SAP PRESS :: Migrating to SAP S/4HANA® - Landscape Transformation

12.5 Transformation to Central Finance

While Chapter 3, Section 3.2.1, only introduced Central Finance , this section focuses on the technical components and other important aspects of introducing the solution. Introducing Central Finance is a variant of a landscape transformation. Therefore, SAP LT plays a central role as a tool for setting up Central Finance as well. Figure 12.12 shows a more comprehensive overview of this scenario.

To operate Central Finance, you must, in simple terms, carry out two steps:

Set up the SAP Landscape Transformation (SAP LT) Replication Server

Set up the Central Finance system

Figure 12.12 Central Finance: Architecture and System Landscape

The SAP LT Server establishes the connection between the local systems. Because the SAP LT Replication Server works at the database level, you can also integrate non-SAP systems. Using database access, no adaptations are necessary at the application server level. The SAP LT Replication Server itself can either be set up as a separate standalone system or can be installed on one of your source systems or on the Central Finance system.

Where you set up SAP LT Replication Server depends mainly on the utilization of the relevant systems to date and on the expected data throughput. The more complex the landscape, the more likely a separate instance for the SAP LT Replication Server should be set up.

The Central Finance system is operated on the basis of SAP S/4HANA as a central financial system. Data from the connected systems is loaded into Central Finance, and among other things, the master data is harmonized to ensure a uniform view. This harmonization can either be carried out manually or, if SAP Master Data Governance (SAP MDG ) is available in the landscape, called from the SAP MDG tool. Using SAP MDG is optional.

You can also install the new Central Finance instance and the necessary SAP LT Replication Server in SAP HANA Enterprise Cloud (SAP HEC), which is a good alternative if you do not want to integrate a new instance of Central Finance into your existing landscape.

12.5.1 Implementing SAP S/4HANA Central Finance

In this section, we’ll look at the most important steps to implement Central Finance. First, we’ll look at the technical settings required to set up the various system connections and also examine the business logic with which you can convert general ledger entries. Converting these entries is an important step towards setting up Central Finance because you’ll need to know how to assign these postings to the proper general ledger account and the account assignments (cost center, order, etc.) and how to derive other report dimensions, such as profit center, function area, etc., using these account assignments. These settings and the settings for the initial data load using the SAP LT Replication Server are covered centrally by a Central Finance -specific Implementation Guide (IMG).

The IMG shown in Figure 12.13 comes from a current development system and, therefore, may appear differently depending on the release version you use.

Figure 12.13 IMG for Central Finance

A major step is configuring the system connections between all of the systems involved. Although these connections are created for an entire system, you can begin with a few selected company codes. You’ll thus get a feel for the potential of the new system without having to worry about your entire, complex enterprise landscape.

The first step in implementing Central Finance is to activate the FINS_CFIN (Central Finance) business function. In parallel, you’ll also activate two further business functions, FIN_GL_ERR_CORR and FIN_GL_ERR_CORR_SUSP, so you can perform preliminary postings and error corrections later on. These two functions ensure that all general ledger entries that originate from the local systems, including general ledger accounts and account assignments not yet created in the central system, are parked as work items on an error list.

You’ll begin the technical definition of the system landscape by creating an RFC (Remote Function Call) connection. Entries in the Universal Journal in Central Finance are technically linked to documents in your local systems. You’ll also need the RFC connections to select data from your local systems during the first data migration and to create the master data mappings to Central Finance.

Because these two tasks will probably be carried out by different users (the initial and more technical data migration is often in the hands of a system administrator, whereas an accountant or analyst is responsible for the functional document links), you may want to establish different RFC connections to differentiate between the two tasks according to user type.

You’ll also have to define all connected systems as logical systems . The idea behind a logical system is to clearly define every system-client combination within your system landscape; so if we look at a document’s header, we can clearly see which combination of system and client was the source of the document.

Finally, you’ll assign the logical system to the Central Finance client and the RFC destination of your logical system. To make these assignments, select the RFC Destination for Source System IMG entry and maintain the logical connections, as shown in Figure 12.14.

Figure 12.14 Configuration of RFC Connections

Preparations must also be made on the local system. Verify that the Data Migration Server (DMIS) add-on (Release 2011_1_700 or higher) is installed on each source and target system (Support Package (SP) 8 is recommended) and that you have implemented SAP Note 2124481 (SAP LT SP08, Correction 3) on the add-on.

