Research Report: SAP S/4HANA Finance and Business Advantages

This research report provides a comprehensive overview of SAP S/4HANA Finance, examining its evolution, key features, and benefits for businesses. It contrasts SAP S/4HANA Finance with the traditional SAP ERP FICO, highlighting the advantages of the in-memory HANA platform and the Fiori user interface. The report delves into the core components of SAP S/4HANA Finance, including SAP accounting, cash management, and Business Planning and Consolidation (BPC). Furthermore, it explores the benefits of SAP S/4HANA Finance, such as faster forecasting, improved reporting, and enhanced compliance capabilities. The report also includes case studies to illustrate the real-world impact of SAP S/4HANA Finance implementations, discussing the challenges organizations face during migration and providing insights into successful strategies.

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SAP S/4HANA FINANCE
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SAP S/4HANA Finance
The society, the world economy, and the industrial sector are experiencing tremendous
transformation. These transformations alter both processes within an institution and its entire
commercial model at a rather rapid speed. It should be noted that such changes have an impact of
altering the need for an institution’s information technology (IT) architecture, necessitating the
need for innovative solutions that are flexible and can swiftly adapt to the changing conditions
within a business entity (May, Böhm & Lehner, 2017) . The growing wealth of financial data
offers a key challenge to the chief financial officers (CFOs). Recent studies indicate that
financial intelligence is essential for any successful organization. As such, the use of these
financial data is vital in assessing markets, enhancing business performance, and redesigning an
institution’s tactical business requirements (Kumar, 2017). The finance department faces a
number of challenges including the use of complicated processes and user interfaces for finance
and tax functionalities which consume time, and lacking a central database for all the financial
information which affect the planning process in business, among others (Morrison, 2018a).
These problems can be mitigated by applying SAP S/4HANA, which opens the path towards a
prosperous generation of value in the digital economy. Advanced database innovations and the
amalgamation of information into a single platform significantly simplify commercial processes
and portray them across systems. This approach offers institutions with an advanced look at their
data and processes. SAP S/4HANA Finance, as part of the SAP enterprise management, is one of
the latest solutions for the CFO’s office. The platform was designed with other objective of
reacting to the challenges facing the financial sector by offering enhanced reporting operations
and improved process efficacy. Essential to note is that the capabilities offered by S/4HANA
database in conjunction with the improved Fiori user experience offers organizations with an
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enhanced approach of conducting businesses (Flanagan, 2017). This paper, therefore, discusses
the basics of SAP S/4HANA finance, highlighting its differences with SAP ERP FICO, its
benefits in business, and challenges faced in implementing it in an organization.
The Overview
SAP history goes back to the early 1970s when it launched its pioneer product, R/, which had the
presentation, the application, and the database layers essential for ERP system were incorporated
into a single system. This version was improved in the late 1970s with the introduction of R/2,
and later in 1992, R/3, which was user-friendly because of its improved graphical user interface
(May, Böhm & Lehner, 2017; KPMG, 2017) .
The growth of the main memory capacity besides the existence of multicore hardware was the
basis for the development of SAP HANA database software. The platform which was anchored
upon the SAP business warehouse accelerator (BWA) product, integrated column-based storage
engine with a raw-based query engine. This architecture enabled it to deliver superior runtime
statistics for the investigative load. The HANA database in utilizes a single database
methodology for both the online transaction processing (OLTP) and online analytical processing
(OLAP), an approach that eradicates unnecessary complexities and dormancy, and facilitates the
acceleration of information dispensation throughout the data flow (May, Böhm & Lehner, 2017) .
SAP HANA system incorporates a number of design principles that enhance its performance
characteristics. The first one in the parallelization of all levels beginning from the hardware to
running query, an approach that was motivated by the existence of multicore systems. Secondly,
the database system depends entirely on the column-oriented data landscape, which permits only
the columns touched by the query. Moreover, besides SQL support, HANA encourages
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analytical functionalities by offering a set of engines which support financial scheduling tasks
(May, Böhm, & Lehner, 2017) . Figure 1 describes the evolution of the HANA database.
