Author: SAP Development
Version: May 2019
This article describes SAP Development strategy for SAP S/4HANA Finance for group reporting, our next-generation product designed to meet financial consolidation and close requirements. For over 30 years, our customers trust us to be the software expert to help them run their financial consolidation and overall closing process: complete flow of collection, processing, analysis and publication; reporting cycles including plan, actual and simulations. Today, we build the consolidation software of the Intelligent Enterprise. From a functional/process perspective, S/4HANA Finance for group reporting takes the best of our existing solutions for consolidation. From a technology standpoint, our new consolidation software embeds all recent techs such as in-memory database, artificial intelligence, machine learning, predictive algorithms and chat bots to further improve your consolidation process.
Please note this article and SAP’s strategy is subject to the Legal Disclaimer at the bottom of this page. In particular, the information in this article is not a commitment, promise, or legal obligation to deliver any material, code, or functionality.
HELP IMPROVE YOUR CONSOLIDATION PROCESS
Financial consolidation is the nexus of complexity and risk in the financial close process. This is because when there are numerous entities, ERPs, local accounting rules, currencies, and people in play, there’s often substantial room for error. When entity accounting and group accounting have different ways to manage processes, it often results in disparate data silos. This can spur lost time and inefficiencies due to either duplicate reporting or lack of visibility into details to properly close the books at the end of the month.
Take for example CPAs that work at corporate headquarters and CPAs that work for a subsidiary. While the latter group of finance professionals must close their own books at month-end, they also need to provide data to headquarters to support corporate processes. To do that requires manual adjustments, access to local tools, corporate tools, and two sets of results to comply with different reporting standards.
Time lost isn’t the only symptom of outdated reporting workflows. Additional consequences of disparate financial data silos can include:
• Insufficient accounting details, such as details on intercompany transactions, missing from the data or details on asset movements to automate fixed asset schedules
• Opaque data mapping from operational details to aggregated group structures
• Data available to business analysts on group level is limited to their highly aggregated, mapped data lacking the possibility to drill down to operational details and preventing the use of advanced automated analysis
• Many back-and-forth between group and subsidiary to ask for additional details
• Data that is populated incorrectly according to local vs. group rules
This is what we improve with S/4HANA Finance for group reporting. Our next-generation software helps you deliver your financial close and consolidation processes on a single system to drill down reports directly to the document level for fast access and better decision-making. You can run financial consolidation on real-time transactional data, rather than a separate consolidation application.
SIMPLIFY YOUR ARCHITECTURE
S/4HANA Finance for group reporting is part of S/4HANA Finance, which integrates financial, managerial, and operational data into a single source and accelerates performance with real-time processes and analytics. The integration of financial consolidation and close helps you simplify your financial architecture. Our ambition is to help you lighten your consolidation infrastructure, using S/4HANA Universal Journal. The Universal Journal is the basis of an integrated accounting system combining general ledger accounting, asset accounting, controlling and material ledger (see below).
The Universal Journal is playing a central role in helping simplify your finance landscape, as depicted in the below diagram.
Traditional financials architectures, where multiple tables and sources are needed. Reconciliation efforts are enforced by design between systems. You need “to move” data to the appropriate table for reporting. Different level of detail is stored in the respective components / tables, components are structured differently (fields and entities differ) and different capabilities in the components need reconciliation efforts (for example customer fields, currencies, multi-GAAP). Mapping rules are required and need to be maintained between financial accounting and management accounting. Lastly, maintenance is required to continuously provide connectivity and accuracy between systems.
Our new architecture uses S/4HANA Universal Journal as the single source of truth for all financial data. With the Universal Journal, financial and management accounting data are recorded in a single chart of accounts. Since all financial data is based on the same line items, no reconciliation between financial accounting and management accounting is ever required. All business transactions, both external and internal, are recorded on G/L accounts. Drill-down is possible without the need for mapping rules. The integration of financial and management reporting enhances your ability to meet financial regulations, such as the requirement to include operating segments in statutory reports.
UNIFY LOCAL CLOSE AND GROUP CLOSE
S/4HANA Finance for group reporting software unifies local close and group close. Unification of data helps you:
• Ensure data quality
Local close and group close share the same master data and rules. You can continuously check postings against central validation rules.
• Accelerate your group close process
You can post adjustments locally and results are provided immediately for group reporting. You can also perform a series of group reporting steps before the group reporting, such as currency translation (see the “Help shorten your group close process” section below).
• Reach transparency and auditability
You benefit from a fully enabled drill-through from group reporting to the line-items of the entity (instead of transformation in multiple systems). You can use our “single source of truth” group reporting with a free-of-choice fields from S/4HANA next-generation ERP.
CONTINUOUS ACCOUNTING HELPS SHORTEN YOUR CLOSE
Moving to the Intelligent Enterprise is not just a technical upgrade. The real value comes when companies adopt purpose driven mindset, leverage innovative approaches such as agile methodologies to reimagine business processes. For consolidation, our universal journal can help you accelerate your financial close schedule. The universal journal represents the single source of truth: integrity of financial data is guaranteed by design, eliminating reconciliation effort and ensuring that everyone can always access the most current data. You can leverage it to run a series of consolidation activities before the end of the local close period and reduce the time needed to close your books — this is what we call “continuous accounting”.
