Benefits Of SAP S/4HANA Finance: Case Studies And Differences From SAP ERP FICO

Historical Overview of SAP S/4HANA Finance

In September 2015, SAP S/4 HANA was launched making SAP Simple Finance an obsolete system. SAP S/4 HANA is a business application that is designed to simplify the data models, no indices, no aggregates, etc. To have a deeper understanding of the process let us discuss the components of Sap S/4 HANA (Anon, 2019).

 Core Module: As the part of the functional/ core component, SAP provides various enhancements as well as includes various financial capabilities.

User Experience Component: In this module one can interact with the core component with the help of user friendly Fiori Screens.

Analytical Component: This is an optional component available in the system. It enables the user to have real-time access to the reports and analytics with help of using pre-packed HANA Live views.

App Component: This component is to assist the key decision maker of an organisation with the help of various financial applications available in the Financial Suite (James , 2018).

This report discusses the reason that resulted in innovation of SAP S/4 HANA. It also elaborates the benefits and the migration process of this new business suite.

SAP has been used around the globe for more than two decades; it is one of the efficient digital business frameworks to simplify complex business and IT challenges. We can learn the importance of SAP from its success in the business environment. Evolution and innovation is a continuous process in the economy, there is constant development in the field of connectivity, cloud computing, supercomputing, robotics and artificial intelligence. With this trend to work constantly to simply the process, SAP has advanced the digital framework to assist their users in the innovation (SAP Technology, 2017).

SAP has also developed and launched SAP HANA in 2011, as the next-generation innovation in the memory platform to facilitate the customer’s needs and to provide them real time access to the data and reports (Ingo’s Classroom, 2017).

SAP introduced yet another product powered by SAP HANA in January 2013, SAP Business Suite. SAP business suite was designed to simplify the running in the system and to help the companies accessing the real-time business. It is the only system, which brings business transaction and analytics together under a single memory platform (Invenio Business Solutions, 2019 a).

In June 2014, SAP with its product SAP Simple Finance ran by SAP HANA focused upon the users and business that were able to access real-time information by removing technical jargons by solving aggregates and redundancies (Denecken, (2015).

Difference between SAP S/4HANA Finance and current SAP ERP FICO

SAP continued to develop and innovate to build a new application on SAP HANNA to work upon new business process and modules. SAP HANA application aims for business leveraging to cater various needs of the company.

To precede ahead SAP ERP system became too loaded and bulky due to extensive table content and duplication, which was overwhelming for the ERP system. Further innovating SAP launched another next-generation business suite known as SAP Business Suite 4 HANA or SAP S/4 HANA with goal to use all benefits of in-memory database. It was SAP’s largest innovation since SAP R/3. SAP S/4HANA business suite is designed with “Red Dot Award for Design Concept” and with modern user experience SAP Fiori, based on the highly advanced memory system (ERP Scan, 2018).

Database

SAP ERP is different from the SAP S/4 HANA as it can run from various databases such as Oracle, IBM, DB2 etc. whereas SAP S/4 HANA is only powered by HANA database, which helps to have advantage of its memory and design principle. As compared to the traditional databases, which retrieve their data from the hard disk, SAP S/4 HANA fetches the data faster from HANA in-memory. We can find OLTP and OLAP capabilities with in the same system in this business suite. This suite requires only the affected columns to be read in the query, which increases the speed in accessing the column-based tables. It also provides better compression of data as it compares distinctive values to rows (Computerworlduk, 2017).

New functional features

There are various new functional capabilities available in the new SAP business Suite and in its own database HANA. These features enable easy and faster working in the system. Some of these new features are SAP Cash Management, BPC Optimized and Central Finance. However to enable these features we require additional licences.

In SAP S/4 HANA both primary and secondary cost element are now combined into GL accounts. Traditional SAP has its CO primary cost element mapped into FI GL accounts whereas in the new business suite only one field is used to record both the cost element and GL accounts. It also results in elimination of reconciliation process as required in the case of CO to FI. A new relevant category is used to maintain both primary and secondary cost element in the SAP /4 HANA under FS00 (Kaar Technologies, 2018).

