BAO6714 Semester 2 Research Report: SAP S/4HANA Finance Analysis

This report provides a comprehensive analysis of SAP S/4HANA Finance, an Enterprise Resource Planning (ERP) software. It begins with a brief historical overview of SAP S/4HANA, tracing its evolution from SAP HANA. The report then differentiates SAP S/4HANA Finance from current SAP ERP FICO,...Read More

Computerized Accounting in ERP 1
COMPUTERISED ACCOUNTING IN ERP
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Computerized Accounting in ERP 2
Computerised Accounting in ERP
Introduction
Computerised accounting is one of the areas that is invested highly in business firms.
Companies nowadays employ the use of Enterprise Resource Planning (ERP) to analyze and
store all financial data. ERP has helped in faster analysis and generation of financial reports.
This report on SAP S/4HANA outlines the importance and challenges of SAP software on
business, user experience in using SAP software, whether it is user-friendly or not is
described in the report. The companies using SAP software have considerable experience in
providing real-time reports and global regulatory and compliance abilities across all
languages. ERP software has helped the firms in closing monthly reports. The SAP software
has brought a lot of changes in the business environments, and provide an added advantage
on business firms over their competitors. This report on SAP S/4HANA contains a brief
history of the software, that is, when and where it was launched and whether it is a
multinational corporation. The significance of SAP S/4HANA in the business for examples, it
promotes real-time reporting and secure data management. On the other hand, the challenges
of implementing this application are outlined in the report.
Literature review
SAP S/4HANA is application software that was launched in February 2015 by SAP
SE Multinational Corporation in Germany as an upgrade of SAP HANA that was launched in
2013. This software is the fourth generation of SAP business enterprise resource planning.
This software application has promoted the processing of vast volumes of business
information in real time. SAP database concept has allowed writing off millions of codes
(Salmon& wild 2016, pg32). The ERP system has been made simple and easy to use in data
entry, storage, and processing of large volumes of transactional data. SAP has presented an

Computerized Accounting in ERP 3
opportunity for companies to reinvent their business models by utilizing internet of things.
SAP S/4HANA uses real-time processing of information; it doesn't require batch processing
of data. The clients can receive their data in real time for simulation and execution of their
data. SAP S/4HANA and SAP Fiori have interlinked together to provide user-friendly display
functions that allow easy use of SAP in a variety of devices (Ahmad & Ismsail, 2016:pg29).
SAP S/4HANA was initially referred to as SAP RF and was growing at a very high
rate. In the year 1992 SAP R2 was introduced and launched. By the year 1992 SAP R3 was
started as an update of the previous application. In the year 2004 SAP ERP was launched
which had more features and components that the business world required. The central
enterprise component was also another name given to SAP ERP which was well received in
the business world with many customers using it. SAP ERP gained popularity very fast which
prompted the company to develop new modules as the technology was changing quickly. The
system offered a variety of services (Densborn & Wagner, 2017: pg87). Due to the
advancement in technology, the SAP Company produced another module in 2015. The SAP
S/4HANA was launched as the most updated Enterprise Resource Planning of all time. This
SAP S/4HANA has many up to date modules which helps in the running of the business. The
primary objective of SAP S/4HANA is to run an enterprise resource planning which uses the
memory available to be effective and easy to use (Zhang, 2017, pg265).
In 2016, 5,400 clients had already implemented the use of SAP S/4HANA. Due to the
competition available in the market, SAP S/4HANA had to be reinvented to offer an added
advantage over other competitors like Microsoft or Oracle. The simplifications of business
processes have paved the way for live data to be accessed. Live data has enabled a secure
method of producing real-time reports. There were many transactions and news involved with
the previous versions of SAP ERP, but the new SAP S/4HANA reduced the number of
reports and sales required. It integrated most of the processes into one making them

