SAP S/4HANA Finance: Historical Overview, Advantages, and Limitations

This report provides a comprehensive analysis of SAP S/4HANA Finance, starting with its historical overview and evolution from SAP Simple Finance to its current state. It delves into the application of SAP S/4HANA, highlighting its advantages, such as real-time data processing, cloud deployment options, and automated procedures, while also acknowledging its limitations. The report then contrasts SAP S/4HANA Finance with SAP ERP FICO, explaining the roles of FI (Financial Accounting) and CO (Controlling) within the ERP system and outlining the key differences in areas like bank ledger management, accounts payable and receivable, general ledger, asset accounting, and accounts receivable. Furthermore, the report emphasizes the benefits of SAP S/4HANA Finance for businesses, particularly its ability to enhance financial and operational drivers, enable seamless operations in the digital economy, and provide unique advantages to IT and business managers. The report concludes by underscoring the software's role in simplifying new features, minimizing maintenance costs, and improving data accessibility.

Running head: COMPUTERISED ACCOUNTING IN AN ERP
Computerised accounting in an ERP
Name of the student
Name of the university
Student ID
Author name

COMPUTERISED ACCOUNTING IN AN ERP
Introduction
If finance for the digital age is re-imagined with the application of SAP S/4HANA that is
financial solution used to be recognized as SAP Simple Finance in previous period, it can be
found that the same operates under the SAP HANA platform based on in-memory. It can be
applied for (i) flexible and easy consumable reporting (ii) cloud or on-premise deployment (iii)
automated procedures and (iv) general view for all the finance and operational associated data. It
further assists in planning the finance and accountings, risk management, cash payable and
receivable and treasury as well as cash management (Maheshwari 2017). In accordance with the
SAP’s traditional application, the entire stored data in the level of database along with the
calculations are performed. Generally, the query processing requires computations and
aggregations. Hence, the suggestions that can be provided is that logic of application must be
pushed in the level of database to improve the query execution’s performance. However,
applications those are based in SAP HANA are considered to offer the best performance by
pushing the execution database in best possible way. It further supports reproduction of real-time
data and hence, it removes unnecessary inactivity as well as complexity for load of the data
(Baumgartl et al. 2016).
Name of the student
Student ID Page 1

COMPUTERISED ACCOUNTING IN AN ERP
Aim of the report is to analyse the SAP S/4HANA finance’s historical overview. For
carrying out this he report will focus on various aspects like application, advantages and
limitations related to SAP S/4HANA’s application wherein the same is used for the purpose of
business. The report in addition will represent the difference among SAP S/4HANA and SAP
ERP FICO. FI in FICO stands for financial accounting whereas CO stands for controlling. Under
ERP, FI as well as CO both are considered as crucial as both stores the data related to finance.
FI is further used for implementing the external reporting like balance sheet and income
statement. Further, the FICO can be incorporated with different other modules including sales,
project systems, production planning, distribution and management of material (Burns 2018).
Historical overview – SAP S/4HANA
For more than past 40 years SAP is being used by wide numbers of customers globally to
assist in running the business in most efficient way though solving different issues and
Name of the student
Student ID Page 2

COMPUTERISED ACCOUNTING IN AN ERP
challenges related to information technology. It helped in re-imagining the business to make it
effective for digital age that was once considered as simple finance. It involves different
interconnected function for managing the finance and delivers real-time data generated from
ERP. Success for the ERP solution of SAP can be considered as the best example to establish
that it enabled the business to run in best way over the past 4 decades (Discuss.asug.com 2019).
However, with the evolution of economy the trends has been reshaped including
supercomputing, cyber security, cloud computing, hyper connectivity along with smarter world
that includes robotics, artificial intelligence sensors and 3D printing. Combining the trends the
entity can innovate the approach in which the underlying systems are operated and simplified for
the growing and competing digital economy. Entities and public developed their interests for
SAP HANA during the middle of the year 2011 and applications were received from over 500
entities for fulfilling their business needs. Primarily the app was initiated for focusing on the
insights on the real-time basis (Akhtar 2016).
Business suite was introduced by SAP during the 2013, January to assist in business
running on the platform of real-time. It received outstanding responses from more than 2000
business houses and customers that made the app as fastest growing. After its huge success, SAP
further initiated the single source for data, financial insights for the reporting purpose. Finally it
released the application for business suite applicable for the business of next generation named
as SAP S/4HANA. It is assumed as most suitable or carrying out the business finance related
tasks and the treason behind it is that it has been developed for providing data on real time basis.
Apart from that it is considered as the biggest enhancement since release of SAP/R3 and the
same was designed in accordance the concept of Red Dot Award that received award after its
release for its design (Menon 2016).
Name of the student
Student ID Page 3

