	Planned cost per the baseline schedule	How much cost was originally supposed to be incurred
EV (Earned Value)	Planned cost of the work completed	How much value has been produced
AC (Actual Cost)	Actual cost of the WBS element	How much has actually been spent
SPI (Schedule Performance Index)	EV÷PV	Below 1.0 = behind schedule
CPI (Cost Performance Index)	EV÷AC	Below 1.0 = over budget

CN41 :

Project Information System (Cost Analysis)

S_ALR_87013532 :

Project Plan-vs-Actual Comparison Report

Chapter 5 Project Settlement

5-1 Monthly Closing Process

In project monthly closing, the work-in-progress (cost) aggregated at the WBS element is reflected in the income statement. This monthly closing process is especially important for projects under the percentage-of-completion method.

Step	Processing Content	Transaction
① Cost Aggregation Check	Verify the current month’s actual WBS costs	CJ20N/CN41
② Progress Rate Entry (Optional)	Enter the physical progress rate	CN47
③ Revenue Recognition Execution	Allocate revenue and WIP across accounting periods	VF44
④ WBS Settlement (CJ88)	Transfer WIP to expense (cost of completed construction)	CJ88
⑤ Balance Verification	Check project balances on the balance sheet and P&L	S_ALR series reports

5-2 Details of CJ88 (Settlement Processing)

CJ88 is the “period-end settlement” transaction for a project; it transfers (or defers) the WIP balance accumulated at the WBS element to an expense account. Under the percentage-of-completion method, this must be consistent with revenue recognition.

CJ88 :

Execution of WBS Element Settlement

[Settlement Rule] The behavior of CJ88 is controlled by the “settlement profile” and the “settlement rule.” The transfer target (G/L account, cost center, profit center, etc.) is defined in the settlement rule. At project completion, a “final settlement” is executed to bring the WIP balance to zero.

⚠ If any WBS elements remain unsettled, the WIP balance will continue to remain on the balance sheet. Be sure to include CJ88 in the monthly and period-end closing checklist.

5-3 Project Completion and Asset Capitalization

For construction and capital investment projects, the asset must be capitalized as a fixed asset upon completion. This is processed using PS’s AuC (Asset under Construction) function, following the flow of WBS element → AuC → fixed asset.

AIAB :

Allocation to AuC (Asset under Construction)

AIBU :

Transfer from AuC to the Final Fixed Asset

AS91 :

Creation of the Fixed Asset Master Record

Chapter 6 End-to-End Business Flow

6-1 Make-to-Order Projects (Percentage-of-Completion Applied)

Phase	Business Process	Main Transaction	Related Module
Project Initiation	WBS creation, budget registration	CJ01/CJ30	PS
Sales Order	Sales order registration, WBS assignment	VA01	SD
Procurement	Purchase requisition → order → goods receipt	ME51N/ME21N/MIGO	MM
Execution	Network activity confirmation, time entry	CN25/CATS	PS/CO
Progress Reporting	Milestone achievement, progress rate entry	CJ20N/CN47	PS
Billing	Invoice creation and issuance via DIP	DP90/VF01	SD
Revenue Recognition	Allocate revenue across accounting periods	VF44	FI/PS
Monthly Closing	WBS settlement via CJ88	CJ88	PS/FI
Project Completion	Final settlement, fixed asset transfer	CJ88/AIAB/AIBU	PS/FI/AA

6-2 Internal Projects (Investment and Cost Management)

For internal IT investment or capital investment projects, no sales revenue is generated, and the primary objectives are cost management and budget management. The percentage-of-completion method is not required, but asset capitalization using AuC may be necessary.

Phase	Business Process	Transaction
Budget Planning	WBS creation, cost planning	CJ01/CJ40
Material Procurement	Purchase order, goods receipt	ME21N/MIGO
Subcontracting	Subcontract order, service entry	ME21N/MIGO/ML81N
Monthly Plan-vs-Actual Management	Review cost reports	CN41/S_ALR_87013532
Completion & Capitalization	AuC transfer, fixed asset capitalization	AIAB/AIBU
Project Completion	Final settlement	CJ88

Chapter 7 Key PS Configuration (SPRO)

7-1 Project Profile

The project profile is a template applied when creating a WBS and defines the accounting parameters, planning parameters, and settlement parameters.

OPS1 :

Project Profile Configuration

OPS2 :

Network Profile Configuration

OPSA :

WBS Element Profile Configuration

7-2 Settlement Profile and Settlement Rule

OKO7 :

7-2 Settlement Profile and Settlement Rule

7-2 Settlement Profile and Settlement Rule

7-2 Settlement Profile and Settlement Rule

7-2 Settlement Profile and Settlement Rule

7-2 Settlement Profile and Settlement Rule

7-2 Settlement Profile and Settlement Rule

7-2 Settlement Profile and Settlement Rule

7-2 Settlement Profile and Settlement Rule

Settlement Profile Configuration

OKO6 :

Configuration of the Transfer-Target Structure

[Design Point] The settlement profile defines which G/L account or cost center the unsettled balance of a WBS element is transferred to. It is common to use different profiles for percentage-of-completion projects versus internal investment projects.