If your organization does not yet implement SP 8 or higher, you’ll have to implement some code changes in your local systems to ensure that you can prepare the general ledger entries for the transfer to Central Finance.

[»] Additional Information and Collective Note

As these systems are continuously being further developed, SAP Collective Note 2148893 provides a good starting point for current information. This Note is updated on a regular basis, so that you are informed if further improvements are added.

As mentioned earlier, the SAP LT Replication Server is a central component of this Central Finance scenario, which connects the various systems. SAP LT Replication Server is basically a server that collects the messages from the local system and sends them to the central system. Setting up the complete SAP LT Replication Server for other scenarios can be a large undertaking.

Figure 12.15 Defining Countries in Central Finance

You can copy these settings from your local systems unless you want to create additional countries in Central Finance for evaluation purposes—if, for example, data has been added from non-SAP sources. Make sure that you are informed of the specific legal requirements for these countries to avoid losing any country-specific information in centralized reporting. Such information should instead be mapped in local reporting.

Next, you’ll specify which of your companies should be mapped out in Central Finance. This step is particularly important if business transactions occur between these companies, for example, if a company within your group supplies goods to another.

These business relationships are mapped in Central Finance and must be maintained. However, if you do not create a company that is involved in general transactions, data from the source will not be transferred, and the process will be fully presented.

You can define companies by following the IMG menu path Company Structure • Definition • Financial Accounting • Define Company. You will also need to provide the companies with the appropriate company codes using Company Structure • Map • Financial Accounting • Company Code—Assign Company, as shown in Figure 12.16.

Figure 12.16 Assigning a Company Code to a Company

Now looking at the company codes, you’ll not only accept the type of attributes required by reporting solutions but also the settings that affect how entries are updated in the Universal Journal. You’ll have to consider the following settings in Central Finance:

Chart of Accounts : If you want to use a central chart of accounts, you should enter the chart of accounts in this field. You should ask whether you need also need a local chart of accounts for local reporting purposes and whether these local requirements should report to the central chart of accounts.

Fiscal Year Variant: The fiscal year variant determines the number of fiscal year periods and the special periods you want to work with. Remember that, if you are consolidating into a single controlling area, you’ll also have to settle a fiscal year variant for all entities that will be part of this controlling area. If you have countries with different fiscal year structures, you’ll also have to create a separate ledger with the corresponding fiscal year variants for these countries.

These global parameters for the relevant company code can be found by following the IMG menu path Financial Accounting (new) • Basic Settings Financial Accounting (new) • Global Parameters for the Company Code • Check and Add Global Parameters. The example shown in Figure 12.17 illustrates how the chart of accounts INT provides the option of specifying a country chart of accounts and the fiscal year variant K4.

Figure 12.17 Sample Global Data of a Company Code

Within individual company codes, you can define ledgers. If you are already using the new general ledger, you should be familiar with the ledger concept to separate postings based on different accounting standards, such as IFRS (International Financial Reporting Standards) and US-GAAP (United States Generally Accepted Accounting Principles). In this context, notice that no settings are available to update profit centers, segments, business partners, functional areas, etc. in the general ledger settings. These settings are outdated in Central Finance because the Universal Journal contains all of these fields by default. Figure 12.18 provides an overview of the maintenance of the ledgers.

Figure 12.18 Overview for Ledger Maintenance

When you define a ledger, you should consider the relevant currencies you use. The local currency for your company code is probably the one you are already using in your local system for this company code. But you should consider introducing a global currency or group currency if you have not already done so.

You can also make some changes to your nonlocal currencies, if you operate internationally. You can set up currencies in ledgers by following the IMG menu path Financial Accounting (new) • Basic Settings Financial Accounting (new) • Ledger • Define Settings for Ledger and Currency Types. By default, a company code currency and a group currency are used for controlling purposes. Figure 12.19 shows some possible currency types.

Figure 12.19 Overview of Possible Currency Types

Next, you’ll define your controlling area. We have deliberately written “controlling area” in the singular because your life will be much easier if you can consolidate all of your data into one controlling area in Central Finance. As with the company code, these are the critical settings:

Currency (please note that the currency type for the group currency is now part of the settings)
Chart of accounts (again including accounts and cost elements)
Fiscal year variant

You must select the cross-company code cost accounting option because your controlling area normally comprises several company codes. To define your controlling area, follow the IMG menu path Company Structure • Definition • Controlling • Maintain Controlling Area. Figure 12.20 shows sample data for maintaining a controlling area.

