Computerized Accounting in an ERP System

This report discusses the usefulness of SAP S/4HANA Finance in managing operational and financial data in enterprises. It explores the differences between SAP S/4HANA Finance and SAP ERP FICO, and highlights the benefits it offers for businesses. The report also includes case studies of companies facing challenges in adopting this accounting software.

Computerized Accounting in an ERP System
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Executive Summary
This report has been carried for the purpose of depicting the usefulness of SAP
S/4HANA Finance for enterprises in managing their different operational and financial data. The
historical overview conducted in the context of the accounting software has outlines its various
characteristics and features. The major difference that is present between the SAP S/4HANA
finance and the current SAP ERP FICO is that it enables in centralizing all the financing
activities and creates real time usage financial data. The major benefit of this accounting
software is that it helps in simplifying the accounting and financial data that makes it more
manageable and controllable in decision-making. The case studies of IBM and Aequs that have
recently adopted the use of S/4HANA from Fico has depicted that there are various challenges in
relation to integration of data, technical and architectural complexities that requires to be met for
the adoption of this accounting software.
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Contents
Introduction......................................................................................................................................4
Part 1: Brief historical Overview of SAP S/4HANA Finance.........................................................4
Part 2: Difference between SAP S/4HANA Finance and current SAP ERP FICO.........................5
Part 3: Benefits of SAP S/4HANA Finance for business................................................................7
Part 4: Case Studies of Companies and the Issues Faced by them in Migrating to SAP S/4HANA
.........................................................................................................................................................9
Conclusion.....................................................................................................................................12
References......................................................................................................................................13
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Introduction
This report is developed for the purpose of demonstrating the importance and
significance of SAP S/4HANA for creating a consolidated view of all the operational and
financial data of businesses. The use of this ERP system for businesses in improving the
flexibility and reporting of financing activities with providing the automation features has been
discussed in the report. The report in the context of SAP S/4HANA accounting software has
presented discussion about its historical overview, its difference from the SAP ERP FICO and
the different benefits that are provided by the software for improving the financing activities for
the businesses. This is followed by providing example of the two case studies of companies by
providing the issues that are being faced by them in integrating the use of SAP S/4HANA.
Part 1: Brief chronicled Outline of SAP S/4HANA Finance
A business can conduct its various operational and financial processes in a simplified
format with SAP S/4 HANA in the digital economy. The mindset behind creating a software
SAP was to metamorphose the world of information technology and changing the way of
running the business for forever. It has presently having 43 years of track record of innovation
and building loyal customers up to 2, 91,000 company’s vision. After achieving the success, SAP
has been charged up with evolving spirit that motivates its developers to transform the
information technology industry (Barua, 2016). SAP has been developed for all size of business
and it helps in compressing complexity in business, find new favorable options for new things
and expand the business to keep moving in the competitive market.
SAP S/4HANA finance is earlier recognized as SAP Simple Finance. It has
characteristics like a straight guideline, stable design and online evaluation. SAP S/4HANA is
SAP ERP 6.0 suite. It is able to passon an SAP HANA Database. To reach at complete SAP
Hana’s caliber few components of FI/CO suite have been recorded. SAP Simple Finance
(version 1.0) was a step further for financial accounting module to SAP HANA optimized
version. In September 2015 SAP Simple Finance has been replaced with SAP S/4HANA Finance
(Muzumdar, 2018).
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Being a part of SAP S/4HANA suite, key components of SAP S/4HANA required to be
discussed. The four components are mentioned below:
 The Functional / Core component: SAP imparts many finance potential and improvements as
core component. To switch or upgrade to SAP S/4HANA the person should carrySAP ERP
Central Component (ECC) 6.0, SAP HANA version 1.0, SAP Net Weaver 7.4 and
Enhancement Package 7. An up gradation of ECC 6.0 is up gradation of assignable tables.
 The user experience (UX) /Presentation component: The functional feature is communicated
by The SAP Fiori – based GUI component through handy Fiori screens. SAP Net Weaver 7.4
and SAP Gateway version 2.0 will be required.
 The Reporting component: This element qualifies reporting and evaluation by the use of pre-
packaged HANA lives views. It is an optional component.
 App Component: For central financial decision makers, this component assembles analytical
applications in the financial suite(S/4 HANA Finance - An overview, 2017).