GL

The user can observe a similar data structure in the SAP S/4 HANA and SAP ERP.  The users working on the traditional GL need not use parallel functionality or the document split whereas in the new GL offers parallel functionality upon the prerequisite on the New Asset Accounting (Roy, 2016).

Benefits of SAP S/4HANA Finance for Businesses

Custom Code

In the SAP S/4 HANA custom reports functions with any disruption. Due to a special setting made in the new business suite at database, interface level which enables to redirect the custom code read operation to compatibility views.

SAP S/4 HANA has  introduced a new credit management system by the name of FSCM-CR, it is designed for the Financial Supply chain management’s credit management. It replaces the old credit management system FI-AR-CR available in the traditional SAP suite. The traditional SAP credit management system absorbs huge time and manual work in the credit control setting whereas new credit management system is designed on a distributed architecture, which enables the external credit rating agencies to interface. The new credit management system has added some advanced feature like on the authorization of credit limit auto-update on the master card, calculation of credit limits, automated risk scoring system and credit event’s workflow.

Global Trade Services

The foreign trade function in the old SAP version is substituted by Global Trade Services (GTS) in the SAP new business suite (Technology Evaluation Centers, 2019). Some of the added features in the new version of Global Trade Services are:

• Declaration of exports and imports is automated
• SAP S/4 HANA has a simplified and automated process designed to check the license. In the older system of SAP ECC the process of checking of licence was a lengthy and a complex process.
• It has also automated the process of embargo check which a times consuming and required manual effort in the older system.
• Sanctioned party list (SPL) Screening

A new accounting standard has been released by the Financial Accounting Standards Board (FASB), which had made the old system of recording and reporting revenue obsolete. Therefore, the SAP ECC SD revenue has been replaced by the SAP S/4 HANA’s Revenue accounting and reporting (RAR).  The old revenue recognition system is based upon the understanding of US GAAP (Generally Accepted Accounting Principle), FRS (Financial Reporting System) and IAS (International accounting Standards).  The new guidelines are also mentioned in the IFRS 15. The new system of revenue recognition provide the option recognising revenue on the occurrence of event such as goods  issue, delivery of goods together with regular way of recognising revenue. The new standards involve the following steps to recognise the revenue

• Identification of contract
• Separating of performance obligation
• Determining the price of the transaction
• Allocation of transaction price
• Recognising the revenue

Warehouse management

The older module of Warehouse Management was replaced by EWM in the SAP S/4 HANA that includes two options Native Integration (inbuilt in SAP S/4 HANA) and the sidecar approach, which is useful for decentralized deployment. Some of the benefits of EWM over the WM are:

• Processing the complex warehouse issues with the help of POSC (Process Oriented Storage Control)
• Labour management
• Boosted wave and replenishment process
• Easy and customisable functionality of RF
• Adding some value services such as kitting

The older version of SAP provides the Material Requirement Planning through the batch jobs. Whereas the material requirement planning in the SAP S/4 HANA occur on the real time as it is powered from SAP HANA. One primary difference that separate SAP S/4 HANA from SAP ECC ERP that it cannot run on storage location level, although it can run on the plant and MRP area level. The modern SAP suggest the usage of material requirement planning with the storage location level MRP scenarios whereas in the traditional SAP material requirement planning’s storage location can either be exclude or planned separately.

Case Studies of Companies and the Issues they Faced Migrating to SAP S/4HANA Finance

Universal Journal

The SAP S/4 HANA has a universal journal known as ACDOCA, which integrates data structure of various modules such as FI, CO, ML, CO-PA, and AA into a single line item. With the help of the universal journal there can now be single table eradicating the need of several index table and aggregates, which help in minimising the data footprint to a great extent. In SAP S/4 HANA material document are not stored in MKPF or MSEG instead they are recorded in MATDOC in which new line is generated for inventory management, eliminating 26+ tables.

Material Number Extension

In the Business Partner module of the SAP S/4 HANA the vendor maser data is integrated with customer master data. The integration of customer and vendor is a mandatory step for the modern SAP S/4 HANA. One of the major differences between the older and newer version of SAP is that the material number can now have 40 characters unlike the older version that can have only 18 characters.

Rebates

In SAP S/4 HANA settlement management are managed through Condition Contract whereas in traditional SAP ERP customer rebates where processed through existing SD.