COMPUTERISED ACCOUNTING IN AN ERP
Before moving further it is important to know the importance of SAP if it is used for the
purpose of business on the basis of in-memory and major difference of the same with traditional
database management. Primary difference of conventional database against in-memory database
is that the HANA database uses the most recent technology for the purpose of innovations that
boosts the performance. Using the SAP suite powered by HANA the performance of the business
can be enhanced against relational database (May, Böhm and Lehner 2017). However, it was
initiated as the alternative for existing customers those were required to migrate into real time
platform. Apart from that the application was considered as advanced platform that was based on
the in-memory and it provides architecture based on data and associates OLTP (high volume
transaction processing) and OLAP (high volume real-time analytical processes). These are
advantageous for running the business and the reason behind the same is that it is based on the
model of unified data excluding the redundant data required by traditional systems that is based
on the RDBMS (May, Böhm and Lehner 2017).
With the release of each of the S/4HANA, additional functionalities kept on
implementing with the newer version along with simplified table structure. Primary
functionalities incorporated in SAP S/4 HANA are (i) refinements of process in existence (ii)
implementation of new function from SAP S/4 HANA (iii) leveraging technical performances of
HANA D3 (iv) implementation of new solutions along with components (v) leveraging
embedded BI for SAP S/4 HANA (vi) integrating business partner network and (vi)
implementing the interface that is user friendly, flexible and offers mobility (Missbach et al.
2016, Pp. 7-8).
Name of the student
Student ID Page 4

COMPUTERISED ACCOUNTING IN AN ERP
However, though it is advantageous for the business, it is noteworthy that all the
platforms based on in-memory are not same as add on under memory platforms or those are
partially focused on in-memory hold the remaining transactional as well as analytical data under
disk. Major ways through which businesses are impacted are – (i) data used by business
application users immediately becomes ‘cold’ and it leads to slowing of the business procedure
that is turn represent that the business is not actually running on the real-time basis and (ii) data
is maintained under 2 stages where different errors may take place. In addition, it results into
complicated system with the efforts of high engineering and needs unnecessary high level of
expenses to maintain the system (Nieuwenhuis, Ehrenhard and Prause 2018, Pp. 308-313).
Difference among SAP S/4 HANA finance and existing SAP ERP FICO
SAP S/4 HANA is primarily focused into financials professional as well as professional
covering all the industries and involves the CFO and different other peoples related to account,
tax treasury operations, risk, compliance and financial operations. Conversely, SAP FICO is the
Name of the student
Student ID Page 5

COMPUTERISED ACCOUNTING IN AN ERP
major component for the functioning of SAP ERP that allows the firms in dealing with financial
data. Main objective of SAP FICO is to help in making the decisions efficiently as well as
planning the business. It involves 2 models namely FI that stands for SAP Finance and CO that
stands for Sap Controlling (Pattanayak 2017, p. 1). FI looks into overall purposes of financial
and accounting reporting and CO plans and monitors costs. Originally FI and CO was released
under separate modules. However, both are now integrated tightly and are referred as the single
module by most of people. Noteworthy differences among 2 are – (i) FICO manage all the bank
ledgers related to all bank accounts as well as the transactions for the company. In addition, it
reconciles the reported transactions in the bank statement of the entity and compares the same
with the transactions recorded under the system of the entity. On the contrary, SAP S/4 HANA
creates the bank account for master file and each of the bank account is assigned while creating
the time with the technical IDs (ii) accounts payable in FICO includes all transactions related to
the vendors and all the vendor accounts are managed by it. Transactions include the memo for
credit posting, down payments, invoice postings, dunning and execution of the customers as well
as the vendor’s reports (Ritter 2015). On the contrary, SAP S/4 HANA is used for enhancing the
speed and accuracy with regards to the procedures of accounts receivable as well as payables. It
applies the most recent technology to assess the customer’s credit risk quickly. In addition, it
simplifies the billing system, enhances invoice management system and optimizes visibility (iii)
under FICO the general ledger includes all transaction of the entity presented under the
accounting charts that lists down all the accounts. Apart from that, transactions are identified
under sub-modules which can further be reconciled against general ledger data on real time
basis. On the contrary, SAP S/4 HANA initiated new concept for the ledger known as extension
ledger (Sulit and Buenviaje 2016). There are basically 4 kinds of ledger accounts including the
Name of the student
Student ID Page 6

