S/4HANA S/4HANA Finance SAP General

SAP S/4 HANA Finance | Key Features | Summary

Finance in S/4HANA is notably designed as the next-generation finance solution for SAP. This post will discuss the overall key features related to finance.

Finance in S/4HANA is notably designed as the next-generation finance solution for SAP. This post will discuss the overall key features related to finance. I will be covering the actual changes to be considered for a system conversion in a separate blog post.

I would personally like to think of SAP S/4HANA Finance as a more organized and “quick-paced” accounting version given the changes and improvements that were introduced.

Here are some key phrases that summarize the overall features of SAP S/4HANA in a Finance perspective:

  1. Single Source of Truth for Financial and Managerial Accounting
  2. NO Data Redundancy and NO Reconciliation
  3. Multidimensional Income Statement
  4. From Traditional Hard Close to New Closing Concepts
  5. Machine Learning is available in SAP S/4HANA (AP, Allocations, and Tax)

Single Source of Truth for Financial and Managerial Accounting

For those of you with background in SAP FICO from the previous years, you would most likely know that the Financial Accounting (FI) data and the Controlling (CO) data have separate tables.

Issues would arise if entries in the CO would not match the entries in FI and it would impose multiple scenarios that involve a lot of table and document cross-referencing. Simply put, analysis would be needed between the FI and CO data pool. The same goes for the data structure of other sub-modules. Refer to the image below.

This time around, SAP S/4HANA introduced a data model design that is based on a “single source of truth for financial and managerial accounting”. All entries (may it be FI or CO) will be stored in a single table called ACDOCA or the Universal Journal.

Notice in the below image how they are merged in a single table. You can use the colors as guide. Note that the image is for visualization purposes and does not necessarily contain the whole data structure. Refer to SAP Help Document for more information.

NO Data Redundancy and NO Reconciliation

With the concept of “single source of truth”, data redundancy is eliminated. Think of the different data models found for General Ledger, Material Ledger, Profitability, Asset Accounting and Controlling. If we were to perform reconciliation between these sub-processes or even perform settlement processes that moved data between them, you could pretty much say that it would be difficult on the system.

Take note that these sub-processes have their own unique data. You could even say that data is repeatedly “copied” for the use of the other sub-processes. With the universal journal, it would mean that the data is stored only once and that reconciliation won’t be needed. Visualize a one line item table will full detail comprising of all the corresponding sub-processes.

Recall: If you have heard of the special ledger functionality, the concept was built upon the requirement that the primary ledger be replicated into the special ledger which eventually results in data redundancies and may cause reconciliation problems. SAP S/4HANA now introduces the concept of extension ledgers that can be used for managerial accounting. For more information click here.

ERP Special Ledger vs SAP S/4HANA Extension Ledger

Here is a quick comparison between the two:

ERPSAP S/4HANA
About 95% of the same legal data due to the need to replicate data.
About 5% of adjustments.
Overall there is high data redundancy.
No data redundancy since there is no need to replicate data.
Extension ledger is built on top of the standard ledger.
Data structure is now able to introduce new accounting concepts such as *predictive accounting.

*SAP S/4HANA 1809 has introduced predictive accounting for incoming sales orders. Predictive Accounting basically shows how much revenue the organization / company will make based on incoming sales order data even if no goods receipt or invoice is booked. I will discuss more on this in a separate blog post and its relation to profitability analysis.  

Additional Note: The universal journal in S/4HANA also introduces real time reporting without the need to replicate to a data warehouse or business warehouse.

Multidimensional Income Statement

If we take into consideration the strength of the universal journal as a single source of truth, we could say that the universal journal is (in itself) a direct report because it is able to store more characteristics. This means that if you take a look at your Profit and Loss statement (P&L Statement) by account, it is possible to have drill down options to the highest granularity.

Some sample drill down options could be: Functional/Business Area, WBS Element, Material Group, Customer Group, Segment, Partner Activity Type, etc.

From Traditional Hard Close to New Closing Concepts

With the introduction and capability of multiple extension ledgers to be associated to one standard ledger, we are no longer limited to the traditional financial closing processes. We now have the following options: Fast Close, Soft Close, and Predicted Close. These new closing concepts give us the ability to provide instant insights in the company’s financial position.

