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michael_davies
Product and Topic Expert
Product and Topic Expert

Would you buy a brand-new Electric Vehicle and pull out the motor to replace it with your old petrol engine? Of course not. The electric motor is the heart of the vehicle and designed to deliver the best outcome in terms of efficiency, performance and user experience.

So how is this relevant to SAP? The Chart of Accounts (“CoA”) is the heart of Finance and a well-designed and well-structured CoA will enable you to get the optimum performance from your S/4HANA Cloud Public Edition system.

In my experience (>25 years and literally 100’s of customers) with SAP Financials, I’ve seen that accountants are extremely attached to their General Ledger (“GL”) accounts. They know the GL account numbers and the postings within them. I’m aware there is a desire to retain that knowledge and the history it represents. This article is to explain some of the benefits of adopting the standard settings out of the box and possibly make you think again about Renumbering the delivered GL accounts.

To be absolutely clear, I’m not proposing that you adopt the delivered YCOA  content without any changes. It’s expected that you would need to:

  • Create new GL accounts
  • Flag accounts as “Not used”
  • Change the Text

 

A little background on YCOA

I’ll assume that you are familiar with the concepts of the CoA within S/4HANA, including the types (Operating, Alternate and Group) as well as the data structure across the CoA, Company Code and Controlling Area levels.

Your system will include:

  • YCOA as the standard Operating CoA
  • YGR1 as the Consolidation (Group) Chart of Accounts if you have activated Scope Item 3AF Group Account Preparation for Financial Consolidation
  • YIKR or other Country specific Alternative CoA, delivered for specific countries
  • Additional Alternative CoA you have created

michael_davies_0-1715327548147.png

Illustration 1. List of Chart of Accounts

Whilst you can change the Description and the General Specifications, you can’t change the name YCOA and you can’t change the assignment to the Company Codes as the Operating Chart of Accounts.

michael_davies_1-1715327548156.png

Illustration 2. CoA settings maintenance

michael_davies_2-1715327548162.png

Illustration 3. Assignment of YCOA as the Operating CoA

Operating Chart of Accounts YCOA comprises:

  • the “header” information with the name, description and parameters for the attached GL accounts (as above)
  • The GL accounts within the CoA, which are defined at the CoA, Company Code and Controlling levels as required

The structure of GL account numbers is Industry independent, noting that there is also a variant delivered for US Public Sector.

michael_davies_3-1715327548170.png

Illustration 4. Standard YCOA structure

The Operating CoA contains the GL accounts which are maintained in configuration for Finance processes and integration with other modules. They are the primary set of GL accounts used for posting transactions, planning and reporting.

So whilst YCOA is fixed as the Operational CoA, it is possible to Renumber (and rename) the individual delivered GL accounts (as well as excluding from transport to Test and Prod systems).

SAP Help for Chart of Accounts: Different Types

SAP Help for Renumbering

SAP Help for Implementation Status

 

Renumbering

Why Renumber?

Why do customers Renumber? The most likely response is to make the CoA appear as similar as possible to the legacy system. There may also be a desire to align with a group, country or other statutory standard reporting structure.

There are certainly benefits, including:

  • Reduced change impact on users
  • Simpler mapping and reconciliation in data conversion
  • Retain integration to external systems which use GL numbers
  • Aligns to historical reporting and planning data

This may seem compelling and could be difficult to push back on, particularly if the option to Renumber has been positioned in the Discover phase. After all, if it’s supported by SAP, it must be ok...right?

Well, yes and no…as with many things in life, just because something is possible doesn’t always make it a good idea!

Note that in the following, “Renumbering” is mainly focussed on changing the GL account numbers (and overall structures) although technically the process can also include Renaming GL accounts, as well as setting to “Not used”.

Also as mentioned above, when I refer to working with the delivered CoA, this does include creation of new GL accounts to meet your requirements but within the existing account number ranges.

Renumbering is easy?

