What is the best practice for structuring WBS elements?

Work Breakdown Structure (WBS) elements are used for financial planning and control of projects. WBS elements function as primary cost collectors in a similar way to internal orders but are contained and related within a single project definition. The hierarchical nature of WBS elements facilitates effective activity and cost breakdown. Whilst network activities provide the most granular work allocation and schedule tracking control for project execution, WBS elements provide the primary financial cost control. Budgets can be assigned to higher level nodes of the WBS structure, and thereby enforce cost discipline at the appropriate level. The total project budget is first distributed to the top-level node of the project hierarchy from the investment program. It can then be further distributed to primary WBS elements.

To facilitate work-in-progress valuation and end-of-project asset valuation, the best practices is to align your WBS structure at level 3 with your target fixed assets. For example, the WBS structure for a new site office, may include WBS elements for land, building, and equipment. If lower level WBS elements are required for more granular project management and cost control, they can be defined at level 4, and budget or plans distributed down accordingly. Many organizations have a standardized coding system for their WBS structure relating to primary asset categories at which they wish to track capital work in progress and planned depreciation. This is facilitated in SAP by the default assignment of an investment profile to the elements to automate the asset-under-construction accounting.