7-3 Revenue Recognition Settings

OKG1 :

7-3 Revenue Recognition Settings

7-3 Revenue Recognition Settings

7-3 Revenue Recognition Settings

7-3 Revenue Recognition Settings

7-3 Revenue Recognition Settings

7-3 Revenue Recognition Settings

7-3 Revenue Recognition Settings

7-3 Revenue Recognition Settings

Revenue Recognition Method Configuration

OKG8 :

Results Analysis Version Configuration

[POC Method Setting] When “cost-based (POC)” is selected as the revenue recognition method, revenue is calculated as (actual cost ÷ budgeted cost) × order value. The pairing of the selected method and the results analysis version must be configured correctly.

7-4 Number Ranges

CJ82 :

7-4 Number Ranges

7-4 Number Ranges

7-4 Number Ranges

7-4 Number Ranges

7-4 Number Ranges

7-4 Number Ranges

7-4 Number Ranges

7-4 Number Ranges

Project Definition Number Range

CN42 :

Network Number Range

7-5 Status Management

WBS elements, networks, and activities each have a system status (CRTD/REL/TECO/CLSD) that controls whether postings and changes are permitted.

Status	Meaning	What Is Possible in This State
CRTD (Created)	Initial creation state	Master data editing only
REL (Released)	Postable state	Cost and revenue postings are possible
TECO (Technically Complete)	Technical completion	No new postings allowed; settlement processing is possible
CLSD (Closed)	Final closure	No postings or changes of any kind are allowed

CJ20N :

Status Change (Release, Completion, etc.)

⚠ If the status is not REL, purchase requisitions, production orders, and cost postings cannot be processed. Be sure to perform the release process before starting the project.

Chapter 8 Key Reports and Monitoring

CN41 :

Chapter 8 Key Reports and Monitoring

Chapter 8 Key Reports and Monitoring

Chapter 8 Key Reports and Monitoring

Chapter 8 Key Reports and Monitoring

Chapter 8 Key Reports and Monitoring

Chapter 8 Key Reports and Monitoring

Chapter 8 Key Reports and Monitoring

Chapter 8 Key Reports and Monitoring

Project Information System (Cost and Schedule Analysis)

S_ALR_87013532 :

Project: Plan / Actual / Variance

S_ALR_87013558 :

Plan-vs-Actual Comparison by WBS Element

CJ2B :

Project Planning Board (Gantt Chart)

KKA3 :

Results Analysis (Revenue Recognition) Report

CJI3 :

Project Actual Line-Item Report

S_ALR_87013014 :

Project Revenue Report

Appendix Key SAP PS Transaction Codes

Category	T-Code	Description
Project Management	CJ01	Create project definition
CJ20N	Project Builder (integrated WBS and network editing)
CJ30	Project budget registration
CJ40	Project cost planning
CJ88	Project settlement (Settlement)
CJ2B	Project visual board
Network	CN21	Create network
CN25	Activity confirmation (time entry)
CN47	Progress rate entry
Revenue Recognition	DP90	DIP invoice creation
VF44	Execute revenue recognition
Reports	CN41	Project Information System
CJI3	Project line-item report
KKA3	Results analysis report
Capitalization	AIAB	AuC allocation
AIBU	Fixed asset transfer

What You Can Do with SAP PS — Key Project Management Functions and Operations

SAP PS (Project System) is a module that integrates project planning, execution, cost management, and revenue recognition. Through budget management via the WBS (Work Breakdown Structure), schedule management via network activities, milestone billing, and more, it supports project-based management for make-to-order manufacturers and engineering companies.

▌ ① Budget and Cost Management via WBS

・Set a budget for each WBS element (CJ30). Budget overruns are automatically checked and flagged when actual costs are posted. ・Commitment management: Future costs are reflected in the budget as soon as a purchase order or purchase requisition is created. ・Budget transfer: Reallocation of budget between WBS elements is managed via transaction CJ37. ・Cost reports: Display planned, actual, and remaining budget by project and WBS element in real time.

▌ ② Schedule Management via Network Activities

・Define work (activities) in the network and set predecessor/successor relationships (dependencies). ・Automatic calculation of earliest and latest start dates (critical path analysis). ・Assign resources (personnel, machinery) and check workload. ・Gantt chart (CN21): Visualize the project schedule and update it directly on screen.

▌ ③ Milestone Billing and Revenue Recognition

・Set a billing trigger on a milestone: an SD invoice is automatically created when the process step is completed. ・Progress-based billing (POC: Percentage of Completion): revenue is recognized according to the progress rate. ・IFRS 15 compliant: allocation of the transaction price by performance obligation and control over the timing of revenue recognition. ・Project profit and loss: revenue, cost, and profit are aggregated in real time at the WBS level.