S/4 HANA Finance (Simple Finance/ sFIN) – the beginning, how to get there, and why

This article was written by Ricki Burke, an SAP Specialist from our Melbourne, Australia office. 

SAP introduced SAP HANA in 2010 as a fast database, a significant change that revolutionised the approach to database record storage changed. It can support both row-based and column-based storage, which is its strength. What’s the difference?

Row-based storage stores table records in a sequence of rows while column-based data is stored in columns. So what? The difference is faster data access, better compression, and improved parallel processing which the means fast, on-the-fly aggregations; ad-hoc reporting; and it’s made possible when transaction data is stored in a column-based table.  

That is SAP HANA: what has that got to do with your ERP suite?

Everything. It is well-documented that SAP are betting the house on their new business suite, S/4HANA, which is designed for the digital economy.

Haroon Arshad, a SAP Solution Lead Finance on an S/4HANA Finance implementation said “With the ability to retrieve information and data quicker, now it was time to utilise it. This meant the application layer would also need to change so the full benefits of speed could be harnessed. EHP 7 was the first push from SAP. Code optimisation, shifting processing logic to the database meant that time was saved as calculations were performed at the database level. This improved especially large calculations such as month end settlements, variance calculations and interest calculations.” 

Then Came Simple Finance

The first module released was S/4HANA Finance (previously known as Simple Finance/ sFIN). SAP redesigned data structures and the application layer. New concepts have been introduced, including:

  • Universal journal
  • Central Finance
  • New Asset Accounting
  • Cash Management
  • COPA
  • IBP (Integrated Business Planning)

As a result, all financial information can be sourced from one table, known as ‘ACDOCA.’ According to Prashant Pimpalekar, SAP S/4HANA Finance, “It allows bringing data from General Ledger, Asset Accounting, Material Ledger, Controlling (Including coding block & CO-PA) into one journal. By this one master stroke, SAP has overcome the need of reconciliation (FI & CO), has overcome the need of settlement (All cost elements, including secondary cost elements are G/L accounts) & has done away with index tables /aggregate tables.”

This has a direct impact on presentation of data as you have the ability to utilise BI, Fiori and SAP HANA Live content far greater in S/4HANA Finance than in the previous ECC version. 

What Isn’t SAP HANA?

Haroon said “there are myths about SAP HANA which are wrong. Two of them are:

  1. It’s just a database/ SAP appliance. It is an entire ecosystem.
  2. It’s very expensive. It is true if you look at the upfront costs but it if take into consideration the long term return, it is far greater than was has been invested.”

Preparation for implementation: what you need to know

It is not going to be a conventional finance implementation. The business and implementers have to really understand the technical architecture. It’s not just one big table carrying everything, you have to evaluate every bit of data going into the system for the best presentation.

You might be used to building processes and then doing the reporting around that. In S/4 HANA, you need to evaluate the information needs and then align the processes. The business users will learn that some things they are used to will go away. Change management is essential as there will be significant adaptations for business users. Haroon said, “SAP recommends an account-based COPA which is always reconciled. It has more detailed information in terms of accounts and value fields and there are no summarizations required. People who have previously worked with costing COPA will find this change is a little painful but they will gain benefits such as no reconciliation requirements and the ability to report quickly.”

SAP has provided new ways to bring information to account-based COPA, which highlight new concepts to evaluate what information is required and build processes and reports. “Previously we used to bring information from COPA. Now we have too much information available” which is good but can be confusing for the users and business.

Different approaches for different implementations:

  1. If you are doing a Greenfield implementation or an upgrade without migration, the challenges exist mainly in process definition. Haroon added “We had challenges in process definitions as information processing is challenging. Partly it’s because if a client is using SAP BW or embedded BW, the sourcing of information as well as data footprint impacts have to be considered.” A clear strategy will be required on what reports will be used, which reporting platform will be used.
  2. The next biggest challenge will be around data migration. If you are coming from a classic General Ledger (GL), serious thinking is required on New GL and document splitting. If you are coming from a New GL environment data migration will be a more straight forward process.
  3. If you are doing a migration project then a full migration approach needs to be considered. A similar scenario example would be New GL migration projects when ECC was introduced.

Migration will be carried out in 3 steps :

  • Prepare the system
  • Execution of migration
  • Post migration activities

As a result configuration, transactional data and balances and migration of code and customer enhancements is carried out.