COMPUTERISED ACCOUNTING IN AN ERP
leading ledger for recording the transaction to the ACDOCA table, non-leading ledger to record
non-leading ledger in ACDOCA table, day ledger and leading ledgers along with extension
ledger to record the transactions those are part of extension ledger (iv) asset accounting under
FICO controls all transaction related to fixed assets of the firm including land, buildings and
heavy equipment. Transactions take into consideration the acquisition of the asset, retirement,
sales, transfer, revaluations and depreciation. On the contrary, SAP S/4 HANA has controls on
different accounting principles through setting up different areas for the purpose of depreciation.
App further optimizes the new asset accounting to run along with extended functionalities and in
accordance with the new data structure for full integration as well as ACDOCA table
(Okungbowa 2015) (v) accounts receivable under FICO considers transaction and manages the
accounts of the customers. Here the transactions includes credit memo posting, invoice posting,
dunning, executing customer’s reports as well as payment of invoice. On the contrary, SAP S/4
HANA speeds up the invoice payments, enhances relationships with debtors, cut off cots,
enhance the visibility of cash flows through implementing tight control on the management of
invoice process. This further helps in sending rapid responses in the scenario of fluctuating
market, recognising risk associated with the accounts and thereby enhancing the financial health
(Okungbowa 2015).
Benefits of SAP S/4 HANAFinances in context of business
Under ERP system SAP S/4 HANA is becoming the most successful on global basis.
SAP S/4 HANA is ERP’s 4th suite that was started by ERP software. Over past 4 decades ERP
has been the core for SAP. Moving forward with SAP S/4 HANA will enable all the
shareholders to have clear vision in context of the value that can be achieved through improving
Name of the student
Student ID Page 7

COMPUTERISED ACCOUNTING IN AN ERP
financial as well as operational drivers of the organisation. However, the benefits of SAP S/4
HANA implementation and major components to create value differ from firm to firm if the
same is compared with the existing status (Plattner and Leukert 2015). In addition, SAP S/4
HANA allows firms to experience seamless working under digital economy. Most importantly, it
is taken as the major driving force for variety of businesses those have implemented SAP ERP
for long times for considering whether implementation of ERP will enhance the performances.
Generally the software is written for the platform of SAP S/4 HANA and is fundamentally
advanced for enhancing the efficiency and simplifying the new features. It further provides
unique advantages to the IT managers and business managers along with various other
employees. In addition, it minimizes the cost of maintenance, generates the report rapidly,
enhances contextual awareness and allows the firms to prepare itself for the purpose of digital
core and accessing the data democratically (Sun, Gregor and Keating 2016). Different other
benefits of SAP S/4 HANA finances are – (i) central finance – on the basis of specific scenarios
this approach is called as implementation of central finance and it offers different benefits. It
allows initiation of SAP S/4 HANA gradually into the complicated landscape of IT. In addition,
it allows enhancing speed of reporting excluding the implementation of large projects through
replication of data to the central finance on the basis of real time. Moreover, the approach used
by it is suitable for those organisations which are moving towards service centres and where the
complicated landscape holds back situation (Wang, Syaiful and Nurul 2017, p. 012020)(ii)
simplification – it is significantly simple in context of management as well as administration of
IT landscape. Simplicity is the major feature that were brought in by the application structure of
ECC. In addition, it enhances performances through enabling the users in executing, analysing
data, planning triggering closing periods, offering enhanced predictions and generating reports.
Name of the student
Student ID Page 8

