3.2    SAP S/4HANA Finance Benefits

We learned from the 2013 IBM CFO survey that performance accelerators are far more effective in the following areas, as depicted in Figure 3.4:

As you can see in Figure 3.4, performance accelerators are better in all areas. In this section, we’ll look at those areas where SAP S/4HANA Finance can contribute to your organization becoming a performance accelerator. So far, we’ve identified seven areas in which SAP S/4HANA Finance can play that role:

Let’s now explore these seven areas in more detail.

3.2.1    Integration of Information

Driving integration of information across the enterprise means that you have the governance in place to ensure common business processes and data definitions in your enterprise. To use SAP’s phrase, it means that you have all that information technically captured in one place: a single source of truth. This single place in your system environment can satisfy all your financial information needs and serves as the single source for all of your interfaces as well. Many organizations are struggling with that, so their finance departments can’t act as performance accelerators because they can’t provide required business insights. These organizations have the following characteristics:

Having only the technical ability for a single version of truth isn’t sufficient, but from an organizational perspective, it’s very important that the right governance structure is in place as well. To get to a single version of truth, an organization must have a clear idea of its financial reporting requirements. The organization must also have the governance structures in place, such as business process ownership and business data ownership, to guarantee harmonized business process and ensure that data are defined and captured in a common and consistent way across all your business units. When the organization has all that governance in place, it then makes sense to have the technology as well to realize a single version of truth for finance via SAP’s Universal Journal in your application landscape.

SAP ERP struggles in this area, as its financial capabilities contain multiple ledgers such as the SAP General Ledger (G/L), Cost Center Ledger, Profit Center Ledger, SAP Material Ledger (ML), and the Profitability Analysis (CO-PA) Ledger (see Figure 3.5). Due to all of these different sources of financial information, reconciliation activities are required to make sure all these ledgers are synchronized.

Challenge of the SAP ERP Architecture: Various Ledgers

Figure 3.5    Challenge of the SAP ERP Architecture: Various Ledgers

With the introduction of SAP S/4HANA Finance, there is now just one ledger called the Universal Journal (captured in table ACDOCA) where all details can be found. As a consequence, you no longer have to consider where to report or interface your financial data from. The Universal Journal contains all this disparate data, as shown in Figure 3.6.

The Universal Journal Combining Information from Multiple Ledgers into One Source Table

Figure 3.6    The Universal Journal Combining Information from Multiple Ledgers into One Source Table

From a technical perspective, SAP S/4HANA drives the integration of information due to its in-memory capabilities, and its columnar table structure redefines data aggregation and indexing (see Figure 3.7).

SAP S/4HANA Finance vs. SAP ERP

Figure 3.7    SAP S/4HANA Finance vs. SAP ERP

Note

Keep in mind that the Universal Journal (table ACDOCA) stores actual data only. Plan data is stored in a different table set.

As shown in Figure 3.7, index tables, aggregate tables, and totals tables are no longer needed to guarantee an application’s good performance. The Universal Journal is the much-desired single version of truth mentioned at the start of this section. This is a key enabler for driving the integration of information across the enterprise and an important step on the road to becoming a performance accelerator.

3.2.2    Enterprise Cost Reductions

The SAP S/4HANA capability of in-memory processing using columnar databases shortens processing time significantly and eliminates the need for running processes in batches. Processes that you would normally run at period-end due to long running times can now be run on a daily or weekly basis. Because it contains all the actual data, the Universal Journal removes the need to reconcile SAP ERP Financials (FI) and Controlling (CO) data and provides you with visibility on, for example, work in progress (WIP) in real time. These abilities enable a soft close, meaning that you don’t have to wait to analyze your data after month-end close activities anymore, and you can analyze the data daily to steer the business. No reconciliation efforts are required because you’re reporting from one single source of truth only.

Due to the speed of SAP S/4HANA processing and the shift toward soft closes, less headcount is required in the closing process. Capacity requirements are now more equally spread over the month rather than increasing dramatically at the end of the month. SAP S/4HANA Finance gives you access to very detailed data in real time, which helps you spot out-of-line situations immediately, minimizing costs of failure. Prompt remedial action is now possible, rather than waiting until the data are available after month-end. Reporting is simplified, fast, and multidimensional, making drilldown reports almost redundant. You no longer need to run operational reporting in a separate SAP Business Warehouse (SAP BW) environment, which has a positive impact on the speed of turning data into information and thus on the operating costs.

3.2.3    Measuring Business Performance

SAP S/4HANA provides better insight during the posting period because you’ll have easy access to real-time profitability on a granular level. Because the introduction of the Universal Journal simplifies data structures, you can perform end-to-end analysis and define new responsibilities in many areas, including the following:

A sales manager with access to real-time open item data any place, anytime on his mobile device using SAP Fiori apps can discuss out-of-line situations more efficiently with customers and can document agreed-upon actions immediately. In addition, this information is visible for the accounts receivable department. SAP Fiori delivers a role-based, consumer-grade user experience across all lines of business, tasks, and devices and will be the new way of accessing SAP S/4HANA information and executing your SAP transactions.

