“… enterprises are faced with the immediate need to embrace the digital age to match the new and evolving business models and offer decision makers with instant insight. “
SAP S/4HANA Finance allows an enterprise to create a consolidated view of all operational and financial data to offer flexible and easy reporting along with automation of processes. It also offers real-time analytics, simulations and forecasting with great user experience. Benefits of SAP S/4HANA include but is not limited to ‘single source of truth, faster forecasting and planning, ‘on the fly capacities’, new reporting and analytic support, global regulatory and compliance abilities across all languages, currencies and industries, faster month closing, integrated with Fiori etc.
Discuss these statements using case study examples (from literature searches) to demonstrate the benefits of SAP S/4HANA Finance.
Your paper should include the following areas:
- A brief historical overview of SAP S/4HANA Finance
- The difference between SAP S/4HANA Finance and current SAP ERP FICO
- What are the benefits of SAP S/4HANA Finance for businesses?
- Case Studies of companies and the issues they faced migrating to SAP S/4HANA Finance. (Minimum 2)
Solution
Introduction
It becomes very important for organizations to automate the financial processes for maximizing compliance, accuracy, and efficiency. SAP developed a financial application named SAP S/4HANA Finance in the ERP platform. This system is based on a set of interrelated set of financial management functions with the help of which companies can automate their financial management. The improvement of this new ERP software has brought changes in the way of managing financial transactions. These new changes enable the management to post the transactions and financial entries into a unified journal by replacing various individual ledgers. The main objective of this research paper is to evaluate the creation and functions of SAP S/4HANA Finance in the context of the success of businesses. This research report is based on different sections. The first section is based on a historical overview of this application Finance. The dissimilarity between the recent SAP ERP FICO and SAP S/4HANA Finance has been evaluated in the next section. The third section is based on identifying the key benefits of using SAP S/4HANA Finance. The last part of this research report is based on considering the case studies and their problems faced in implementing this software suite (Fahn et al., 2018)
Historical overview of SAP S/4HANA Finance
In 1972 the first product was launched in the market. The former product was based on the one-tier system. At the start, sFin was the term used for the reflection of innovations only that were developed by making changes in the underlying architecture of the ERP system of SAP. It had seen that the innovations made at the start were not appropriate to the scope of SAP S/4HANA Finance, so this was the reason that sFin was referred only to the innovations and re-architecting of the infrastructure of finance described in the innovations section of SAP S/4HANA Finance. After that, all innovations made in respect of SAP HANA were named as Smart Financials for a short period. When SAP announced SAP simple finance for the first time in at Sapphire 2014, than at the time the finance was considered as the first line of business to influence the proficiencies of SAP HANA. The announcement of SAP Simple Finance confirmed the availability solution in the SAP HANA Enterprise Cloud, which was based on a private cloud deployment model (left & Strahringer, 2018).
SAP Simple Finance was considered as a solution that encompasses portfolios like SAP GRC, SAP SAP EPM, and SAP ERP Financials. In this way, the entire scope of SAP solutions was based on SAP Simple Finance. The next generation business suit was announced by SAP S/4HANA in 2015 with the name of SAP S/4HANA Finance. In the context of moving towards SAP S/4HANA, SAP Simple Finance was considered as the first step. It had seen that start taken for moving towards similar types of process and architectural simplification by other lines of business. The main reason for renaming SAP Simple Finance as SAP S/4HANA Finance was to develop a steady naming in respect of all types of business lines, including sales, procurement, and manufacturing. The important aspect of this development of this ERP software is that entire SAP solutions portfolio for finance through all deployment modes (such as private, public, hybrid, premise cloud) is encompasses by it (Foerster & Golowko, 2018).
The difference between SAP S/4HANA Finance and current SAP ERP FICO
SAP S/4HANA Finance
A business suit developed on the HANA (in-memory platform) of SAP is known as S/4HANA. Basically, this suit is based on different levels of ERP capabilities to manage business areas such as supply chain, procurement, finance, sales, HR, and more.