Figure 1: The evolution steps of SAP HANA database system (May, Böhm, & Lehner, 2017)
A considerable number of people are aware of the existence of HANA, but, differentiating
between HANA, S/4HANA, and S/4HANA Finance is still imperceptible. As defined by Kumar
(2017), HANA is the SAPs new advanced- executing platform, and S/4HANA is the novel suite
that has the capabilities of executing on the HANA database. S/4HANA finance is a software for
accounting management. Kumar (2017) reports that S/4HANA finance was launched in 2014 for
monetary functionalities in the SAP S/4HANA business suite. Note that the difference that exists
between ‘traditional’ database and the in-memory platform, is that the advanced HANA applies
the in-memory feature to enhance its operations, and SAP positions it as a focal repository for
data (May, Böhm, & Lehner, 2017) . This way, it can only use a single copy of data for
operations and analysis. This eliminates the inherent latency and the risk of inconsistencies in the
case of inadequate design.
SAP business suite is a group of commercial software which facilitates end-to-end processes to
execute in SAP databases. Integrating the HANA database in the business suit is an approach
adopted by a number of prominent institutions having sophisticated SAP platforms. SAP,
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however, altered the dynamics of software logic to optimize the functionalities of SAP business
suit in conjunction with the database platform. The suite augmented for HANA is the S/4HANA
Enterprise Management, and all applications incorporated into it execute the HANA database
(KPMG, 2017). Figure 2 shows the applications incorporated into the S/4HANA business suite.
Figure 2: S/4 HANA business suite (KPMG, 2017)
Notably, the name S/4HANA Finance was adopted in 2015, with the previous versions being
referred to as SAP Simple Finance (Kumar, 2017). Irrespective of the edition, the application has
the functionalities for any business entity that can be used to augment, hasten, and streamline the
finance role. It is worth noting that with every release of the S/4HANA Finance, advanced
functionalities have been incorporated to the new, restructured table architecture.
S/4HANA Finance incorporates a group of interrelated financial management functionalities that
offer concurrent information from enterprise resource planning (ERP) applications. It has three
major components: SAP accounting, cash management, and business-object planning and
consolidation (BPC) as illustrated in figure 3 (KPMG, 2017). SAP accounting is fundamental for
any S/4HANA design, and it possesses the essential functionalities for monetary and
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administrative accounting. In SAP accounting, financial displays are activated employing Prima
Nota, a prompt for producing entries on the universal journal (KPMG, 2017; Flanagan, 2017). A
distinguishing feature of S/4HANA is that the general ledger accounts and the cost elements are
merged, resulting in the cost elements being generated similarly as the general ledger accounts.
The Cash Management component of S/4HANA Finance provides a drill-down functionality into
the bank offsets and monetary positions time. This approach facilitates the execution of account
management process by the finance departments (KPMG, 2017). BPC component is essential in
planning and the amalgamation of industrial operations.
Figure 3: The applications of S/4 HANA Finance (KPMG, 2017)
SAP ERP FICO
SAP ERP FICO is a fundamental component in the SAP ERP central components (ECC) that
permits institutions to monitor and manage their financial information. SAP designed FICO as an
application to assist business entities in creating and managing their monetary statements for
evaluation and reporting, which is vital in tactical planning and decision-making (Islam, 2019).
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Architecturally, SAP ERP FICO has two elements: SAP Finance (FI) and Control (CO). SAP FI
is concerned with the general finance accounting functionalities while SAP CO conducts
scheduling and monitoring operations. Originally these two elements were developed as distinct
segments. However, they were fused and could be perceived as one unit. SAP FI facilitates the
generation of financial reports, including balance sheets and profit or loss reports. These
financial statements are vital for reporting and analysis. SAP FI module is comprised of several
sub-segments that have distinct functions in the accounting process. These sub-modules are
general ledger contain the operation data of an institution, accounts receivable depicts client
dealings and manages client accounts, accounts payable, bank ledger, consolidations, funds
management, and travel management, among others (Islam, 2019). SAP CO supports procedures
to organize, report on, and scrutinize costs commercial operations, which is essential in
enhancing the profitability of a business venture. SAP CO also has several sub-modules,
including cost elements, cost centers, profit centers, internal orders, profitability analysis, and
product costing. Ideally, SAP FICO is part of the larger SAP ECC accounting function and
associates with other modules such as plant maintenance, material management, and quality
management, among others (Islam, 2019).