Output Management

SAP S/4 HANA replaces the message determination of SAP ECC’s NAST table by BRF+ (Business rule framework plus). Adobe Document Server and Adobe Forms are the target architecture.

We work in a dynamic environment where there is a constant need of innovation to reduce the complexity in the process. The constant change results in change in the needs and outlook on technology of the existing users, potential consumers and employees (Espresso Tutorials Blogs, 2017). SAP S/4 HANA is the advance version of SAP ERP designed to make the process simpler and easily accessible. Some of the benefits of SAP Business Suite/4 HANA are discussed below:

Performance: SAP S/4 HANA provides a better performance as it exclusively powered by SAP HANA, which is based on memory computing database. By the use of SAP HANA, the function that usually take few minutes to complete a task can now be done in just few seconds, which help the user to attain the best business performance and to maximise customer satisfaction with the help of real time data. SAP S/4 HANA allows its users taking its full benefit as it provide exceptional speed in transaction, processing and reporting discarding all the other slower options (Invenio Business Solutions, 2019 b).

Agility: SAP S/4 HANA’s end user interface is designed with the help of SAP Fiori, which is known for its modern design, exceptional quality and simplification of the process for  its consumer experience. S/4 HANA is one of the top user-friendly, simple and flexible SAP solutions available in the market, it allows the user to easily access the overview pages, work lists and reports. With the simplification in the user interface, it allows an organisation to evolve eventually generate new revenues for the organisation, it also allows the users to connect at a deeper level and access lot and Big Data. This allows the organisation to understand the insights of the business by having an access to real time data, it also help the key decision makers to make important business decision.

Simplicity: SAP S/4 HANA can be best defined as simplicity. With the help of highly streamed solution available in the SAP business suite, it helps in simplification of the management and administration of the IT landscape. In the previous business system, company often faced issue regarding multiple batch-run dependencies, to solve these issue aggregate tables were eliminated, processing time was minimised. To ensure that the efforts are place on the right place, on the strategic growth the system were simplified to respond to transactions and queries. When integrated with business wide cloud implementation, SAP S/4 HANA enables in centralising the hardware and network resources, and assists the digital core to simplify the process, by being powered from HANA in-memory database (Chalfen, 2015).

Reduction of Cost: SAP S/4 HANA is an exceptionally cost efficient business solution, although it might seem difficult to understand on the surface. The primary reason that makes the system more cost efficient is that it integrates the analytical and transactional capabilities of multiple different systems onto a single location, which help in minimising the outflows and providing centralised control. It helps the user to save time and effort of an organisation by eliminating the need of manual reporting and providing far more precise and detailed report and results.

Innovation: There is a rapid change in the technology, which makes it difficult for a company to have an edge against the others. Enterprise have to work hard to stay ahead because merely “keeping up” just does not work in this environment and make the decision that provide us a edge in the future and help us to stay ahead than the others. SAP S/4 HANA works primarily upon the cloud computing, which is one of the forefront technologies available in the business environment. There is a wider platform available for the software vendors as a result of cloud adoption and it also provides a broad range of advanced products in the business organisation (NTT DATA, 2017).

Easy transition: To be a business product to be successful it important that it provide a smooth transition, hence it is necessary for SAP S/4 HANA to have a smooth and easy transition to cloud based future for it being truly successful. It is a quite challenging process to switch from traditional SAP ERP to SAP S/4 HANA. It is important for an organisation to weigh down the advantage of this business suite to take its full advantage in this competitive and dynamic business environment. However, SAP S/4 HANA is an enabling platform It is necessary to intensively evaluate the digital capabilities of this business suite in order to truly maximise its benefits from an upgrade (Savantis Solutions, 2018).

SAP S/4 HANA is improved version of SAP ERP powered by SAP HANA to improve the transaction speed. However, a financial product like SAP S/4 HANA and related technology require a strategy to plan, implement, deploy and take the full advantage to attain the goal of the organisation (Kumar, 2016). Following are the case studies of two companies to understand the issues faced by them in the process of migration.  