An additional option, where a client may require running legacy SAP system in parallel to a new release from SAP, Central Finance is available now to bring legacy data into the new SAP environment. Central Finance can be used on top of a legacy environment for reporting purposes and can source data from multiple systems whether they are SAP or non-SAP.

Cash Management is also revamped in S/4HANA Finance and provides new look liquidity forecasting, cash position, bank management and treasury processes. Additional process design efforts would be required in this space. “Data input, process transaction remain the same. What changes is the system architecture under the hood. Ultimately reporting is the improved by miles.”

“From an implementation point of view it would be unwise to implement ECC now. If you upgrading or doing a new implementation the future is SAP HANA.”

User experience must be considered when migrating. SAP have a number of tools to help give the user a better experience. The frontend tools that are recommended with S/4HANA Finance are SAP NWBC (NetWeaver Business Client), Fiori, Lumira and SAP Screen Personas. “I expect classic GUI to be phased out”.  NWBC is used to run standard transactions, Fiori to put that information onto tablets and phones, Lumira helps make even the ugliest of data sources more pleasing to the eye and easy to understand. Similarly when the business want to customise to their personal requirements they can use SAP Screen Personas and it can be faster and easier than developing custom applications. 

Conclusion

Haroon said, “From my project experience this exercise would take a lot of effort and thinking. In a nutshell when handed over to the business they will require additional training on user interface, navigation and education would be required to understand the new architecture”

To make S/4HANA Finance simple, org structures must be simplified. For example chart of accounts, profit centres and cost centres need to be redefined. Reporting is now more powerful and we don’t need complex over engineered organisational structure designs.

From a future perspective once S/4HANA Logistics and S/4HANA HR will be introduced into the full S/4HANA suite, integration of S/4HANA Finance with other modules will be improved.

Pre Checks

  • Go through the release notes
  • Understand what is and what is not available (SAP products and solutions)
  • Industry solutions, which are restricted
  • Country specific solutions, which are restricted
  • The future roadmap of SAP

Cloud or On Premise

Companies have the options of running Cloud, On Premise, or a mixture of both. Depending on your organisation, industry or country, your options may be restricted. If you have the choice, Cloud is often cheaper with fewer maintenance costs. With the growing awareness and appetite for Cloud the space is getting bigger as companies like Amazon (AWS), Microsoft (Azure) are building regional Clouds offering more options to the market. 

The why?

If you are a CIO and have KPIs you want to monitor, you can have a Fiori dashboard based on SAP HANA Live. This will give you real-time, not close to real-time but “really real-time” data!” SAP HANA has smashed the difference between OLAP and OLTP. Everything is now on one database.

“S/4HANA Finance is becoming something very beautiful. It is a lot easier to provide the information to the business”. ECC was a very mature product and S/4HANA Finance has added on top of a robust presentation.”

SAP already have a number of customers up and running with S/4HANA. For example “UNIORG has better alignment between finance and controlling, faster and easier reporting, and a continuous closing process.”

Per SAP Insider, “Convergent is using SAP S/4HANA and SAP S/4HANA Finance to manage rapid, 200% growth. The company went live in just 3 months – and has already reduced days sales outstanding (DSO) and set up real-time invoicing”.

Asian Paints — the largest paint company in India, “look forward to delivering new capabilities of real-time transactions with analytics to the entire organization and reworking the way that we look at our product line profitability, our geographic profitability, and most importantly, the global consolidation of accounts on this reimagined platform.”

The Users

I have spoken to numerous specialists about S/4HANA Finance. While there are many benefits. One problem that you will have is not everyone likes change. From the information I have gathered on the new implementations, one thing stands out: do not forget about the users.

The future

To borrow a phrase, “Tomorrow will be nothing like today.” Real-time data means more informed decisions can be made. The business landscape is changing and this presents opportunities. How will they be taken?  

 Acknowledgement:

I would like to thank Haroon Arshad, currently the SAP Solution Lead Finance on an S/4HANA Finance implementation for his contribution.

https://scn.sap.com/community/simple-finance/blog/2015/10/19/sap-s4-hana-simple-finance-simplified

http://sapinsider.wispubs.com/Assets/Articles/2015/July/IP-digital-transformations-with-SAP-S4HANA

 

To find out more about Ricki. Why not visit his bio page to learn more. There you will find his up to date jobs list and social media streams.

 

One Comments

  • Gout March 12, 2016 at 8:24 am Reply

    Outstanding post however , I was wanting to know if
    you could write a litte more on this subject? I’d be very
    thankful if you could elaborate a little bit further.
    Many thanks!

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