In addition to these basic financial settings, the controlling area determines which entities you can use for reports in Central Finance. Here you’ll define which account assignments are active in your Universal Journal (cost center, order, etc.). The cost center, order management, process-based cost accounting, and cost-effectiveness analysis components are often selected. Profit center accounting is not activated as a separate account assignment because it is covered in the Universal Journal.

Figure 12.20 Sample Data for Maintaining a Controlling Area

Next, you’ll define your operating concern. To use the full potential of the Universal Journal, you’ll have to activate account-based profitability analysis . For primary cost and revenues, account-based profitability analysis ensures that all of the sales postings, revenue reductions, and costs of goods sold included in accounting documents can be automatically posted to a combination of CO-PA characteristics, such as product, customer, and region. These settings for maintaining the operating concern and the characteristics are found under the familiar controlling menu items, not under Financial Accounting (New).

Finally, you’ll have to map your organizational units . The global parameters for country companies, company codes, etc., introduced previously are usually managed using the value mappings that you created as described earlier in this section. If you are working in the SAP Standard, you normally won’t have to adjust these settings for assignment entities, as shown in Figure 12.21. However, you’ll have to add entities if you want to map your own fields or fields from an external system in Central Finance. When you’ve completed these settings, the main organizational structures for Central Finance are available.

Figure 12.21 Overview of Assignment Entities

The next section looks at how to maintain the master data used in financial documents.

12.5.3 Master Data

This section looks at the required master data. In Central Finance, you’ll have to differentiate between long-term master data (such as accounts and profit centers for which an established master data governance process is usually available) and dynamic master data (for example, orders and projects that are created on demand). For master data uploaded to or updated in Central Finance at regular intervals, such as customers, suppliers, materials, and accounts, you’ll carry out a mapping based on the key fields.

Introducing Central Finance can also trigger a cleansing of your master data . If you already use SAP Master Data Governance (SAP MDG), you’ve already cleansed your data and are thus at an advantage because Central Finance can read these assignments. Central Finance uses some mapping tables from SAP MDG.

Even if you aren’t working with SAP MDG yet, you can prepare the way for later implementation because you can use the master data mapping tables in Central Finance without a separate SAP MDG license.

Alternatively, when preparing your master data, you can also use your data warehouse. Your organization probably harmonized your master data in the data warehouse, and now, you have predefined transformations from when you transferred data to the data warehouse. The entities listed in this section represent the focus of reporting here. You must ensure that all the field content used in reporting is also available in Central Finance as master data, including master data for control procedures, payment terms, etc.

Let’s start with creating accounts in the general ledger. This section does not get into the specific functions of the general ledger and does not look at all accounts types in detail. What is essential, however, is that all locally used accounts also exist in Central Finance. If these accounts do not exist, the relevant data records are parked in an error list.

One special consideration is the primary cost elements . In Central Finance, the two master data types—accounts and cost elements—are merged into one. As a result, a separate data record exists—not for the cost element, but for the account only. The following lists the most important types of cost elements (see also Figure 12.22) for which you’ll require accounts in Central Finance. We’ll also explain how to determine the relevant data for each cost element:

01: Primary costs/Cost-Reducing Revenues
Check your balance of accounts and the settings for the controlling area to identify all accounts/cost elements for wages and salaries, depreciation of plant and equipment, material movements, etc.

11: Revenues
Look at the balance of accounts again to identify all accounts/cost elements for sales both to external customers as well as to internal business partners.

12: Sales Deduction
Compare your balance of accounts to the conditions of sale applied when you issue bills to your customers.

22: External Settlement
Determine where you have investment costs that can be billed with plant and equipment in construction or where production orders are billed to the finished goods warehouse.

Figure 12.22 Relevant Primary Cost Elements for Central Finance

Secondary cost elements are also created as accounts. Experienced SAP users may find it strange to create accounts for secondary cost elements, but let’s look at the various types of cost elements you’ll need in Central Finance more closely. Start by providing a list of cost elements that you currently use (using Transaction KA23 , Cost Elements: Master Data Report). After gaining an understanding of the process in which every cost element is updated, you can then decide whether you want to keep the same granularity of the cost elements for the process in Central Finance or whether you would prefer a different mapping.