Computerized Accounting in ERP 4
compound to reduce the number of reports generated. The database storage is only exclusive
to SAP software only, unlike the previous versions which supported databases form other
companies. The use of only SAP database saves the cost of purchasing databases from other
companies. SAP S/4HANA
SAP S/4HANA is divided into several logistics and modules which simplifies the
different departments of business environments. The first module is the inventory
management; this module of enterprise management gives a simplified information model
which helps in tracking inventory in the business firm. Inventory management outline what,
when and how the stock is taken in the company. It simplifies the manual checking of stock.
Procurement is another module of enterprise management in SAP, and it has increased the
efficiency of the procurement officer in procuring and payment of the suppliers. There is
efficient management of what was purchased and the amount of the products. Reports from
the procurement officer can easily be generated with the help of SAP. Material requirements
planning and order management are modules of enterprise management in SAP S/4HANA.
The Difference Between SAP S/4HANA Finance and Current SAP ERP FICO
SAP FICO enables business firms to manage and organize all financial data and
information by generating financial statements for reporting and analysis by the business
management. It is divvied ton two units, SAP FI for Finance and SAP CO, which stands for
SAP controlling. SAP S/4HANA is only one unit which supports only the finance option.
SAP Finance (FI) helps in business financial reporting, that is generating of all the financial
statements required by the company. It is also involved in the accounting department of the
business firm (Pattanayak, 2017: pp214). On the other hand, SAP Controlling (CO) is
involved in the planning and monitoring of the company income and expenses. SAP FI and
SAP CO were launched as different modules while SAP S/4HANA was launched as one
module containing different units in it for processing and analysing information. SAP FICO

Computerized Accounting in ERP 5
worked as different units combined, but SAP S/4HANA works as one unit (Yaftian & Mihret,
2017:pg12)
The SAP FI modules include: account receivables unit, general ledger, accounts
payable, asset accounting and fund management amongst other groups. The asset accounting
module manages all the operations that are related to the organizational assets, that is,
acquisition or disposal of an asset. The SAP CO units include the following: cost elements,
profit analysis, and product costing. This unit is mostly used by the top management of the
company in the analysis of profits and other related expenditure. The above arguments show
that SAP FICO worked separately in producing several reports but in SAP S/4HANA all the
units are integrated together to allow real-time analysis provision of reports. The reports will
be easily generated because all the data required by the software for analysis is readily
available in the same place (Sachan &Jain, 2018:214).
One of the significant elements of SAP S/4HANA is the SAP Fiori function which
promotes user-friendliness of the software. This has enabled access to the software form
desktop computers, mobiles devices or even laptops. SAP FICO does not have such feature in
it. Even though it produces the same result, SAP S/4HANA is more user-friendly than SAP
FICO. In November 2015, SAP S/4HANA introduced another business module called
Materials Management and Operations, and this unit helps in the management of inventories
and procurement of company's stock. In January 2018, human capital management was
integrated by SAP S/4HANA as one of the new modules to manage the human resource, on
the other hand, SAP, FICO has no recent update. 4HANA software has integrated its module
into one whole software application which helps in faster analysis of data (Maheswari, 2017:
254).

Computerized Accounting in ERP 6
Benefits of SAP S/4HANA Finance for Businesses
SAP S/4HANA have brought a lot of profits into the business world, and the
enterprise resource planning has changed how business data is being processed. Both
financial and managerial accounting has been combined for secure and faster processing of
information. Real-time processing of data has led to the availability of crucial information for
decision making. The SAP S/4HANA has sped up the process of decision making by the top
management for proper running of the business organization. Because of SAP S/4HANA,
there is a universal journal entry which has led to the easy reconciliation of financial
transactions (Bardhan & dudgeon, 2017: pg255). For example, a manufacturing company in
the Netherlands, Lyondellbasell, used this software in making the decision. On June 2015,
during a board meeting, some financial statements were lost, and the board had demanded
them. Due to the availability of this software, the finance officer was able to process the same
information within a quick time and submitted the same to the board. Therefore, SAP
S/4HANA has helped companies in processing data in real time and accurately
(Bhattacharjee &Vazquez, 2017: 14).
SAP has been working for years to solve Complex Information Technology and
business problems in the business platform. The launch of SAP S/4HANA has brought a
significant change in the operational and transactional processes of the business. The business
environment is evolving rapidly with technological trends in cyber security and cloud
computing which has prompted the differences in ways of conducting business transactions
(Ptak &Schragenheim 2016:36). Business firms innovate how they do their operations to
cope with the changing business environments. SAP recognized the gap in the global
business and developed a digital framework which helps their clients do business in a safer
and secure environment. SAP has promoted their clients to do transactions in a digital way
whereby there are easy storage and analysis of business data (Antero, 2015:pg65).