SAP S/4HANA Finance and Current SAP ERP FICO
SAP S/4HANA Finance and SAP ERP FICO are all SAP financial management applications,
and they are used to manipulate economic data that is essential in process planning and decision-
making. Despite their functional similarities, they are different in a number of aspects, including
their design. As mentioned earlier, SAP S/4HANA Finance is an application in the S/4HANA
suite, an optimized suite for HANA database (May, Böhm, & Lehner, 2017) . As such, S/4HANA
Finance is capable of running on the HANA platform, an in-memory platform (May, Böhm, &
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Lehner, 2017). This feature is the first distinguishing factor between the two SAP S/4HANA
Finance and SAP FICO. S/4HANA Finance manipulates data in the in-memory HANA platform,
which permits the generation of financial statements and cash flow evaluation reports using
concurrent data (Flanagan, 2017; Cecchini, 2019). This real-time analysis reduces the inherent
latency and data inconsistencies associated with data redundancies of the conventional database
systems. Secondly, SAP S/4HANA Finance incorporates a sophisticated user-experience
component (Fiori graphical user interface (GUI)) which replaced the SAP GUI applied in the
SAP ERP Central Component (ECC) suite which hosts SAP ERP FICO (Flanagan, 2017). Fiori-
based GUI is significantly user-friendly, thus, improving the user-experience.
Thirdly, the in-memory HANA platform is used by SAP as a focal repository of data, such that it
only utilizes a single copy of data for operations and evaluation. As reported by Cecchini (2019)
and Flabagan (2017), SAP refers to this design as a “single source of truth” since finance and
controlling functionalities have been fused. This arrangement eliminates data redundancies and
the necessities of reconciliations. Moreover, the concurrent FI-CO amalgamation in SAP ERP
FICO is eliminated in S/4HANA Finance, and the manipulating data is now housed in an
advanced finance table ACDOCA shown in figure 4 (Flanagan, 2017). The streamlining between
SAP ERP ECC and HANA platform having an in-memory database means that SAP eliminated
index and cumulative tables, which were replaced by a single source of information (ACDOCA)
(KPMG, 2017; Flanagan, 2017). Consequently, the S/4 HANA suite did away with the third-
party database, resulting in all data being processed on an in-memory HANA platform.
Additionally, S/4 HANA utilizes an advanced financial document referred to as the universal
journal, which is generated anytime something is posted to the finance module from other
modules. Ideally, this document is the “single source of truth” for internal orders, finance, and
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controlling, among others (KPMG, 2017). Fourthly, S/4 HANA suite supports investigative
functions by incorporating a rich set of advanced search engines, which for instance, the
planning engine offers mechanisms to facilitate financial planning tasks. The advanced engines
may also be applied in vendor-line element report to locate the vendors either by name,
nationality, postal code, telephone number or any other thing available in that distinct advanced
search engine screen (Flanagan, 2017).
Finally, HANA possesses the capabilities of manipulating data swiftly; hence, for financial
transactions, some index and aggregate tables eliminated since they are not needed. The index
table that have been eliminated in HANA platform include BSAD (for customers-cleared items),
BSAK (for vendors), BSAS (general ledger accounts), BSIM (materials), BSIS (general ledger
accounts), FAGLBSAS (new general ledger accounts), and FAGLBSIS (new general ledger
accounts), among others. On the other side, the aggregate tables that are eliminated in HANA in-
memory system are cost totals for external postings (COSP), cost totals for internal postings
(COSS), FAGLFLEXT (new general ledger), GLT3 (concise information preparations for
association), KNC1, LFC3 (vendor master) (Flanagan, 2017; Cecchini, 2019).
