• Vikram Fotani

Functional Benefits of SAP S/4 HANA Finance over SAP ECC

It's already been 3+ years now since SAP launched SAP S/4 HANA, a completely new product which is built on in memory platform SAP HANA, providing a new user interface in the form of SAP Fiori and available with On Premise/ On Cloud deployment options.


Many customers have already implemented SAP S/4 HANA and many others have started their journey towards it as they found a strong use case due to which their processes can be simplified using SAP S/4 HANA system.


But there are still many customers who are waiting for 2025 when SAP will stop supporting ECC systems and they will be left with no choice. This might be because customers are finding it difficult to understand the business benefits that S/4 will bring to their existing processes.


Although there are many technical benefits of SAP S/4 HANA like it provides faster transactional and analytical processing, reduces the data footprint of the company, provides a new user interface etc. but these are not the only benefits to the customers.


In this and the subsequent blogs in this series, I am trying to explain various different functional innovations possible with SAP S/4 HANA Finance.



1. Universal Journal for Accelerated Closing


There is a common complaint from customers using ECC that they are not able to close their books on time. This is mainly because of huge reconciliation effort required to reconcile FI and CO components.


In ECC, although there is a very tight and real time integration between FI and CO modules, but these modules still exist as 2 separate components. There is lots of effort required during period end closing in order to reconcile FI, CO, Asset Accounting and Material Ledger. Moreover, there are separate set of tables used in ECC to store FI, CO, AA, ML postings which unnecessarily increases the redundancy of data.


With SAP S/4 HANA, SAP has introduced a Universal Journal, which combines FI,CO, Asset Accounting, Material Ledger and Account based COPA components into ONE single component. Since all these components will now store data in one single table ACDOCA, there will not be any redundancy and no need of reconciliation. With this innovation, many period end activities will be eliminated and financial book can be closed on time. Moreover the time saved can be utilised to perform more productive tasks.


Not only this, since most of the Financial informations is stored in Universal Journal Table ACDOCA, it would provide more transparency and visibility as reporting would be much faster and easier compared to extracting the reports from multiple tables using joins.


2. Predictive Accounting


Accounting in ECC is always based on Financial Postings made during a particular period. There is additional effort required in order to create the sales predictions for the future periods based on the delivery schedules of Incoming Sales Orders.


With SAP S/4 HANA, one of the innovation is Predictive Accounting which is available in the form of Extension Ledger. With this functionality, just performing the one time small configuration, predictive sales results can be obtained and saved in Universal Journal which will help the business to see through future and plan and adjust their future strategies without any manual intervention.


3. Real Time Asset Accounting with multiple GAAPs


One of the major problem in ECC is to perform Asset Accounting for multiple GAAPs (Accounting Principles) as ECC allows only one GAAP (Book Depreciation Area) to get real time postings. All other GAAPs (Non Leading Depreciation Areas) are totally dependent on Book Depreciation Areas for its APC and Depreciation values. In order to reconcile multiple Accounting Principles, there is a need of Delta Depreciation Areas and period end accounting (ASKB) which is a time consuming exercise.


With New Asset Accounting in SAP S/4 HANA, it is now possible to have Real Time Postings to multiple GAAPs as all accounting principles can take their own values without any dependency on Book Depreciation Area in real time. Moreover Asset Transactions will also get posted and stored in Universal Journal Table ACDOCA which eliminates the need of time consuming reconciliation. It is also possible to post Asset Transaction specifically to a particular GAAP using new transaction AB01L which eliminates the need of Transaction Types restriction of Depreciation Area.


Even Deprecition Posting Transaction AFAB is simplified in SAP S/4 HANA. In ECC, during Depreciation Run, system doesn't allow to post the depreciation if even a single asset out of the group of asset has an error. We need to execute the Depreciation Run in Restart mode after fixing the underlying error.


This is no longer the case in S/4HANA. Other assets are allowed to post and only the assets that have errors will be held back.  We can even complete the rest of your month end close and move on to the next period in this situation. 


4. COGS/ Prod Variance Split in Account based COPA


During PGI, system debits the COGS account in Financial document, but if we want to know bifurcation of COGS into Material, Labor, Overhead expenses etc, that information is not available at all in Financial Accounting, we can get that bifurcation only in Cost based COPA.


Similarly during Production Variance, if we want to know this Variance coming from Quantity or Price Variance, Financial Accounting doesn't provide this information and we need to rely on Cost based COPA.


In SAP S/4 HANA, with Simplified Account based COPA, it is now possible to provide these bifurcation and post into Financial Accounting



COGS Split in SAP S/4 HANA

5. Integrated Business Planning for Finance


In ECC, we have different tools for different types of Finance planning like Expense Planning, Profitability Planning, P/L Planning etc which creates the silos in planning data and requires a separate data storage. If we are using BPC which is available on the separate box, we continuously need to transfer the master/ transactional data from ECC to BPC or vice versa and also the reports that we get are outdated (Not Realtime).


With SAP S/4 HANA, SAP introduced embedded BPC called as Integrated Business Planning for common financial planning. With embedded IBP, there is no need to transfer the data between ECC and BPC as the data is available in common database. It is possible to access the planning/ actual data in real time which allows faster planning cycles and advanced simulation functionalities powered by SAP HANA's in memory computing. It also provides Advanced User Experience and screens can be accessed from Microsoft Excel and SAP Fiori.


Summary


So, these were some of the functional benefits of SAP S/4 HANA Finance which can simplify the Financial processes of your organisation. I will keep on adding more benefits as they are release by SAP.


If you are a customer and interested in knowing how SAP S/4 HANA can help simplify your existing business processes, we can conduct the Assessment of your system and provide you the detailed report.

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