A good example of how SAP Fiori can be used is the Process Receivables transactional app shown in Figure 3.8. Using this app, you can access a list of receivables payable by an individual customer. You can then create promises-to-pay and dispute cases. You start the app either by entering a customer number directly or by searching for a customer.

SAP S/4HANA Finance allows you to have real-time access to your cash position. There is no data latency, meaning cash managers are able to perform their tasks on the real cash situation. SAP Cash Management provides you with the following in real time:

Cash Management with an SAP Fiori App

Figure 3.8    Cash Management with an SAP Fiori App

SAP S/4HANA Finance also offers a number of different SAP Fiori apps such as SAP Smart Business for Cash Management (see Figure 3.9). This app provides real-time insight into the current liquidity, forecast of 7-day cash position, 30-days liquidity, and other key figures. It also allows you to identify bank accounts with insufficient funds and to see an overview of bank risk considering the cash deposited in different banks. These features certainly make managing working capital much easier.

SAP Smart Business for Cash Management

Figure 3.9    SAP Smart Business for Cash Management

3.2.4    Optimize Planning, Budgeting, and Forecasting

With the introduction of SAP BPC for S/4HANA Finance, a new, more user-friendly planning process is supported. In SAP ERP, you had different planning solutions for Cost Center Accounting, Profit Center Accounting, Internal Orders, and CO-PA. Reconciliation of all these solutions could cause problems and delays. SAP BPC for S/4HANA Finance provides a single tool (as depicted in Table 3.1) to plan the following elements:

Because all this planning data will be stored in one single data structure, reconciliations are no longer needed. Another benefit is that you can apply the same validations to the planning data and that reporting will have the same look and feel. In fact, SAP created a single source of truth for financial planning as well as for finance data. Keep in mind that plan data isn’t part of the Universal Journal because it contains actual data only. You still have to read two different tables if you want to run a plan/actual comparison report.

3.2.5    Continuous Finance Process Improvements

SAP S/4HANA isn’t only about the speed of the database but also about the value SAP S/4HANA technology will bring to finance activities in general. SAP S/4HANA Finance allows you to run your processes faster, which enables faster planning, reactions, reporting, and analysis.

As stated earlier, SAP S/4HANA enables continuous insight into your financial figures; it allows you to shift activities from month-end to weekly or daily activities. Because FI and CO data live in one single table (ACDOCA), you can run, for example, your legal reporting and customer and market view reporting without needing to reconcile these reports. Using this single table also allows you to combine information from various areas into one report, for example, spend analysis by responsibility and P&L by market segments, along with other dimensions, such as customer and material group or WIP analysis by relevant production order and cost center. SAP S/4HANA Finance extends the reporting and analysis capabilities that were previously only possible via SAP BW reporting.

SAP S/4HANA Finance provides new functionality such as intercompany reconciliation, which is a great improvement in the financial close process as well. Intercompany reconciliation detects intercompany mismatches at an early stage, allowing you to have them corrected before the month-end close. It also does the following:

SAP also provides a very user-friendly goods receipt/invoice receipt (GR/IR) monitor that shows the GR for which no invoice has been posted and vice versa.

SAP S/4HANA Finance also comes with the Financial Closing Cockpit, which allows you to centrally monitor and control closing tasks; enables automation of some manual steps, transactions, programs, jobs, workflows, and remote tasks; and allows owners to collaborate effectively during the closing process. It also offers best practice closing templates to streamline the closing process and supports audits by recording the output and history of all tasks performed and who did them.

To further streamline the financial close process, SAP S/4HANA Finance also comes with the newly developed SAP Fiori app called SAP Smart Business for Financial Close (see Figure 3.10). This app provides real-time insight into the progress, quality, and financial results of the end-to-end financial close and supports respective actions.

SAP Smart Business for Financial Close

Figure 3.10    SAP Smart Business for Financial Close

3.2.6    Provide Inputs to Enterprise Strategy

Today, companies are expected to produce more predictable financial results, eliminate surprises, and respond to market changes with more agility. To meet these expectations, finance functions have to forecast with more precision, reduce cycle times associated with budgeting and investment, and shift from a retrospective statutory reporting view to one that is more forward looking. Therefore, it’s absolutely necessary to be able to link your company’s KPIs with your strategic objectives and have a system in place that can show whether you’re still on the right track and provide you the information to get on track again if necessary.

SAP S/4HANA Finance offers SAP BPC for S/4HANA Finance, as well as the ability to integrate both operational/nonfinancial and financial information in a cohesive manner and to optimize the planning, budgeting, and forecasting processes. It also works with advanced analytics tools such as SAP HANA Live and SAP Crystal Reports, which are available to build real-time dashboards.

From the IBM CFO survey, we’ve learned that a value integrator is very successful in driving integration of information across the enterprise via a robust infrastructure with common standards, data definitions, finance processes, and planning platforms (as depicted earlier in Figure 3.2). In other words, they were able to implement a single version of truth for the financials processes.