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Figure 4: The ACDOCA table (Flanagan, 2017).
The Benefits of SAP S/4HANA Finance
SAP S/4HANA Finance, as discussed above, incorporates several advanced features that
enhance its performance in a business environment. Some of these features include the
concurrent analytics, universal journal entry which is regarded as a single source of truth, and
streamlined architecture that combines both the finance and controlling functionalities, among
others (Gosselin, 2017; Cecchini, 2019). By developing the S/4HANA business suite, SAP
aimed at eliminating conventional barriers including operational, analytics, and planning systems
which has the goal of offering prompt acumens and real-time analysis by applying all degrees of
financial information (Kumar, 2017; KPMG, 2017). It is essential to note that the application of
S/4HANA Finance is necessary for all policymakers to model data and generate useful
predictions of vital data using concurrent analysis and various systems. Ideally, S/4HANA
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Finance was designed to redefine business applications and maximize on the use of the in-
memory HANA platform. The result was a tool that could function in real-time applications and
integrate the operation report element of the industrial process. Its development was particularly
directed to business specialists and professionals in the sector, including CFOs and executives in
tax departments, treasury and business departments, or the threat compliance departments of an
institution (Gosselin, 2017). Essential to note is that one of the vital features of S/4HANA
Finance is its enhanced execution rate. Moreover, its portability makes it triumphant since it may
be realized as an on-premise design or the in cloud implementation. S/4HANA Finance is
essential for the successful operation of any business venture. Its application, without a doubt,
will improve the dynamics of activities in any organization.
Research indicates that S/4HANA Finance is associated with a number of benefits which include
and not limited to a single source of truth for financial data, streamlined reporting, reduced data
footprints, accelerated financial close, improved security features, advanced assent accounting,
enhanced financial reporting, and integrated business planning (KPMG, 2017). The sections that
follow provide detailed discussions of these benefits.
Universal Journal
This journal is regarded as the single source truth of all financial data, hence only a single copy
of this data is used, eliminating the redundancies and reconciliations that are associated with
SAP ECC suite (Flanagan, 2017; Morrison, 2018b). As reported by KPMG (2017), this universal
journal merges the features of accounting and managerial accounting component of SAP ECC to
enhance the period-end reconciliation closing while applying live data.
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Streamlined Reporting
The S/4HANA database entry contains all the necessary business information and utilizes the
capabilities of in-memory processing to create exhaustive, concurrent statements, an attribute
that removes the necessities for batch tasks associated with the conventional database systems.
The HANA data model also provides the opportunities for swift multi-dimensional reporting that
is anchored on the universal journal (KPMG, 2017; Morrison, 2018b). Additionally, S/4HANA
Finance augments memory application by differentiating between recent and non-recent data and
houses them in distinct sections of the HANA database (Gosselin, 2017).
Reduced Data Footprints
From earlier discussions, it is understood that sub-ledgers in S/4HANA Finance are merged into
a single ledger or rather a universal journal. This integration eliminates redundancies and the
need for data reconciliations, thus, reducing data footprints. Additionally, some index and
aggregated tables that are used in SAP ECC to enhance performance have been removed, since
performance improvements in S/4HANA business suite are handled by the HANA database
(Flanagan, 2017). As reported by KPMG (2017, p 20), ‘initially, a vendor invoice having three
line items needed more than ten tables to be restructured more than fifteen times, while with
S/4HANA Finance, only four tables are updated five times.’
Accelerated Financial Close
Essential to note is that S/4HANA Finance tremendously redefines the procedures for generating
period-end closes. For instance, it offers almost immediate visibility on profit and loss
statements, thus, augmenting a user’s capacity to decide based on the evaluation of concurrent
trends and statistics (KPMG, 2017; Morrison, 2018b). Other beneficial features offered by
S/4HANA Finance that is essential for business are innovative cash management system,
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