COMPUTERISED ACCOUNTING IN AN ERP
Further, it offers enhanced awareness and authorisation to the democratized data (iii) innovation
–stage for future innovation is set by SAP S/4 HANA. As technology is evolving rapidly, just
keeping up is not enough. Hence, the entities shall stay ahead of the curve and take the decisions
those will be ready for the future circumstances (Haddara 2014, Pp. 394-403). In addition the
software leverages data accessibility, context and speed. Further it adopted cloud platform
through the business that allows the entity to deliver innovative solutions and broadening
capabilities those are provided by SAP S/4 HANA (iv) ease in using – Fiori 2.0 provides the
modern designs for the purpose of complete new experience to users that allows them accessing
overview pages, listing the reports and preparing the work list is easy manner. Fiori’s UI of SAP
is designed particularly for making it highly responsive, intuitive, and simple and personalized
that enables users to raise question s promptly and have access to required data irrespective of
devices or deployments. It further allows the firm evolving as well as driving additional revenues
gradually (Hejazi, Halpin and Biggs 2014). Moreover it connects with customers at deep level,
generate relevant insights on real time basis, access big data that supports in making decision
rapidly (v) rapid processing for monthly closing – as the HANA allows high speed, existing
programme for carrying out activities on real tine can be easily reprogrammed. In addition,
existing job batch can be carried out faster as the effect of posting correction will be carried out
on the basis of real-time and will need not to wait for closing procedures. Moreover, with the
initiation of the universal journal, additional reconciliation are not required for sub-modules of FI
and CO. however, through design the posting as per FI and CO both are reconciled on
continuous basis as both are written in the same ACDOCA table (Hejazi, Halpin and Biggs
2014).
Case studies for the companies migrated to SAP S/4 HANA and issues faced by them
Name of the student
Student ID Page 9

COMPUTERISED ACCOUNTING IN AN ERP
The industries, society as well as economy are transforming rapidly in context of the
digital platform. It has impact on the process carried out by the entity along with the entity’s
business models. Moreover, it altered the entity’s requirement in context of IT architecture that
generates requirement for solutions those are flexible and can be quickly adapted with the
changing scenarios.
Case study 1 – Wipro
Implementation of SAP S/4HANA went live for Wipro on 15th January 2015. Different
areas implemented by them are – (i) SAP Fraud Management (ii) S/4HANA Finance (iii)
treasury management (iv) SAP risk managementand (v) SAP Financial Cockpit and (vi) SAP
cash management. The components were implemented to attain the business objectives.
Irrespective of various ways are there for shifting towards SAP S/4HANA, Wipro chose to
migrate through the central finance. It is one of the approaches for using that in turn helps the
customers with various SAP as well as non-SAP systems to attain immediate benefits of finance
those comes with SAP S/4HANA (Wipro.com 2018). However, for moving towards SAP
S/4HANA it had to face number of challenges including – (i) changes in the functionalities –
considerable changes to the functional scope of the entity found while the app is compared with
SAP ERP. To explain the same with an example is that cash management as well as liquidity
management in SAP classic is unavailable in SAP S/4HANA. The said function is substituted by
whole new application which also required configuration and deployment. In addition, the credit
management is substituted by SAP credit management. Further, to use the solution the users
required configuration of the same (Wipro.com 2018) (ii) data inconsistency – financial data
migration is crucial for converting towards new system. Transactional data is shifted to new
Name of the student
Student ID Page 10

COMPUTERISED ACCOUNTING IN AN ERP
model as per the universal journal. For migrating the existing data successfully, the data shall be
clean as well as consistent. However, though the integration of data is managed efficiently,
likelihood of errors always exists there. Most common error found in such cases is difference
between general ledgers and sub-ledgers (Ghattamneni 2016, Pp. 8-12).
Case study 2 –Fujitsu
As transformation in digital platform needs higher level of innovations in context of
structures and procedures in future period, Fujitsu needed migration towards SAP S/4HANA
finance. Major advantage of moving towards SAP S/4HANA from ERP is that is offers platform
for process spaning along with simplification and consolidation of entity’s procedures. Different
issued faced by the entity while moving towards SAP S/4HANA were the IT specialists were
required to consider the technological and operational integration. For doing so SAP system
hardware was costly and exceeded its budget. However, fast as well as secure operation along
with implementation for allowing high flexibility resulted into differences in SAP S/4HANA
finance implementation (Fujitsu.com 2019).
Conclusion
It can be established from the above presented discussion in context of SAP S/4HANA
implementation that the same is important tool for entities since it helps in carrying out the
modification in data in real time basis. In addition, it helps in simplifying the way used by the
entities for applying SAP business suite through accumulating the transactions and analysis
together under single platform of in-memory. Apart from that, it helps in minimizing the cost of
maintenance, generates report rapidly, enhances contextual awareness and allows the firms to
make itself ready for digital platform. Irrespective of its variation with the SAP ERP FICO,
Name of the student
Student ID Page 11

COMPUTERISED ACCOUNTING IN AN ERP
different advantages like easy and simple to use, cost effectiveness and central financeit
improves the performances and hence influences the entities to shift towards SAP S/4HANA.
Name of the student
Student ID Page 12

