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S/4 Hana Finance Core Competence

Finance plays a fundamental role in the transformation to a digital company. It is essential that those responsible for finance are involved in the changeover to SAP S/4 - this is where all the threads come together.
Holger Dunkel, Consilio
September 11, 2023
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This text has been automatically translated from German to English.

SAP users are currently facing two major challenges: On the one hand, SAP has scheduled the mainstream end of maintenance for legacy systems for 2027, and on the other hand, current requirements for enterprise resource planning systems can no longer be satisfactorily mapped with SAP's classic ECC. In order to remain competitive and at the same time anchor the idea of digitization in the DNA of one's own organization, the switch to S/4 Hana is mandatory. However, the changeover is considered to be complex and demanding, as it affects the finance area to a large extent. In addition, there are several migration strategies to choose from.

Recognize S/4 as an opportunity


The switch to S/4 Hana offers companies simplified, streamlined processes and a basis for new technologies such as cloud applications, among other things, thanks to the new data model and the return to the standard. This enables the optimization of the organizational structure and internal processes through harmonized structures, the unbundling of the IT architecture, and the faster implementation of innovative functions. Finance is a special case in the transformation because some innovations are mandatory under SAP S/4. This unsettles many decision-makers. SAP partners such as Consilio have extensive expertise in the finance area and bring in-house transformation methodologies such as "SAP Activate Tailored by Consilio" into the transformation as a project accelerator, which helps to overcome these hurdles. In projects, some top issues have emerged with customers.

Margin Analysis


SAP has provided the CO-PA (Controlling/Profitability Analysis, Profitability Analysis) the two methods accounting and costing-based profitability analysis as application for the profit and loss and market segment accounting. They can be used in parallel and enable an EBIT(DA) presentation according to the cost of sales method (UCT or IFRS).

What is the path for users who already use or plan to use costing-based or accounting-based Profitability Analysis? 

The comprehensive analysis in the Explore phase of S/4 transformation projects clarifies whether margin analysis already fully covers the requirements - especially in group reporting - or whether imputed profitability analysis will continue to be used. In general, the following applies: Customers who already have a very customer-specific imputed CO-PA in the ECC system should analyze very precisely in advance whether margin analysis covers their requirements.

Companies that do not use Profitability Analysis or have only used the SAP standard should implement Margin Analysis in order to benefit from SAP innovations in the future. If the strategy is not yet clear, both costing-based and accounting-based (margin analysis) profitability analysis should be activated during implementation. Important: In cloud-based solutions, only Margin Analysis is still available.

Material ledger


As a sub-ledger in the Universal Journal, the Material Ledger (ML) becomes the sole source of inventory and material valuation. It enables the presentation in different currency types as well as an actual costing over all stages of production costs including price updates. It also makes material valuation more transparent and accurate by enabling line-item recording of all material movements such as goods receipts or invoice receipts.

Does the Material Ledger need to be implemented and used when moving to SAP S/4 Hana? 

The activation and use of the Material Ledger (ML) is mandatory for all companies with material valuation and inventory management. The activation obligation applies, among other things, to parallel currency and real-time analysis. Optionally, parallel valuation and actual costing can also be implemented and used.

Companies that want to switch to S/4 must therefore deal with the use and functionalities of the ML and should already develop a concept in advance - regardless of whether they have already used the ML under ECC or not. Reason: A subsequent change of various settings of the material ledger, especially regarding parallel currencies, is not possible without completely rebuilding the system.

Parallel accounting

The new general ledger (NewGL) has already been available since SAP ERP/ECC 6.0. Advantages include the possibility of parallel mapping of accounting rules in ledgers, real-time integration of CO into FI, accounting options at profit center, segment and business area level by means of document splitting, acceleration of period-end closing or greater flexibility of customer-specific fields. The new general ledger is standard under S/4, and the use of the account solution is still possible.

Should the new general ledger be implemented in the ECC system before the S/4 Hana transformation or only in the course of the change?

The right time for the changeover, before or during the switch to S/4, is basically determined by two factors: complexity and capacity. This means that only a precise analysis or a preliminary study will provide information about the right time for the introduction.

AA real-time integration


New Asset Accounting has been available from SAP since EHP7 and will become mandatory with S/4. Core aspects of the solution include better support for parallel accounting and real-time integration for multiple accounting standards. The proven account solution will continue to be supported. Should the conversion already be carried out in the SAP ECC system or only in the course of the S/4 transformation?

Those who are currently using the classic or new general ledger in ECC and want to introduce Asset Accounting for the first time should in any case activate the new solution directly. Alternatively, if you are already using classic Asset Accounting in the SAP ECC environment in conjunction with the new General Ledger, but would like to take advantage of the benefits of AA real-time integration into the General Ledger from a technical perspective, it may also be worthwhile to activate new Asset Accounting ahead of time.

The following applies to both scenarios: A preliminary project significantly reduces the complexity of the subsequent S/4 migration if the new asset accounting is already used in ECC. However, the full range of functions of the new FI-AA is only available with the new data model in S/4 Hana.

https://e3mag.com/partners/consilio-it-solutions-gmbh/
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Holger Dunkel, Consilio

Holger Dunkel is Partner Finance at Consilio


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Working on the SAP basis is crucial for successful S/4 conversion. 

This gives the Competence Center strategic importance for existing SAP customers. Regardless of the S/4 Hana operating model, topics such as Automation, Monitoring, Security, Application Lifecycle Management and Data Management the basis for S/4 operations.

For the second time, E3 magazine is organizing a summit for the SAP community in Salzburg to provide comprehensive information on all aspects of S/4 Hana groundwork. All information about the event can be found here:

SAP Competence Center Summit 2024

Venue

Event Room, FourSide Hotel Salzburg,
At the exhibition center 2,
A-5020 Salzburg

Event date

June 5 and 6, 2024

Regular ticket:

€ 590 excl. VAT

Venue

Event Room, Hotel Hilton Heidelberg,
Kurfürstenanlage 1,
69115 Heidelberg

Event date

28 and 29 February 2024

Tickets

Regular ticket
EUR 590 excl. VAT
The organizer is the E3 magazine of the publishing house B4Bmedia.net AG. The presentations will be accompanied by an exhibition of selected SAP partners. The ticket price includes the attendance of all lectures of the Steampunk and BTP Summit 2024, the visit of the exhibition area, the participation in the evening event as well as the catering during the official program. The lecture program and the list of exhibitors and sponsors (SAP partners) will be published on this website in due time.