In S/4HANA Finance for group reporting, as all financial data sits in a single source of truth, you are able to start performing some time-consuming consolidation topics (for example the intercompany reconciliation) ahead of time. From a database/hardware perspective, what makes it possible is our HANA in-memory technology, which eliminates batch processing.
By being able to run some consolidation processes in advance, without having to wait for period-end to identify and correct issues, we aim at helping you close your books faster.
LEVERAGE PREDICTIVE ACCOUNTING
SAP adds new features to support your organization delivering more accurate forward-looking insights on your financial performance. With legacy financial consolidation systems, you need to plan your activity based on estimates created manually, via scripts or business rules. To help you better anticipate your consolidated plans, budgets and forecasts, we embed predictive algorithms into S/4HANA Finance for group reporting.
Our predictive accounting feature is based on past data already sitting on S/4HANA and helps you combine actual and predicted data to have a more accurate forward-looking view on your management reporting financial statements. When you utilize this new feature, predictive postings are not automatically added to the financial statements. To ensure segregation of data, these postings are isolated in an “extension ledger”, independent from the actual data.
Predictive accounting enables you to look at and analyze data using a forecast of future results based on the most up-to-date data. It helps you get a better understanding of what your results at the end of the current period or quarter might look like, and why.
DECENTRALIZED DATA COLLECTION AND DATA MAPPING
We further improve data collection experience to help you collect financial data from subsidiaries that are not yet using SAP S/4HANA – for example a company you just acquired. Our integrated Data Collection app includes direct reading of S/4HANA consolidation master data, predefined and custom input reports to gather financial data for each company or group, Google Sheets-like data input grid, native derivation of S/4HANA global parameters and master data to allow instant break-down check during data input and copy-paste to and from Excel.
In addition, we also deliver on a Data Mapping app to help you map any ERP data to your consolidation, in particular when you acquire new companies. We are embedding AI and machine learning algorithms to help you perform data mapping faster and more accurately. Our AI effort strictly follows SAP Guiding Principles for Artificial Intelligence, as defined by the SAP AI Ethics Steering Committee.
GIVE CONTEXT TO DATA
“Context to data” will first help you smoothly design, input, analyze and retrieve non-financial measures and qualitative data required for your financial consolidation process. We will deliver capabilities to easily build flexible forms for structured and unstructured data to help you collect supplemental information for your monthly, quarterly or annual reports. In simple words, we want to deliver a combination of “Google-like” sheets and documents, including typical tables for figures but also texts, questionnaires or comments. In the animated picture below, you can see how we aim at combining structured and unstructured data for data collection:
CLOUD, ON-PREMISE OR HYBRID
Following SAP’s cloud strategy, S/4HANA Finance for group reporting is available on the cloud, on-premise or using and hybrid model. You can use it by running third-party public cloud services from providers such as Amazon Web Services, Google Cloud Platform, IBM Cloud, and Microsoft Azure – or within an SAP data center. No matter your choice, you can reduce your capital expenditure. You can also opt for a hybrid model of public cloud, private cloud, and on-premise solutions from SAP and third-party vendors – for maximum flexibility. Select different approaches for different needs and get the most value from your investments.
BUILDING BLOCKS FOR AN INTEGRATED REPORTING
To ensure flexibility, we develop S/4HANA Finance for group reporting through “building blocks”, for an integrated reporting. S/4HANA is the central block — it integrates accounting and consolidation, and is available both on the cloud and on-premise. The additional blocks are available on the cloud. The data collection app helps you gather information from your decentralized subsidiaries. SAP Analytics Cloud is our app for planning, BI and visualization. We also plan to deliver on an app to help produce your disclosure statements. Last, our goal is to enable our partners and ecosystem to develop apps for custom developments.
PRODUCT ROAD MAP
For more detail on S/4HANA Finance for group reporting strategy, you can refer to our product road maps — cloud and on-premise — and also read our blogs on #sapgroupreporting.
The information in this article is proprietary to SAP and may not be disclosed without the permission of SAP. This information is not subject to your license agreement or any other service or subscription agreement with SAP. SAP has no obligation to pursue any course of business outlined in this article or any related presentation, or to develop or release any functionality mentioned therein. This article, or any related presentation, and SAP’s strategy and possible future developments, products, and platforms, directions, and functionality are all subject to change and may be changed by SAP at any time for any reason without notice. The information in this article is not a commitment, promise, or legal obligation to deliver any material, code, or functionality. This article is provided without a warranty of any kind, either express or implied, including but not limited to the implied warranties of merchantability, fitness for a particular purpose, or noninfringement. This article is for informational purposes and may not be incorporated into a contract. SAP assumes no responsibility for errors or omissions in this article, except if such damages were caused by SAP’s willful misconduct or gross negligence. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and they should not be relied upon in making purchasing decisions.
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