The area of S/4HANA suite developed especially for dealing with the development of solutions for financial management is recognized as SAP S/4HANA Finance. It empowers:
- Consolidation of multiple sources of back-end data through central finance
- Creation of universal journal for controlling and financial data
- Minimization of efforts for reconciliation by developing one communal outlook of financial information and data.
The SAP S/4HANA Finance was developed for removing all existing customary barriers between organizational planning, and transactional systems and analytics. In this way, this software could be utilized for modeling of information and data, which eventually helps in the creation of forecasts. Some of the advanced features developed in it include real-time analytics, universal journals, and streamlines design. It is available in the market in both the cloud and premise versions. It is a part of S/4HANA suite, which made of four different parts (Collignon, 2017).
Current SAP ERP FICO
Central Component of SAP ERP is based on a central functional component known as SAP FICO, which helps the financial management of an organization to manage the financial data. The core function of SAP FICO is to help the management in management and creation of financial statements. The financial statements prepared with SAP FICO increase the effectiveness of decision-making, business planning, reporting, and analysis of performance. CO (SAP Controlling) and FI (SAP Finance) are two different modules of current SAP ERP FICO. Each of these components is used by the management for definite specific financial purposes and processes. Overall accounting practices and financial reporting are managed by SAP Finance (FI) while in contrast to it, the key role of SAP CO is based on the management of costs such as monitoring and planning costs. At the start, both of these modules were launched as separate from each other, but currently, they are tightly integrated due to which they are now referred to as one single module.
Although, it is considered as easy to find dissimilarities between current SAP ERP FICO and SAP S/4HANA Finance comparison among these is actually harder. The in-memory database known as SAP HANA, is used to store and process the financial data of the organization (Gaikwad & Bharathi, 2018).
Benefits of SAP S/4HANA Finance for businesses
The main focus of finance leaders in using SAP S/4HANA Finance is to get a better understanding and insight into the financial performance of their organization. It is a part of the next generation of technology, which enables the financial management of the company to automate the main processes of the company and to improve collaboration. This new development of SAP will increase the effectiveness of strategic decisions of finance leaders well beyond their basic financial responsibilities. This ERP software is deemed as a truly unique system of managing finance that helps in meeting the needs of organizations in the modern business environment. There are different levels of advantages of using and implementing this new software within the organization. Management of ERP system of an organization becomes easy because of advanced functionalities and characteristics developed in this ERP software Finance. Some major advantages of using SAP S4 HANA Finance are given below:
The tool of Best Combining: It is considered as the best tool for combining the data and attributes from managerial and financial accounting. In this way, it helps the companies to increase the closing process and period end reconciliation based on using real-time data.
Real-time Reports: The table of SAP S4 HANA contains important data related to finance. The intensity of the memory is used to produce detailed and continuous reports. This is the element that will eliminate the requirements of the group functions and replicate the information in different frameworks, such as business intelligence (Prifti et al., 2017).
Financial Close: The financial closes could be prepared by SAP S/4HANA Finance on an annual, by annual, quarterly and monthly basis. Instant visibility is provided by it that helps the managers in enhancing the credibility of decisions regarding analytics easy with numbers and trends.
Financial Planning: The role of S4 HANA Finance in financial planning is also very important because the financial process of the organization could be streamlined by accessing through the interface based on Microsoft Excel. The financial data could be transfer quickly and easily by automating data into S4 HANA Finance cloud (Nieuwenhuis et al., 2018).
New Asset Functionality: Another benefit of this ERP software is based on the progress of new asset accounting functionality existed and embedded in Financial Cloud Platform that will monitor the comparative evaluation of various resources with accounts and ledgers. It does not matter that management registers or records, and it tends to be effective. Real-time values are used for calculation.
Cash Management: Cash management feature is one of the important benefits of this software because it would simply manage the liquidity, short-term position, and bank accounts. Management has access to a toolkit that will help in cash management activity. In this way, working capital could be maximized (Alexander et al., 2018).