Computerized Accounting in ERP 7
Efficient reporting is another benefit of using SAP S/4HANA. The accuracy of the
financial report is one of the most critical parts of the business. The database table has all the
data that allows the software to compute and provide accurate reports in real-time. There is
no data replication because it is being processed in real-time and therefore there is no
requirement of batch processing (Kumar, 2016:89). Due to the accuracy and availability of
financial reports, the business can enjoy faster financial closing. The closing of financial;
periods, e.g., Annually, semi-annually, quarterly or even monthly, it has been made easy, and
the finance officer can close the period with ease. Statement of comprehensive income and
that of the financial position that is required in decision making is readily available.
Asset accounting has been improved, and there is no recording of depreciation value
because SAP S/4HANA has brought in a new module of asset valuation. The use of asset
accounting module efficiently manages Acquisition, depreciation, and disposal of assets
without the confusion of the company day to day business. Liquidity management component
has replaced the cash management. A business firm can manage short-term cash positions
and ensures that there is no or little theft of company’s cash (Papageorgiu, 2014: 77). In the
recent year, most companies lost a lot of cash due to theft by the employees, but with SAP
S/4HANA all the liquid can be traced to the person who withdrew the money. This software
promotes faster tracking of the money; hence there is no loss for the business. Ego
pharmaceutical company in Australia lost millions of dollars before integrating SAP
S/4HANA. The employees were able to sell the drugs for their benefit without the company's
knowledge. They used the back door in selling the stock because the company was not in a
position to trace their share. When SAP S/4HANA was applied in the management of the
financial sector in the company, there were no losses experienced since then. Inventory
management has helped the company trace their stock without losses (Kurbel, 2016:369).

Computerized Accounting in ERP 8
The flexibility of SAP S/4HANA in the business world is a significant improvement
in the company's system. Finance officer can get the financial reports faster without the
lengthy, time-consuming reconciliations. The software generates both financial and
managerial statements in a way that it saves time (Amahalu & cinyere, 2017). During an
emergency meeting, the reports can easily be generated from the system without any
constraints. The use of Fiori has improved the user interface and promoted user productivity.
The software is flexible in that there is a simple, easy way to use an analytical function to
produce financial statements. User productivity and the flexibility of SAP S/4HANA has led
to increasing profits in the organization.
Cost saving is one of the most critical parts of any business firm, most of the
businesses are focused on reducing the cost of production and the expenses of the company.
The companies nowadays spent a lot of money on software productions IT strategy. With the
implementation of SAP S/4HANA, a company can save cost because it optimizes data
volumes and removes the overlapping of data. Operating and infrastructure costs can be cut
down by the use of SAP S/4HANA because its operation is in a way that it saves cost.
Migration to SAP S/4HANA
An adoption plan for implementing SAP S/4HANA can be quite tricky despite the
flexibility part of SAP. The process of choosing SAP product, to begin with, is very
complicated. The reason for the company's challenging move to switch SAP S/4HANA is a
massive investment in enterprise resource planning implementation. The existing database
management system, e.g., a structured query language server and therefore they have to
switch to 4HANA. The decision of which process should be run on the SAP S/4HANA and
which transaction should be run differently is a challenge for the top management. One of the
significant challenges of migrating to SAP S/4HANA is the cost involved, and it is quite