COMPUTERISED ACCOUNTING IN AN ERP
Reference
Akhtar, J., 2016. Production Planning and Control (SAP PP) with SAP ERP. SAP PRESS.
Baumgartl, A., Chaadaev, D., Choi, N.S., Dudgeon, M., Lahiri, A., Meijerink, B. and Worsley-
Tonks, A., 2016. SAP S/4HANA: An Introduction (SAP PRESS).
Burns, D., 2018. Financial Accounting in SAP FICO (SAP ERP): Business User Guide (SAP
PRESS).
Discuss.asug.com., 2019. [online] Available at:
https://discuss.asug.com/servlet/JiveServlet/previewBody/49367-102-1-74827/
ASUG10738_10738_Presentation_1.pdf [Accessed 3 Oct. 2019].
Fujitsu.com., 2019. [online] Available at: https://www.fujitsu.com/us/Images/Solutions-SAP-
ERP-factsheet.pdf [Accessed 3 Oct. 2019].
Ghattamneni, M.R., 2016. Migration Strategies while Working with ERP (Enterprise Resource
Planning) Packages Like SAP Suite, HANA and S/4 HANA. American Journal of Computer
Architecture, 3(1), pp.8-12.
Haddara, M. 2014. ERP selection: the SMART way. Procedia Technology, 16, 394-403.
Hejazi, S.S., Halpin, A.L. and Biggs, W.D., 2014, February.Using SAP ERP technology to
integrate the undergraduate business curriculum. In Developments in Business Simulation and
Experiential Learning: Proceedings of the Annual ABSEL conference (Vol. 30).
Maheshwari, A., 2017. Implementing SAP S/4HANA Finance (SAP PRESS). SAP PRESS.
Name of the student
Student ID Page 13

COMPUTERISED ACCOUNTING IN AN ERP
May, N., Böhm, A. and Lehner, W., 2017. SAP HANA–The Evolution of an In-Memory DBMS
from Pure OLAP Processing Towards Mixed Workloads. Datenbanksystemefür Business,
Technologiesund Web (BTW 2017).
Menon, S.A., 2016. Critical challenges in ERP implementation: A qualitative case study in the
Canadian oil and gas industry (Doctoral dissertation, Capella University).
Missbach, M., Staerk, T., Gardiner, C., McCloud, J., Madl, R., Tempes, M. and Anderson, G.,
2016. SAP on the Cloud (pp. 7-8). Heidelberg: Springer.
Nieuwenhuis, L.J., Ehrenhard, M.L. and Prause, L., 2018. The shift to Cloud Computing: The
impact of disruptive technology on the enterprise software business ecosystem. Technological
forecasting and social change, 129, pp.308-313.
Okungbowa, A., 2015. Asset Accounting Configuration in SAP ERP: A Step-by-Step Guide.
Apress.
Okungbowa, A., 2015. SAP ERP financial accounting and controlling: configuration and use
management. Apress.
Pattanayak, A., 2017. SAP S/4HANA Embedded Analytics: An Overview. Journal of Computer
and Communications, 5(09), p.1.
Plattner, H. and Leukert, B., 2015. The in-memory revolution: how SAP HANA enables
business of the future. Springer.
Ritter, D., 2015. Towards more data-aware application integration (extended version). arXiv
preprint arXiv:1504.05707.
Name of the student
Student ID Page 14

COMPUTERISED ACCOUNTING IN AN ERP
Sulit, M.F.M. and Buenviaje, M.G., 2016. Status of Implementation of System Application and
Product in Data Processing (SAP) Enterprise Resource Planning (ERP) System. Asia Pacific
Journal of Academic Research in Business Administration, 2(1).
Sun, R., Gregor, S. and Keating, B., 2016. Information Technology Platforms: Definition and
Research Directions. arXiv preprint arXiv:1606.01445.
Wang, G., Syaiful, B. and Nurul, F.A., 2017, September.Assessing the ERP-SAP implementation
strategy from cultural perspectives. In IOP Conference Series: Materials Science and
Engineering (Vol. 237, No. 1, p. 012020). IOP Publishing.
Wipro.com., 2019. Journey towards SAP S4HANA decoded using Central Finance - Wipro.
[online] Available at: https://www.wipro.com/applications/journey-towards-sap-s4hana-
decoded-using-central-finance/ [Accessed 3 Oct. 2019].
Name of the student
Student ID Page 15