Case Studies of companies
Honda Australia
Honda Australia is operating based on two divisions that include power equipment and motorcycles and passenger vehicles. The company is facing difficulty in operating a unified business because of the disparate legacy ERP systems. The main factor behind that difficulty includes the time-consuming process and error-prone consolidation and manual process of Honda Australia. The management of Honda Australia decided to make the digital transformation to bring all business aspects together on a single platform. The decision was taken to replace the existing legacy operational applications of the company with SAP Automotive Enterprise Management and SAP S/4 HANA applications. The IT transformation was striated by Honda Australia in 2016 based on the objective of running the operations of a company with one system. The most important thing regarding the transformation made by Honda Australia was that it considered different SAP parts such as Manufacturing modules, Vehicle Distribution, Warranty, and finance. For example, the migration to this ERP software has brought the replacement of bespoke built legacy financial applications (Jones et al., 2018).
There were different levels of the issues faced by the company in bringing IT transformation with new SAP development. The first key problems faced by the company were the complexity associated with the implementation of SAP S/4 HANA applications. For this, there were requirements of support from the test and change management of Honda Australia along with the need for direct involvement of SAP in the form of system integration partner. Power equipment, motorcycle, and vehicle divisions were operating and independently running by Honda Australia in the context of both the IT and operational perspective. This was the main concern and challenge of implementing this new ERP application as it required the transformation of two systems and two IT teams into a single platform. A third key issue faced by the company was that management revealed that the company is currently facing problems with its legacy IT due to which cost and operational inefficiencies were increasing. The report indicated that the lack of skills of employees of Honda Australia to understand the highly complex nature of this new ERP software was a problem encountered during the migration. As SAP S/4 HANA applications such as financial management tool were new in the market, so it was expected by the company to bear the high cost of hiring professionals. In this way, the creation of a challenging environment was one of the focused issues faced by the company.
Microexcel
Microexcel is one of the well-known companies in the paint manufacturing industry. The company has adopted SAP S/4HANA Finance to establish a single platform that will develop unified operations. The decision was taken by the company based on certain issues that included inefficiencies and inaccuracies existed in the current legacy system of the company; heavy losses were experienced because of issues in fulfillment of orders and issues of well-managed training system within the company. The purpose of adoption of this new software Finance was based on integrating comprehensive reporting within the company for providing support to management in day-to-day business activities. It was realized by the management that business functions could be streamlined by implementing additional solutions and applications of SAP S/4HANA. There were certain problems faced by the company in migrating to new ERP software. The first key problem faced by the company was the poor planning because the management did not provide any level of details about the step taken by SAP management to implement SAP S/4HANA applications such as detail regarding project management plans and testing methods. These were the reasons that the analyst of the company was unable to comment on the situation of the company properly.
Lack of testing skills in the management was another key issue faced by the company. The management faced issues of finding highly skilled people or to implement a proper and well-managed training program. In respect of the implementation of this new ERP software, it is expected that timing is everything, but Microexcel management faced certain problems in getting the right timing during the migration. This became the reason for the delayed process of migration to SAP S/4HANA Finance. The report revealed that lack of understanding of the business cycle of the company and the advanced understanding of the impact of new ERP software on the organization was the key factor of creating issues in the migration process (Seino, 2019).
Conclusion
It is concluded that the features of SAP S/4HANA Finance are more than simple finance features. This new development of SAP is based on bringing a broader set of capabilities into a single and common table structure and platform. One of the foremost advantages concluded of using SAP S/4HANA Finance is that it works on tightly integrated components that work together by connecting. Another main advantage is that it is glued based on the universal journal. It is concluded that this new ERP software assists in the prevention of duplication of financial data and information. It is concluded by considering the case studies that this new application does not only help the companies in operational data and management accounting, but it enables the management to integrate finance into other operating activities and aspects such as HR, procurement, manufacturing, service, sales, and marketing.
References
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Fahn, S. et al., 2018. SAP® S/4HANA Finance–Ein Akzelerator für diedigitale Transformation im Finanzbereich? Controlling, 30(5), pp.54-59.
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