Postings for the following types of cost elements (as shown in Figure 12.22) can currently be transferred to Central Finance:

21: Internal Settlement
Check the settlement structures in your local system to determine which cost elements are used to send the costs of orders and projects to other recipients in Controlling.
41: Overhead Rates
Check the costing sheets in your local system to determine which cost elements are used to send the costs of cost centers to orders and projects in Controlling.
42: Assessment
Check the assessment cycles in your local system to determine which cost elements are used to send the costs of cost centers to other cost centers in Controlling.
43: Internal Activity Allocation
Prepare a list of activity types and business processes from your local system to determine which cost elements are used to send the costs of cost centers to orders and projects in Controlling.

Furthermore, you’ll have to define profit centers and cost centers . Profit centers don’t have major requirements, except that in Central Finance the profit center exists with segments before profit center billing can be carried out. The cost center, in turn, is, in addition to an account, the one master data that is almost certainly accepted to Central Finance.

If you want to change to a single controlling area to simplify reporting, identifying which cost centers belong to which company code can be a challenge. Therefore, you should use appropriate and unique numbering conventions and identify whether the same cost center key can exist in multiple systems to avoid conflicts if various local systems are connected. Because the attributes of the cost center also determine how cost centers are allocated to the functional areas, profit centers, and business areas, cost centers should be carefully assessed.

[ ! ] Cost Centers Attributes

Pay attention to how cost center attributes are maintained. The profit center or the functional area derived, for example, from the cost center overrides any assignment maintained in the mapping tables (see also Figure 12.21).

The idea of centralizing and harmonizing all of the material masters in their entirety can be a complex undertaking. In Central Finance, however, you are only interested in a smaller subset. All settings that control demand planning, production, procurement, inventory management, etc., can remain in the local systems. The most important elements to consider include the following:

Naming/numbering conventions
These conventions generally do not cause problems if you use data from the first local system. However, problems can occur in each subsequent system if you have not already cleansed your material masters. Remember to prepare the way for end-to-end inventory reporting if possible and prepare a central materials ledger even if you do not use this function directly in Central Finance.

Assignment to product hierarchies
Because product hierarchies are one of the most important ways to aggregate families of similar products in CO-PA, investing some time on this topic is worthwhile. Whether you then consciously decide to use “messy” product hierarchies in the local system and use a different structure in Central Finance or indeed harmonize your product hierarchies, this complex question cannot be answered by the finance department alone.

Assignment to material groups
Concerns regarding product hierarchies apply similarly to material groups. You should also know whether you have material attributes in your material masters that are required for central reporting, such as expenditure categories, for example.

The master data for customers and suppliers can be kept quite minimalistic because you do not initially need any settings that regulate procedures such as payments or exports. Insofar as customers are affected, you are primarily interested in attributes, such as the customer group, that you require for strategic reporting in the profit and loss account as well as in suppliers and in the settings for company-wide reconciliation. If you develop the sequence in which the data is transferred between the systems, you must be careful with data used across all customers and suppliers if a specific business area will not be included in Central Finance.

12.5.4 Mapping, Error Handling, and Initial Data Load

Now that you have identified the most important master data for Central Finance, you must consider whether a 1:1 relationship exists between the sender and receiver systems or whether a conversion must be performed. If you change nothing at all, the system will assume a 1:1 relationship, and the postings will be carried out when the corresponding master data is available. Please note that you also need to ensure that the appropriate document types, posting keys, and so on are available in Central Finance because this data is all part of a Universal Journal entry. If you want to override this for one of the entries, you must assign a corresponding action.

For each entity (shown in Figure 12.21), the following mapping options are available in Central Finance (shown in Figure 12.23):

Keep Data: This setting is the default. Field values of this type are not converted at all, and the units that are transferred from the sender system are retained.
Mapping Obligatory: The field values for all populated fields must be mapped. If no mapping data is available for the data in the FI documents, an error is issued, which can be corrected by the error correction system (Error Correction and Suspense Accounting, ECS).
Map if Possible: The system attempts to map all populated fields. If no conversion is maintained, no error is issued. Instead, the original data that was transferred from the sender system is used.
Clear Data: The sender system will only occasionally transfer a field for which you have no use in Central Finance. If you have fields that you do not want to transfer, you must use this setting to ensure that these fields are deleted or removed from the document.