However, finance organizations who are performance accelerators go a step further by integrating their organization’s strategic, operational, and financial planning to impact the overall business performance (see Figure 3.11). SAP S/4HANA Finance can play a crucial role here because the newly introduced Universal Journal is key to that goal.

Impacts on the Overall Business Performance Business performance

Figure 3.11    Impacts on the Overall Business Performance

Because you have easy and real-time access to your internal data via SAP S/4HANA Finance’s Universal Journal, you can use this as a basis for simulating the impact on the business performance of potential new offerings by using SAP advanced analytic tooling such as SAP Predictive Analytics. SAP Predictive Analytics allows you to evaluate opportunities for stimulating your organic growth or the potential for mergers and acquisitions as well (see Figure 3.12).

Application of SAP Predictive Analytics

Figure 3.12    Application of SAP Predictive Analytics

SAP Predictive Analytics can provide organizations with the ability to anticipate and shape their business, their customer relationships, competitive forces, and operational aspects. It enhances organizational performance by applying advanced mathematical modeling, deep computing, simulation, data analytics, and optimization techniques by using analytical engines, data mining, and statistical models that address specific business process areas. SAP S/4HANA Finance brings greater speed and agility of decision-making, with clear links to target performance outcomes, more reliable and accurate financial reporting, and greater visibility into the levers that drive performance. By combining your own internal data organized in SAP S/4HANA Finance’s Universal Journal with external data sources such as industry trends and the nature of the competition, you can better determine the most promising opportunities.

To do that, you first need to establish a data foundation and a single version of the truth for your financial processes before you can progress on your analytics journey, as shown in Figure 3.13.

Your journey starts by having the data foundation in place (e.g., a governance structure to safeguard data quality). The next step is to establish a single version of truth that will allow you to start analyzing your data more carefully and begin applying predictive analysis more extensively to finally enter the cognitive space where systems are able to understand, reason, and learn.

Progressing on the Analytics Journey

Figure 3.13    Progressing on the Analytics Journey

3.2.7    Develop Talent in the Finance Organization

Considerable skills are required to benefit from SAP S/4HANA’s real-time data provision and to operate sophisticated analytical tools such as SAP Predictive Analytics. SAP S/4HANA Finance can help assess and improve business performance only with these sophisticated business analytics and the talent to interpret and use cross-functional information. However, acquiring the right technological and business know-how is only one of the issues CFOs have to deal with; many CFOs are preoccupied with more immediate challenges, such as whether their own finance teams are ready to weather the storm. Table 3.2 lists some finance workforce challenges and the opportunities available to address these challenges.

Workforce Challenge Workforce Opportunity
Finance skills are focused on transaction processing. Transform competencies to more value-added activities to support the evolving role of finance.
Qualified professionals are wasting effort on activities that add less value. Refine the skill mix to focus professionals on driving business value and innovation.
Data analysis is performed by management. Develop junior employees in decision support.
The finance team is globally distributed. Enable global collaboration.
Shared services expansion or relocation eliminates local roles. Educate and redeploy top talent into retained organization.
The implementation of SAP ERP systems eliminates roles. Expand transformation to train and educate top talent to develop value-add capabilities.
Employee turnover is high. Grow organically by defining new career paths.
Linear traditional career paths are eroding. Chart multidimensional career paths to develop the leaders of tomorrow.
Employee development is informal. Align learning and development programs to support the CFO agenda and future job roles.

Table 3.2    Finance Workforce Challenges and Opportunities

The first three workforce challenges in Table 3.2 share a common theme in terms of high-value employees performing low value-added work. The opportunity is to optimize talent capabilities by rebalancing who is doing what. Keep in mind that when using SAP S/4HANA Finance, many transactional activities aren’t needed anymore because data are available in real time. Consequently, your workforce needs to be more focused on analyzing the data instead of preparing the data for reporting.

The next three challenges refer to how transformation is focused on eliminating job roles and realizing full-time equivalent (FTE) benefits. The opportunity is to invest in talent and redeploy them in the organization to make the transformation a success. When implementing an SAP S/4HANA Finance system, you have to think about the necessary job roles for running it. As stated previously, fewer transaction processing roles will be required, but more roles will be needed in the analytical space.

The last three challenges address how people and career paths are shifting in ways we’ve never seen before. The opportunity is to define new career paths and learning programs to grow organically and prepare the workforce for the future. From the IBM CFO survey, we learned that performance accelerators are extremely focused on developing analytical talent. They understand that advancing their business insight capabilities also means keeping scarce analytical skills engaged and motivated with fresh challenges and expanding responsibilities.

In addition to sharpening their forecast accuracy, performance accelerator organizations are developing more sophisticated analytics such as complex scenario planning and predictive models. As their ability to anticipate rises, value integrators should consider embedding these predictive capabilities into operational systems to improve responsiveness at the front lines of the business. With new technology and new processes in place when using SAP S/4HANA Finance, training is typically restricted to how to use the tool to continue to perform jobs before the SAP ERP implementation—essentially focusing on efficiency versus effectiveness. You should go beyond how to use the tool or module, for example, to help develop critical thinking skills so that employees can leverage the tools to perform value-added analysis.