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Organizational Structure In SAP

The fundamental purpose of any ERP system like SAP is to integrate the various business functions like finance, HR, logistics, etc. so as to facilitate the flow of information between them. This helps the entire business to function as a single coherent and cohesive unit and allows the senior management to understand the impact of a decision on the business as a whole.

Any successful ERP system must allow the business processes to be efficiently mapped into it. SAP facilitates this mapping by providing standard organizational elements like client, company code, fiscal year variant, etc. All these organizational elements with their own significant roles are configured and integrated to represent the actual business processes.


The client is the highest level in the SAP organizational structure hierarchy. SAP stores master data as well as transactional data in tables in a database. Every client has its own set of master records and tables i.e. every client has its own set of data in the database. If changes are made to the data in one client, then the data in other clients is not affected.


SAP best business practices suggest the creation of at least the following three clients in any SAP landscape:

  • CUSTOMIZING AND DEVELOPMENT CLIENT: The customizing and development client is required for checking any configuration changes or ABAP Workbench developments for errors before they are implemented in the production client. This is because if some wrong configurations are implemented in the production client, then it can hamper day to day operations and even cause loss of important data. This process is called unit testing.
  • QUALITY ASSURANCE CLIENT: All the modules in SAP are tightly integrated and interdependent. When any changes are made to the configuration or to the ABAP code the cross module effect of these changes needs to be checked extensively for errors. This process of carrying out cross module testing is called integration testing and is carried out in the quality assurance client.
  • PRODUCTION CLIENT: The production client is where the actual business transactions are recorded. Any changes in configuration must first be tested on the development and quality assurance client to make sure they are free from errors and do not cause system instability. Once these checks are done, the changes can be made in the actual production client.

The three clients therefore result in three separate sets of tables within the SAP database. Once the configurations or ABAP developments are found to be error free in the development client, they are moved via transports to the quality assurance client for further checks.

Once the integration checks are also error free the changes are moved via transports to the production client. This ensures that configuration or ABAP coding errors do no effect the productive system. Besides these three clients other clients like the Sandbox or the training client can be created as per the requirements.


The company code represents a legal entity. Every company which is registered in a country needs to produce the financial statements like balance sheet, profit and loss statement at the end of the accounting cycle. In SAP company code represents the smallest organizational unit for which a complete set of financial statements can be drawn.

The company code is a required organizational element. At least one company code has to be set up before the financial accounting component of SAP can be implemented. Whenever any transaction is posted in the SAP system, a company code is to be entered. At the end of the accounting period all the transactions for a company code are collectively used to prepare the financial statements.


A company is an optional organizational element which can be used to combine together the financial statements of multiple companies into one statement. A company is not necessary to set up and is needed only if transactions of multiple companies need to be consolidated.



The process of entering a transaction in SAP is called posting. Postings can happen any time during the year. Different countries use different accounting cycles for closing and year end activities. The fiscal year variant defines the number of posting periods and the number of special periods.

It also defines whether the fiscal year is calendar dependent or not. A maximum of 16 posting periods in all are allowed in SAP. Having different posting periods allows the transactions for different time periods to be separated from each other. For e.g. a company may have 12 normal posting periods from January to December and 4 special posting periods.

Then all the transactions made in January will be entered with the posting period set to 1. This way monthly transactions can be separated from each other.


Every screen of SAP offers various fields into which data can be entered. Every field can have its status set to optional, required, and suppressed or display. These fields are combined together and collectively called field status groups.

A collection of field status groups is called the field status variant. Field status variant is defined at the client level. A field status variant is assigned to a company code. Many company codes can have the same field status variant.


Chart of accounts is a list of the G/L accounts that may be used by one or more company codes. There are three different types of chart of accounts: operating chart of accounts, country chart of accounts, and group chart of accounts.

The chart of accounts is also defined at the client level. This allows more than one company code to use the same chart of accounts.



All the above mentioned organizational elements are integrated into the SAP organizational structure which can be used to map business processes. Integration is carried out by assigning one organizational element to another organizational element. The assignments are as follows:

  • All organizational elements are placed under the client. By definition client is at the highest level in the organizational hierarchy.
  • Company is an optional element which can be created under the client and can be used to club together multiple company codes.
  • The company code is the central element in the organizational structure hierarchy and is created either under a company or under the client directly.
  • The company code is assigned to a chart of accounts. The chart of accounts contains the list of all the accounts which can be used while entering transactions for the company code.
  • The company code is assigned to the fiscal year variant. The fiscal year variant definition can be used while entering the transactions to the company code.
  • The company code is assigned to the field status variant. The field status variant decides which fields will be required, optional, suppressed or in display mode while entering any transactions for the company code.

About the Author:

Pete has been working with SAP technologies for over 10 years. He started out as an ABAP consultant and then moved on to BW where he has worked many different clients covering a wide variety of industries. "I love introducing SAP technology (especially BI) to new clients and showing them how they can go from zero to hero within their business in super fast time". Contact me on twitter @PeterMoxon

  1. Atanu Banerjee

    So when you keep client at top – should I assume that “ABC Paper Mills” and “ABC Metals” employees login to same production client (say 400) ? Thanks.

      • Atanu Banerjee

        How silly that would be Pete, that complete different businesses – they will see each other and share master data ? Thanks.

        • It actually works really well.
          The master data also uses other fields to tie records together, eg. company code, org unit etc… Client is just the top level that help separate master data and transactional data. It also allows for cross-company report.
          It is also used to separate ‘copies’ of systems. What I mean is, when there are several copies of a system running on the hardware. Some companies have a test system running on the same hardware as the production system. Or… multiple development systems running on the same hardware.

  2. Here’s the thing… SAP systems can be setup any way you want. I’ve worked at lots of companies who have used one single system and others that use many systems. Some have all modules on 1 system per country per company. Some have one system per module per country, cross country and more.

    SAP systems often seem really complicated even to experienced consultants and it is because of the flexibility built into the software. Basically, what ever the customer wants, they can do. Even when it seems a dumb idea to others 🙂

    • Atanu Banerjee

      Well – I am concentrating on SAP landscape consolidation – lot of buzz going around for single instance vs multiple instance and if I go further and be futuristic then single vs multiple tenancy – ultimately cloud-enabling ECC. So if I may ask you, could you please tell from your experience considering P&G (i) Detergent business will be very different from their (ii) Health Care business – do they go for single instance multiple productive clients: (i) & (ii) or two separate instances altogether, which case database will be different. And if I assume they go for second landscape (separate instances), could they still be able to do FICO reporting at company level (P&G) ? Thanks in advance for your time.