Figure 12.23 Mapping Actions

The most common mapping is pair mapping, in which account A from the local system is converted to account B in Central Finance. To prepare the mapping, use the Web Dynpro application MDG_BS_WD_ID_MATCH_SERVICE. Remember also that all new documents you create will go through the normal interfaces in accounting. As a result, all common options for conversions and the implementation of user exits are available.

If you are planning the conversion of your data, you’ll need to decide what to do when things go wrong. Errors may concern all incoming documents (for example, if a period in Central Finance has not been opened yet) or specific master data (for example, locked cost centers).

If you have activated the business functions for preliminary posting and error correction, you’ll receive a list of the documents that could not be posted and were recorded in the worklist as an error. You can either select a single element and manually correct the master data or adjust the conversion rules and update the list. Note that, at the time of posting, only errors in the FI documents are covered by this function. If, for example, an error occurs in a CO document, because a certain type of activity does not exist in Central Finance, the system will output an error directly in the SAP LT Replication Server.

Consistency is key for the initial load of data to Central Finance. You’ll want to ensure that all data from the local system is transferred and cleansed, and during the upload process, you’ll want to prevent users from making new postings or scheduling new jobs. You should therefore block postings during the periods when the transfer to posts transactions to prevent accidental updates.

To ensure that the data in your sender system is clean, various reports are available, which you should run before the migration:

To prepare for transferring your asset postings, close the periodic asset posting using the RAPERB2000 program and then execute the periodic depreciation run using the RAPOST2000 program.

Make sure that the index tables and transaction numbers in the new general ledger match so that the RFINDEX report can run for all fiscal years. Limit the selection in the local system to the company codes you want to transfer to Central Finance.

Using the TFC_COMPARE_VZ report or Transaction FAGLF03 , make sure that the figures in the new general ledger correspond to those in the subsidiary ledgers.

If you use the new general ledger in your local system, you must ensure that the numbers in your different ledgers match. Use the RGUCOMP report or Transaction GCAC for the selected company codes.

Also, make sure that the values in the SAP ERP Materials Management are in line with the figures in the new general ledger by executing the RM07MBST and RM07MMFI reports for the relevant company codes.

Prepare your balances for all currencies and ledgers. Run the SAPF010 report for your accounts payable and accounts receivable and the SAPFGLBCF report for the SAP General Ledger.

Prepare an excerpt of your closings (program RFBILA00) that contains the totals per cost center (Transaction S_ALR_87013611), the general ledger account balances for the corresponding company codes (report RFSSLD00), and the document journal (report RFBELJ00).

You are now ready for the initial data transfer. Follow the process in the IMG (see Figure 12.24) and select the logical system from which you want to copy the data.

Figure 12.24 Selecting the Logical System

You’ll also designate corresponding accounts for each company code, which are used during the migration for counter-postings. Once the data transfer is complete, the balances on these accounts should be zero. During the extraction, the data is initially stored in a temporary table in Central Finance. The posting is only simulated.

After reviewing the content, if you are satisfied with the results, use Post Initial Load Data (see Figure 12.25) to confirm, which will trigger the actual posting in Central Finance.

Figure 12.25 Confirming the Production Data Transfer

Once the actual postings are finished, run the RFINS_CFIN_MATCH_FI_TO_CO report to check the consistency of the CO postings. Furthermore, you can also carry out a final preparatory step for the closings you carried out on the local systems in Central Finance to ensure consistency.

Now, you have completed the initial technical setup of Central Finance. You have transferred all FI-relevant documents and uploaded the initial data to your Central Finance system. The first data transfer is now complete, and you can continue to use your CO documents after you upload process separately.

Of course, completely configuring a Central Finance system or the SAP S/4HANA Finance platform still involves many more steps. Further information on SAP S/4HANA Finance is available, for example, in SAP S/4HANA Finance: An Introduction by Jens Krüger (2nd edition, SAP PRESS, 2016, www.sap-press.com/4122).

12.5 Transformation to Central Finance

12.5.1 Implementing SAP S/4HANA Central Finance

[»] Additional Information and Collective Note

[»] Additional Information on the SAP LT Replication Server

[»] Additional Information on the Implementation of Central Finance

12.5.2 Global Parameters

12.5.3 Master Data

[ ! ] Cost Centers Attributes

12.5.4 Mapping, Error Handling, and Initial Data Load