Computerized Accounting in ERP 9
expensive to install and maintain the software. The functionalities of the system is also a
significant concern because a lot of clients are not conversant with the use of SAP S/4HANA
enterprise resource planning. Companies are also concerned with the number of resources
they will need to run the software, and this is regarding human resource and the availability
of the required hardware. Despite the benefits involved with SAP S/4HANA, there are
challenges involved in the installation and use of SAP S/4HANA.
CenturyLink Telecommunication Company migrated to SAP S/4HANA ERP in the
year 2017. This company based in the United States offers IT services including, internet
connectivity, and computer hardware and cyber security services among others. The company
integrated SAP S/4HANA, but it encountered difficulties during the implementation of the
software. Conversion means that the company had to redesign the business process involved
with their clients because of the changes in the interface (Appiah, &Mensah, 2014:48). The
company was unable to do business for close to two months because of the redesigning
process, and the clients were not familiar with the SAP S/4HANA framework. The company
had large volumes of data which it was hard to transfer the data to the new 4HANA. The
original clients and vendors were replicated into the master data before the installation of
SAP S/4HANA enterprise resource planning.
Financial data migration should be done carefully because any alteration of the data
can lead to the loss of valuable information by the company (Gunawardana, 2015: 68). Data
migration should be consistent during the transfer of data from the master database. Data
inconsistency is one of the major challenges involved in the migration of SAP S/4HANA. For
example, Protective Life insurance company based in the United States have been operational
for decades. They implemented the use of SAP S/4HANA recently, but despite the success of
the software the company had gone through difficulty during the installation of the SAP
S/4HANA software. Data inconsistency nearly caused them to lose data during data transfer.

Computerized Accounting in ERP 10
The protective life insurance had made inconsistent updates which costed the insurance
company. The company had made direct updates to the database which is very uncommon,
and the updates are usually made consistently via the database interface. Despite the data
inconsistency of the insurance company, it was able to recover all the data it needed (Quinn,
2014: pg67).
The functionality change is another challenge that is involved in the installation of
SAP S/4HANA software. The SAP ERP used classic cash in the analysis of cash inflow and
cash outflow, but in SAP S/4HANA ERP cash management module is in operational in place
of classic payment. This brings a lot of changes in the process of analyzing the income and
expenses of the company. The company has to transfer the old credit management master
data to the new cash management module. For example, in 2016 Fairfax media in Australia
was able to adopt the new changes in financial reporting. Their cash inflow and outflow were
integrated into the new SAP S/4HANA software whereby the board implemented it without
any difficulty. In most companies, the changes in functionality usually bring out several
challenges in the implementation stage, but with Fairfax media, it was able to handle the data
functionality properly (Smith & Binti, 2016: 26).
The architecture of SAP S/4HANA is quite complicated and require a lot of modules
to be installed and activated for the software to work well. Fiori, gateway and HANA studio
is one of the few components that need to be installed for the proper functioning of the SAP
S/4HANA. For example, in 2013, the Oroton group has implemented the use of SAP
S/4HANA software to improve their customer satisfaction. The application Programming
interface is one of the updates made by the Oroton Group limited to customize their products
for their clients. During the architecture programming, the company nearly lost their data
because the ERP they were using was entirely obsolete the architecture definitions is usually
done before the installation of the SAP S/4HANA application (Boateng, 2016: pg36).

Computerized Accounting in ERP 11
Conclusion
In conclusion, computerized accounting is fundamental in the global business
transactions. The companies that have adopted the use of SAP S/4HANA in doing their
business transaction have an added advantage over their competitors. Faster forecasting and
planning, quick report analysis, real-time analysis are amongst the benefits of SAP S/4HANA
software. However, data inconsistency and data migration are amongst the challenges
associated with the implementation of SAP S/4HANA. The problems can be avoided by
carefully transfer of data and preventing significant updates of the software. The integrity of
the data can be checked by keeping the master database without any alteration of data. For a
company to become a successful digital business, a proper data management strategy needs to
be installed order to provide a competitive advantage over their competitors. The architecture
of SAP S/4HANA has many modules and components that allow real-time generation of
financial reports.

Computerized Accounting in ERP 12
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