SAP S/4HANA is acknowledged as soul center of the entire business. It integrates internal
and external components in to one line structure to take it far away from tradition ERP. SAP
S/4HANA has made operations across all line of business digital so that one can analyses
business planning, prediction, execution on the basis of one source of information in real- time
on one system(Etemadi and Kazeminia, 2014).SAP S/4HANA works as a layer of complete
remedies in finance that fulfills all demands in the digital economy. SAP S/4HANA has all the
finance remedies and that is why it is a market ruling portfolio that is developed digitally. It
helps in archaic advantages of the SAP HANA platform.
Part 2: Distinctions between SAP S/4HANA Finance and current SAP ERP FICO
There exist major dissimilarities between current SAP ERP FICO and SAP S/4HANA
Finance. A business suite built on the top of the SAP memory platform is the SAP S/4HANA.
Having the Enterprise resource planning (ERP) capabilities wide various business areas like sale,
finance, human resource, procurement, supply chain etc. SAP S/4HANA has gained its own
importance among users.SAP S/4HANA Finance considered as a part of SAP S/4HANA suite
that particularly deals with solutions with respect to financial management. It entitles
companywide common view of financial data consistently to reduce the efforts required in
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reconciliation. It centralizes the finance to integrate numerous extremity data roots (Zainol,
Fernandez and Ahmad, 2017).
The first business finance application wasSAP S/4HANA Finance that is expanded on SAP S/4
HANA platform. SAP S/4HANA Finance eliminates conventional hurdles between debatable,
planned and systematicsources to provide immediate analysis and perception.SAP S/4HANA
Finance has focused on delivering best services in all industries by creating financial
professionals, Finance assistant, chief finance officer (CFO) and others. These persons should be
taken in accounting and taxation, risk and compliance, financing activities and treasury. SAP
S/4HANA Finance can be used all over the world by any kind of business.SAP S/4HANA
Finance owns the high dealing speed with consolidation characteristics of numerous financial
activities like financial, management accounting and non-financial accounting. According to
SAP SHANA, a speedy reconciliation of financial operations is possible like quarterly close. It
furnishes a sole cause of commercial truth in respect of business as a whole (El-Sayed and
Youssef, 2015).
On the other hand, SAP FICO is known as the key operational module in SAP ECC. It
enables a company to manage all the commercial data. The main goal of SAP FICO is to enable
companies to systematically manage and produce the reports and financial statements of the
company for reporting and analyticalpurpose. SAP FICO helps financial planners in executing an
effective business plan and make decisions. SAP FICO comprises of (2) two components, one is
SAP Finance (FI) and the other one is SAP Controlling (CO). SAP Finance (FI) tackles the
whole financial reporting and accounting whereas SAP Controlling (CO) aims at controlling
financial cost of planning and monitoring (Werner, 2017). Earlier these two modules were
introduced as separate module but they are so integrated that later on it is considered as one
module.
SAP FI component is applied for internal as well as external summarizing. The major
focus of this component is to track each financial transaction occurs and recorded by the entity
and then generate a correct report or financial statements as on the last date of the accounting
period. Key operations with SAP FI module are explained below.
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 Accounts Payable: Account payable is a sub component of SAP FI. It records all vendor
transactions and manages their accounts. Vendors account is maintained separately that
can be reconciled in real time in general ledger with updated figures whenever
transactions are recorded in vendors account. Posting of invoice and credit memos,
recording payments of invoice, down payments and generating vendor report are covered
in transactions in accounts payable(Wongsim, 2016).
 Account Receivable: Account receivable is a sub component of SAP FI. It records all
customer transactions and manages their accounts. Customers account is maintained
individually that is reconciled online in general ledger with updated figures whenever
transactions are recorded in customers account. Posting of invoices, credit memos,
receipts and generating reports are included in transactions in account receivables.
 Asset Accounting: All transactions related to a company’s assets are managed in asset
accounting. Whenever transactions are recorded in assets account, figures automatically
updated in reconciliation accounts in general ledger. Transactions covered in Asset
accounting is sale of asset, acquisition of assets, asset transfer, and revaluation of assets
and depreciation of asset (Ylä-Kujala et al., 2017).
 Bank Accounting: It tracks entire transactions occur with the financial institutions. All
the bank transactions recorded in the system are reconciled with the transactions stated in
bank statements.
Part 3: Merits of SAP S/4HANA Finance in respect of business
Some merits of SAP S/4HANA Finance in respect of business arediscussed below:
 SAP S/4HANA has generated stability across every line of businesses and has made a
reconciliation easy going by minimizing the number of errors.
