12.2    Multinational Service Company

Our next customer case study recently embarked on a multiyear transformation program to enable improved reliability, agility, and efficiency across all of its business segments. This global SAP implementation project on SAP S/4HANA for Finance included the following functional domains: corporate finance, supply chain, customer engagement, manufacturing, quality management, human resources, enterprise asset management, and product and services delivery processes. It has been live for six months at the time of publication.

12.2.1    Vision

Due in part from a continual series of acquisitions, this customer had a lack of consistent structure and streamlined business processes across different segments, functions, and business units. The company needed to integrate key processes across multiple functions, including corporate finance, supply chain management, customer engagement, manufacturing, human resources, enterprise asset management, and product and service delivery. To do so, the company selected the SAP S/4HANA Finance add-on.

12.2.2    IT Project

The client was already running its SAP Business Suite on SAP HANA and getting the benefits of being on the latest suite from SAP, so it was natural to upgrade to SAP S/4HANA Finance to benefit from further simplification and innovation. The key to TCO was reducing the data footprint, which was achieved due to the simplified data model.

12.2.3    Benefits

Let’s look at some of this customer’s pain points and how SAP S/4HANA was deployed to overcome them through a lens of the following financial business elements.

Financial Reporting and Analysis

Running detailed operational reports such as CO-PA reporting on the ERP system had an unacceptable impact on system’s performance. It forced the company to extract this operational data to an SAP BW environment, which caused a delay in reporting. During the course of a given month, extracts to SAP BW were normally made only once a day, and during month-end, it could be done on demand. Furthermore, not all business data required was even available on the spot; the company often had to run month-end closing jobs to make the data available on the level needed to satisfy financial reporting requirements. The company also needed to perform a complex reconciliation task to guarantee reliable financial reporting because it had no single version of truth in its SAP landscape. Instead, the company had to deal with various ledgers such as the G/L, Asset Ledger, SAP Material Ledger (ML), CO-PA ledger, and so on. A lack of access to real-time data produced significant manual efforts in internal financial reporting and analysis.

SAP S/4HANA Finance took away the majority of these pain points because it provided one access point for all financial reporting requirements. Now the finance team never has to wonder where to report their financial data from; the Universal Journal contains all the financial information they need. It took away the necessity of reconciling the various ledgers as well.

Next, due to SAP S/4HANA technical capabilities such as in-memory processing and columnar storage, this service company no longer needs to run operational reporting in an SAP BW environment. The company can simply define and run operational reports in the SAP ERP system without jeopardizing its performance.

In a nutshell, SAP S/4HANA Finance combines financial and management accounting as well as profitability data into one Universal Journal. It abolishes totals, indices, and other predefined aggregates, and relies on line items as a single source of truth to provide an intuitive UX, reduce operational reporting efforts, and accelerate financial processes. It significantly reduced the finance business operation and analysis costs for this specific customer.

Managing Month-End Close

Beyond the described financial reporting and analysis pain points, the customer experienced more month-end misery:

• End of period bottlenecks because many activities need to be run at the same time, but not enough manpower is available to execute it in parallel
• Manual workarounds for loading data in the system due to lack of automation
• High cost of audit due to lack of transparency of the data and audit trail

The good news is that a soft close with SAP S/4HANA Finance supports the following:

• Real-time execution of closing activities
• Intra-month execution of month-end activities such as intercompany reconciliation
• Accelerated month-end batch processes and real-time reporting
• Self-service analytics, which eliminates the requirement to develop specific reports to satisfy your reporting needs

This customer was able to eliminate one third of its month-end closing processing. By combining financial, management accounting, and profitability data into one Universal Journal and offering a real-time intuitive UX, SAP S/4HANA clearly reduced operational reporting efforts considerably.

Managing Receivables

This customer was struggling with the fact that AR-related data are only visible within the AR department. Sales and account managers talking to their clients were often equipped with outdated open item and payment history reports, making it cumbersome to discuss open item issues with their customers.

SAP S/4HANA Finance offered them all of this information in real time and easily accessible by mobile applications. Next it provided a lot of analytical SAP Fiori apps that enable exception-based management reports, allowing for proactive responses and decisions. In addition, SAP S/4HANA Finance offers the following:

• Real-time simplified analysis to help determine a customer’s top line contribution
• Improved search facilities to support detailed analysis

SAP Receivables Management in SAP S/4HANA improved working capital and financial health by using real-time receivables data to assess customer credit risk, streamline billing, resolve disputes, and prioritize customer collections.

Managing Payables

As in the receivables process, payables processing suffered from delays caused by batch-oriented processes in SAP ERP. The multinational service company was bogged down by the following obstacles:

• Often manual, error-prone, and time-consuming invoice processes
• Open items only visible within the AP teams, which cause delays in the issue resolution process
• Inaccurate view of days payable outstanding (DPO) due to lack of understanding of exceptions and duplicates
• Missed opportunities to take advantage of cash discounts

SAP S/4HANA Finance boosted the payable process significantly by allowing real-time, detailed information. It offered our customer the following benefits:

• Automating invoice management and increasing speed of payment proposal runs
• Full visibility of relevant AP invoice content
• Real-time insight into AP open items and details
• On-demand forecasting of available cash for using discount opportunities and payment term adjustments
• Improved working capital and financial health by using real-time payable data

Managing Assets

The current architecture of SAP ERP was causing inefficiencies in financial asset processing and required a reconciliation between the asset subledger and the G/L. Details on this customer’s assets weren’t visible in a central place, which caused the following:

• Lack of hierarchical views of depreciation areas
• Cost center asset postings only on the accumulated level, meaning the customer couldn’t drill down to the individual asset
• A complex way of running the deprecations for the various depreciation areas

The Universal Journal in SAP S/4HANA Finance removed the need for reconciliation. All detailed asset data can be viewed from here, and depreciation can be run much simpler due to simplified processing logic and data structures. Multiple parallel documents for all valuations are posted in real time to ensure correct values from the beginning.

12.2.4    Path Forward

For both customer engagements, SAP S/4HANA Finance showed clearly it has the potential to remove pain points that couldn’t be resolved with SAP ERP functionality. The client was one of the very early adopters of SAP S/4HANA 1503; the next step would be to upgrade to SAP S/4HANA Finance 1605 to benefit from the latest updates. Now that migration from 1503 and 1605 to 1610 is possible, the client will eventually migrate to SAP S/4HANA 1610 and start enjoying the benefits of logistics simplification and innovation as well.