To utilize the full advantage of SAP S/4 HANA an organisation must take necessary step to minimise the complexity in the organisation. If we observe carefully, we will find out due to the unnecessary complexity in the organisation, we lose the full potential of the SAP ERP. The main reason of complexity in the organisation arise due to various issues such as lack of coordination, different process in the organisation and variety of products which adds on to the unnecessary complexity in the SAP system  like customisation of the organisation SAP solution or versions. The complexity in the SAP system makes it difficult to manage and even make the management information less efficient and less reliable. Some of the critical decisions that the Company has to make in the conversion of their business suite were: the initial releases, the edition options, add on features, technical prerequisites required and the business case (KPMG International Cooperative, 2016). To successfully implement a financial business suite in a company it has to go through various steps such as making a strategy, laying a roadmap, designing the structure, built and implementation.

Setting up of a business suite like SAP S/4 HANA require well thought strategy to take the full advantage of it. Some of the paths that KPMG followed to in the implementation of SAP business suite are:

• Having the knowledge existing of SAP application such as, number of users, details of the current licences and version. Understanding of the information smoothens the transformation process.
• To avail the full benefits of the SAP S/4 HANA an organisation should assess and reduce the complexity in the environment. KPMG has a methodology to understand the various complexity that arises in a business such as product complexity organisational complexity or the process complexity based on which it has designed a SAP system(KPMG International Cooperative, 2017).
• Designing the SAP module in such a way that it caters your current need as well as it aligns with the company’s future development.
• To avail the intended benefits of the SAP S/4 HANA it is important that the system should properly be linked with the management model
• Various tools such as BSR (business scenario recommendation), SAP VLM (SAP Value Lifecycle Manager) are available in t the SAP module to assist with the value analysis.  To provide the insights of the process and SAP environment, KPMG offers KPMG Facts 2-value” and asset based solutions.
• It is best to draft a business case to create an additional value from SAP S/4 HANA. The migration process is most benefitted id the data are simplified, standardised and integrated.  
• It is important to lay an overview of the project because it not only provides a better understanding but also the efforts of the individuals and overall cost depends upon it.
• Implication of new project not only affects the technology but it also influence various components of an organisation such as the employees, data, stakeholders, process and management information (KPMG International Cooperative, 2018).
• It is important for an organisation to define clear scope of the SAP process as it essential in the migration process and also in detailed designing of the SAP S/4 HANA process.
• Select the required level of detail
• It is also important to analyse the need of the organisation and determine whether the company needs to opt, the new business suite should be on cloud version or SAP HANA premises.   
• The company has option to disintegrate certain system from SAP S/4 HANA to reduce the complexity in an organisation. In order to choose the efficient model for integration of process a Scenario analysis is conducted.
• Migrating from one system to another is not a smooth process especially there is an integration of multiple SAP and non-SAP process, therefore there a multi-phase  plan that ensure clear phasing of the system.
• In the final step of migration, a focus is made upon the completion of business suite. The final business case can be made based on the selected migration scenario and the architecture design.

Group Lar has a vast international experience as real estate developer, investor and asset manager. It is managed by prestigious Spanish family from last 40 years. The group has extended its arm in seven countries now. Group Lar adopted SAP system in 2001, which was replaced by SAP S/4 HANA in 2014 because of its obsolescence.

In the process of migration from SAP ERP to SAP S/4 HANA the company faced few hurdles which was overcome by following the strategy and taking considerable steps.

The major challenge faced by the company was that it requires an IT application that provides a higher level of scalability and faster running process (Techedge, 2017).  

The company successfully migrated to new SAP system taking its full advantage. The company now financial system has consolidated all the activities of the organisation in a group in all the countries where they functions.  

Conclusion

This report about discusses the innovation of a new business suite of SAP S/4 HANA. It explains various module of SAP S/4 HANA. The constant change results in change in the needs and outlook on technology of the existing users, potential consumers and employees. SAP S/4 HANA is the advance version of SAP ERP designed to make the process simpler and easily accessible.

A financial product like SAP S/4 HANA and related technology require a strategy to plan, implement, deploy and take the full advantage to attain the goal of the organisation. The report provides a practical guide in defining the company’s ERP strategy in migration to SAP S/4 HANA with the help of two case studies. This provides assistance with the SAP execution, optimisation and strategic issues as it creates a link the between the IT structure and business with a focus on realizing value from your SAP investments.

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