 From batch to real time: It runs a very speedy financial closing. SAP S/4HANA is
basically created on SAP’s in memory platform. It reduces the time of lengthy batch
concentrated process to online processes for finance entities.
 Build confidence: SAP S/4HANA is a root to build confidence in the financial as well as
operational data (Fagbemi and Olaoye, 2016).
 Timely decision making: SAP S/4HANA enables timely and relevant decision making by
real- time apprehension without any delay.
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 Sole origin of truth: SAP S/4HANA Finance attributes comprehensive guide for finance
and management accounting. Data is once updated is accessed by all financing
applications. It speeds up the reconciliation of intercompany and improves its accuracy.
 Control over processes: SAP S/4HANA makes it able to have instant control over finance
processes and accounting results whether related to finance or management (Kristandl,
2017).
 No aggregation and Data duplication: All the finance applications work at the same level
communicating a thorough business apprehension. It identifies the cash movement
contribution by eliminating the redundancy of data collection.
 Evaluation of impact of business decision: SAP S/4HANA analyzes financial effects of
planned and calculated business decisions.
 Analytical and Assignable data Combined: SAP S/4HANA Finance gives perception
involving all financial data such as historical, current and forecasting data in to a
streamlineway. SAP S/4HANA Finance has pulled the old annual planning process
towards the online drastic planning (Pan and Seow, 2016).
 Performing financial methods: SAP S/4HANA is capable to perform strategic finance
and business planning by forecasting, simulation and performing what – if analysis of
financial and operational data.
 Smart Applications: The major finance activities have been consolidated with new
intelligent services, like loT, modern analytics and machine learning. For example SAP
S/4HANA Finance automatically matches payment with invoice by machine learning.
 Reduction in closing cost: SAP S/4HANA helps in reducing general ledger and closing
cost. It is found in studies that top quartile performing entities reach 26% fewer days to
the annual close than their competitors. It results in 61% reduction in closing and general
ledger cost (Perdana, Robb, Rohde and Birt, 2018).
 Non-disruptive replacements: The current operations will not going to be disrupted on
migration of SAP older version to SAP S/4HANA Finance.
 Centralized finance: Data can be run on Shared services model only if has centralized its
transactions and SAP S/4HANA is capable of running on the same model. SAP
S/4HANA Finance manages liquidity of all line of businesses centrally.
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 Complete and consistence choice: SAP S/4HANA Finance’s digital user experience,
disentangle data model and code line are compatible for both online and offline on
premise.
 Global coverage: SAP S/4HANA Finance includes all the key finance areas with more
than 62 country versions, 26 industries and 45 years of experience.
 Updating about regulatory compliance: SAP S/4HANA Finance makes sure updating
about the legal, regulatory and statutory compliance by entities.
 Consumer Grade – UI: SAP S/4HANA Finance enthusiastically accepts the SAP Fiori
design for finance applications to provide a pleasant experience to its consumers.
 Compliance and Enterprise risk with simplicity: SAP S/4HANA Finance reduces risk of
Frauds taking place in an entity through financial deliberate errors as it automates
enterprise risks and compliance. The frauds can be found and removed online before it
gets out of company’s control with the use of SAP S/4HANA Finance.
 Financial planning with account analysis: Financial Planners can make business decisions
freely in real time by using the updated software that is SAP S/4HANA Finance. It
provides a general planning model so that users can take advantage of the same
(Fehrenbacher and Djamasbi, 2017).
As such, it can be said that for a planned and predictive finance SAP S/4HANA is a
systematic tool. It gains multiple measurements of finance and operations wide real time
financial perception. It forecasts and creates models to analyze financial effects of various
business options on entity.
Part 4: Case Studies of Companies and the Issues Faced by them in Migrating to SAP
S/4HANA
IBM, an American multinational company, has undergone transition from SAP FICO to
SAP S/4HANA. The challenges that are being faced by the company in adopting the use of SAP
S/4HANA are discussed as follows:
Technical Complications
The migration from FICO to SAP S/4HANA is quite complex due to requirement of
additional source systems for centralizing the financing activities. The source systems require
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installing of data duplication components and also upgrading the functional level. Therefore,
carrying out such changes requires lot of time and money and can be stated as quite challenging
on the part of the company (Information and Communications Technology, 2018).
Architecture Modifications
This is the major challenges faced in adoption of S/4HANA ERP systems. This is
because the introduction of this new product requires installation of many components. These
component versions are released in a constant manner for making up gradation to S/4HANA.