Fast CloseElimination of reconciliation tasks
Real time execution
Continuous execution
Can run multiple times in the same period  
Soft CloseEliminate period end tasks
Profitability characteristics can be derived automatically upon line item posting
Continuously being able to close the books and have immediate live insight  
Predicted CloseExtend accounting reach
Predicted actuals can be derived to predict period end close  

Note that there are also some changes on the “closing” related transaction codes. For more information click here.

Obsolete TransactionNew Transaction
FAGL_FC_VALFAGL_FCV
KKAKKKAKH
KKAOKKAOK
KK51KK51H
CO88CO88H
VA88VA88H
KO8GKO8GH
CJ8GCJ8GH

Machine Learning is available in SAP S/4HANA (AP, Allocations, and Tax

SAP S/4HANA gives us an option to utilize machine learning for finance operations such as Accounts Payable, Allocations, and Tax Solutioning. This in turn helps free up the analyst to focus on decision making.

A simple example would involve GR/IR reconciliation where machine learning algorithms are integrated into Goods Receipt / Invoice Receipt (GR/IR) matching. The same goes for tax compliance and universal allocation processes.

SUMMARY

Key SAP S/4HANA Finance FeaturesDescription
Single Source of Truth for Financial and Managerial AccountingACDOCA or Universal Journal.
Data model design that is based on a “single source of truth for financial and managerial accounting”
NO Data Redundancy and NO ReconciliationData is stored only once, and that reconciliation won’t be needed. Extension Ledger + Standard Ledger = Management Ledger allows new accounting concepts such as predictive accounting.
Real time reporting without the need to replicate to a data warehouse or business warehouse.
Multidimensional Income StatementPossible to have drill down options to the highest granularity / characteristics. Enriched financial statements.
From Traditional Hard Close to New Closing ConceptsFast Close, Soft Close, and Predicted Close. Instant insights in financial position.
Machine Learning is available in SAP S/4HANA (AP, Allocations, and Tax)Option to integrate machine learning algorithms to finance operations such as Accounts Payable, Allocations, and Tax Solutioning

6 comments

    1. Hi Venkat,
      Thank you for your inquiry. Here are my inputs below:

      1. ACDOCA or Universal Journal Structure
      2. Significant enhancement of Material Ledger (ML) architecture and processing logic – it is the foundation for material valuation inventory in SAP S/4HANA

      First, we can consider the structure of ACDOCA or Universal Journal. SAP has made some significant changes as this table should cover fields in General Ledger Accounting, Asset Accounting, Profitability Analysis, and the Material Ledger. That in itself says that there are attributes in the material ledger data model that is present in ACDOCA. You can refer to the 3rd image of this blog post where the orange box is highlighted as INV or Inventory and also click on the embedded link.

      Second, one key note in the latest trend of material management is that it aims to improve and provide flexible valuation methods in parallel accounting and even multiple currencies (all the while improving system performance). As such, SAP has enhanced the architecture and processing logic of the material ledger for S/4HANA. It is considered to be a significant change. You can also refer to SAP Note 2354768. Due to these changes, there is no general backwards compatibility. This is also the reason why no compatibility views exist on table level for material ledger actual costing. Therefore, any sort of add-ons, custom codes, and analytical content must be adapted to consider the changes.

      Recall that in ECC, the inventory valuation tables contain both transactional and master data attributes (EBEW, MBEW, MBEWH, OBEW, QBEW, etc.). These tables still exist in S/4HANA but they will only store material master data attributes. The transactional fields such as LBKUM, SALK3, and VKSAL are now found in ACDOCA. Since those tables will no longer be updated with transactional data, the material ledger has to be activated.

      Additional Note: ML is a basic prerequisite for the utilization of actual costing. Take note that there are some misconceptions with S/4HANA Actual Costing. Even though activation of Material Ledger is now mandatory it is good to know that activation of Actual Costing is still optional with SAP S/4HANA.

      Overall, the statement stands firm that ML is required in S/4HANA due to the significant architecture and processing logic change. I hope this helps.

      Like

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