In this article we describe alternative options of an SAP application landscape that can provide a corporate financial reporting and give the list of questions to answer to make the right choice for a customer, taking his situation and preferences into account
Business requirements
The business has the requirement for a reporting from a group perspective, providing formats like a corporate balance sheet and profit and loss statements, when the corporation consists of more than one company code and is possibly managed in multiple ERP systems.
Possible Solution Options
Different system environments are suitable to enable corporate financial reporting:
- Single global SAP S/4HANA system including all logistical and financial operations and data
- SAP S/4HANA for central finance, as a designated system to receive all detailed financial documents from several source systems, providing the capabilities for consolidating them and providing corporate reporting along multiple GAAPs.
- Using a consolidation system (such as SAP Business Planning and Consolidation) to retrieve the relevant data from different sources and prepare it for reporting
- SAP S/4HANA Group reporting consolidates the data from several systems
- Using a pure data warehouse system (such as SAP BW/4HANA)
Characterization of the Solution Options
Single global SAP S/4HANA system
In a multi-system architecture SAP S/4HANA for central finance can be set up to receive all detailed information from financial postings from the source systems and prepare them for reporting. Source systems can be SAP S/4HANA, SAP ECC and third-party ERP systems.
More info on the solution can be found here: https://blogs.sap.com/2020/02/14/different-views-on-what-is-central-finance/
As SAP S/4HANA for central finance provides all the functionality of SAP S/4HANA finance, it has all the capabilities to provide financial reporting in any level of detail and also the functions to prepare data for corporate reporting. The most important piece here is SAP S/4HANA Group reporting.
In fact, SAP S/4HANA for central finance is more than just a solution to provide corporate reporting. It can do much more, and its real value comes with using the extended functionalities. In the questions section I will help to identify if the usage of central finance is the best solution for a customer’s requirement or a leaner solution might already be sufficient.
SAP S/4HANA for Central Finance
In a multi-system architecture SAP S/4HANA for central finance can be set up to receive all detailed information from financial postings from the source systems and prepare them for reporting. Source systems can be SAP S/4HANA, SAP ECC and third-party ERP systems.More info on the solution can be found here: https://blogs.sap.com/2020/02/14/different-views-on-what-is-central-finance/
As SAP S/4HANA for central finance provides all the functionality of SAP S/4HANA finance, it has all the capabilities to provide financial reporting in any level of detail and also the functions to prepare data for corporate reporting. The most important piece here is SAP S/4HANA Group reporting.
In fact, SAP S/4HANA for central finance is more than just a solution to provide corporate reporting. It can do much more, and its real value comes with using the extended functionalities. In the questions section I will help to identify if the usage of central finance is the best solution for a customer’s requirement or a leaner solution might already be sufficient.
Consolidation System
Consolidation systems offer functions to retrieve financial data from the source system in an aggregated form, and additional functionality for consolidation and preparation of the data for reporting
The main difference to the central finance scenario is that consolidation systems manage only the financial data that is required for consolidation and corporate reporting. The data arrives usually only at period end in an aggregated form and cannot be used for financial reporting in day-to-day manner and in more detail. Furthermore, it will never allow to perform operative financial processes which central finance enables.
SAP S/4HANA Group reporting as consolidation system
Questions for the choice of the target solution
1. Is there currently more than one system in which financial transactions are posted?
If the answer would be that there is only one system, it appears obvious that this system should also host the capability for corporate reporting, and no further systems would be required
2. If there is currently only one system, is there a high probability that new systems with financial transaction enter the environment?
In a dynamic corporate environment with frequent acquisitions there will be a demand for rapid onboarding of new companies and to integrate them into fast into the corporate financial reporting. That can be achieved by central finance or also in a consolidation solution. While this integration would remain on the pure consolidated reporting level in a consolidation system, central finance offers the chance to integrate the company also on the transactional level over time
3. If there are currently multiple systems, can it be managed to bring them to a single global system in the future?
If the answer is yes, the target landscape should consist of a single global system of SAP S/4HANA which has many advantages, particularly in the corporate finance area. The solution for corporate reporting would then be SAP S/4HANA Group Reporting
4. Will the operations remaining outside of a main SAP S/4HANA system be rather small in comparison the main system?
When most of the data is already in the main system and the data from outside does not need to be available in realtime and in all detail the solution with SAP S/4HANA Group Reporting might be a pragmatic approach
5. Do you need the details from documents and the possibility to drill down and drill back to original documents in the corporate reporting?
The solutions involving consolidation systems or data warehouse use extraction and aggregate levels and will not provide the possibility to drill down into the detailed financial documents or their origin documents in logistics or sales. If that feature is important that calls for a single global system or central finance
6. Are you willing to invest effort and cost in setting up a solution for corporate reporting and the connections from source systems into it?
Setting up a consolidation system and its extractors or continuing to use it will usually cost less effort than implementing a central finance system and its source system connections. The effort for central finance grows when source systems are non-SAP and / or data in source systems is not harmonized and sophisticated mapping would be required
7. Would you prefer to perform more functions than only corporate reporting on a central level?
A considerable added value of the central finance solution is the possibility to also perform operations like central payments, central asset accounting or central projects. Over time a central finance system can become the main system for any function in finance.
Of the other options of course only the single global system would allow that.
8. Is your financial master data in the different companies harmonized or is data mapping required to prepare for aggregated reporting
The central finance solution includes sophisticated features to replace master data information in the incoming data in realtime by harmonized data by different techniques. Master data to be treated here can be accounts, cost centers, profit centers, business partners, projects, products and others. That leads to the possibility to perform detailed reporting on the harmonized data at any point in time. Trying to do such a harmonization in one of the other solution approaches will afford high effort, often manually, will not lead to the same detail level and is mostly available only days after period end.
9. Do you need the functionality to intercompany profit elimination as part of corporate reporting?
The requirement would speak against the lean solution of only a core BW.
10. Would the data volume of finance data reach critical limits if all financial documents of the group are coming together in the same system?
There are some industries like automotive and retail where the biggest players produce so much transaction data that the volumes of finance data alone can become critical, reaching double-digit numbers in TB. That would affect both the single global instance, as the central finance option. There are measure possible to reduce data volumes, such as document summarization, but applicability would have to be checked in detail.
Evaluation Questionnaire
We have developed a questionnaire with the questions mentioned above. Answering them will guide you to the best solution by assigning points to the respective answers and giving you an overview on the fit of the different options. You can find it here
Conclusion
You have received an overview about applications out of the SAP portfolio that can cover the requirement for corporate reporting. We have given you the key questions to answer for the choice of the right application in your target application landscape, after a transformation.
Of course, this is only a high-level view, giving some first orientation. SAP offers many more sources and services to go into more detail of this decision that will certainly have a high impact on your future strategy.