The major changes have also been brought into the application programming interface of the
company such as adoption of new integration tolls within the different business departments. The
updates in the architecture are required before introductions of S/4HANA to avoid the possibility
of occurrence of system failure (Burgess and Paguio, 2016).
Adoption of Change
The implementation of major structural and functional changes within the business
operations by the adoption of S/4HANA requires gathering support from employees at all levels.
The company has to face change resistance from employees due to less knowledge regarding the
new product features and its use. In this context, there has been provided detailed knowledge
about the new product to the employees and managers at all levels to gain an understanding of its
superior functions and the ease of operations that could be achieved with its usage (SAP
S/4HANA Finance, 2018). The company has ensured to maintain proper communication during
the adoption of changes to providing understanding regarding the contribution of each person in
relation to achievement of the strategic goals and objectives.
Migration of Data
The migration of large data from FICO to S/4HANA is a problematic aspect for the
company. This requires developing a competent IT team having experts for adequately
conducting the process of data migration so that it remains protected. However, IBM is having a
SAP FICO system in place before upgrading it to S/4HANA. This facilitates in data migration
with the presence of similar protocols for execution and also compatibility between the data
interfaces (IBM Services, 2019).
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High Level of Custom Developments
The adoption of S/4HANA requires many new additional features to incorporate within the
old ERP system of SAP FICO. This requires modification or removal of several outdated
processes which is associated with different challenges as outlined below:
 Insufficient flexibility to adopt the changes is quite problematic due to associated costs
and requires high level of efforts on the part of the company
 Also, company has to incur high maintenance due to developing a highly customized
workplace which requires continual reviewing and monitoring for identifying the
problems (Carnero, 2015)
Creation of a Multi-Application Environment
The adoption of S/4HANA results in developing a complicated and interconnected
network of systems and applications for conducting the core business activities for the company.
This may be due to presence of different customized applications characterized by having
complicated network of applications and systems.
The challenges faced by Aequs for adopting SAP S/4HANA into its business processes
are discussed as follows:
Business Partner Growth
Aequs is undergoing transformation is ERP landscape by adoption of S/4HANA and is
partnering with India Software Solutions Pvt Ltd as its technology partner for upgrading its
business processes to the S/4HANA. However, it requires Aequs to restructure its business
model and work in partnership for achieving its stated strategic goals and objectives (ETCIO,
2019).
Integration of the Work Processes
It is also required on the part of the company to integrate and align its different
operational processes into a single platform for the application of SAP HANA. However, it can
be quite problematic for the company to collaborate on its different work processes and
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streamlining its various activities. It requires improving coordination across individual
departments for achieving the stated business goals and objectives.
Knowledge Transfer
It is also quite difficult on the part of the company to provide relevant training to the
employees so that they are able to work effectively on the new software features and
functionalities to ease up their different work roles and responsibilities. The development of
adequate training manual is quite complicated for the company as it would requires incurring
extra cost and time (Aduamoah, Yinghua, Anomah and Ahmed, 2017).
Sizing and migration Strategy
The development of optimal sizing proves to be a critical issue before the companies
undergoing the implementation of HANA. This is because it determines the architecture needs
and requires for conducting the process in an effective manner, Thus, it can be said that it is quite
challenging for the company to determine its optimal size and forecast the requires resources and
changes in the infrastructure which is directly linked to the budget considerations. There is need
for proper planning of all the business activities for conducting the project in a streamlined
manner. In addition to this, the major challenge that is present before the company to take
decisions relating to the adoption of on-premise, clod or hybrid strategy. This is dependent on the
security considerations of the organization and the maintenance capabilities of the infrastructure
(Ahmed, 2019).
As such, it can be illustrated from the case examples of the two companies that it is
necessary for business to develop proper planning and implementation strategies to overcome the
significant challenges associated with the introduction of S/4HANA ERP system into the
business processes.
Conclusion
As such, it can be said from the discussion held that business entities around the world
are placing larger emphasis on adoption of accounting software of SAP S/4HANA. This is
because it would lead in improving the operational efficiencies by streamlining the different
business processes and helps in improving the business performance to a large extent. It has also
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been discussed that businesses face significant challenges in adoption of HANA software related
to its technical and architectural complexities which can results in incurring higher costs and
money for the businesses. However, the benefits obtained with the adoption of the accounting
software provide motivation to the businesses in integrating its use.
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