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:
- Single Source of Truth for Financial and Managerial Accounting
- NO Data Redundancy and NO Reconciliation
- Multidimensional Income Statement
- From Traditional Hard Close to New Closing Concepts
- 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.
Here is a quick comparison between the two:
|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 Close||Elimination of reconciliation tasks|
Real time execution
Can run multiple times in the same period
|Soft Close||Eliminate 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 Close||Extend 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 Transaction||New Transaction|
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.
|Key SAP S/4HANA Finance Features||Description|
|Single Source of Truth for Financial and Managerial Accounting||ACDOCA 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 Reconciliation||Data 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 Statement||Possible to have drill down options to the highest granularity / characteristics. Enriched financial statements.|
|From Traditional Hard Close to New Closing Concepts||Fast 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|