Firstly, I’d point out that Renumbering is not a quick, simple exercise to do properly.

Whilst SAP delivers tools to make the system changes for the renumbering, there is still a significant effort required to:

  • Understand the intended purpose of the delivered GLs, their settings and how they are used in the standard Best Practise processes as well as Account Determination configuration
  • Identify which GL accounts are to be retained and renumbered
  • Define new numbers and names
  • Map the SAP delivered GL account numbers to new (legacy) numbers
  • Execute across the landscape

All of this takes time and effort to understand, communicate and agree with the customer. This is particularly the case for new GL Accounts in YCOA with no equivalent to Legacy processes such as those for Event Based Revenue Recognition. The customer needs to have a solid understanding of the new process to be able to engage with the mapping and Renumbering process.

Also bear in mind that an account can only be renumbered if it has not been posted against in Test or Production (in a 3 system landscape). This means you need to execute the renumbering early in the project at the same time other project activities are in progress.

You will also need to find a suitable window for the conversion step, avoiding time when SAP upgrades are running and you will need users to be off the system.

All of this is contrary to the Activate methodology and Cloud Mindset. An S/4HANA Cloud Public Edition project is supposed to be about the adoption of standard solution and process. The intention is to go-live as quickly as possible to start realising the benefits from the system. This also means avoiding activities which are not absolutely necessary and which could delay the project go live.

Renumbering is not a one-off activity

Just because you have run the Renumbering once, it doesn’t mean the process is done with.

Additional General Ledger Accounts are automatically created in YCOA with the activation of new Best Practise Scope Items and additional Countries. These GL accounts will be created with the standard SAP GL numbering.

You will need to need to be identify these accounts and Renumber again prior to transport and first posting in Test or Production. This also means that for a new process which you may not be completely familiar with, you’ll need to work out how the postings fit into the customer’s CoA structure. The subsequent projects to extend scope become longer and more complex.

Dependent settings after Renumbering

The Renumbering process will update GL master data, configuration (including Account Determination) and transactional data in the Development system (as no transactions can be posted on the changed GL accounts in Test or Production).

However, there are further aspects which will need to be reviewed, particularly as Renumbering may well impact the structure and grouping of the accounts which is part of the standard YCOA. Accounts which were previously part of a logical range may now be in very different number ranges. This means any previous assignments based on groups or ranges needs to be checked, including:

  • Financial statement versions, particularly any assignments based around number ranges rather than individual GL accounts
  • Mapping of FSV items to semantic tags
  • Cost Element groups

Note also that some of the Semantic Tags and FSV are hard coded for use in specific processes, such as:

The reality is that not every dependency is obvious or well documented. The more you diverge from the delivered settings, the more you risk hitting an unexpected issue.

Mapping challenges – additional GL accounts

S/4HANA Cloud Public Edition is a fundamentally different solution with different processes and architecture to both previous SAP solutions such as ECC and from 3rd party vendors. It follows that the GL accounts used in these processes will not be the same and any mapping for Renumbering will highlight these differences.

An existing SAP customer coming onto S/4HANA will usually find there are a range of differences requiring new GL accounts due to the differences in process and posting, for example:

  • Revenue Accounts previously managed as Value Fields in Costing Based COPA
  • Accounts for COGS split previously only requiring Value Fields in Costing Based COPA
  • Accounts for Variance Categories previously only requiring Value Fields in Costing Based COPA
  • Accounts for Statistical Revenue items
  • Event Based posting GL accounts particularly for Revenue Recognition
  • Accounts for Secondary Cost Elements

Mapping challenges – reduced GL accounts

Some GL accounts from the legacy CoA are not required in standard YCOA, for example:

  • Bank Reconciliation GL accounts where several House Banks can post to a single GL
  • Reconciliation Account Adjustment accounts as Advanced Valuation can post directly to the original account
  • Accounts used in Accounts Approach for Parallel Accounting which is replaced by the Ledger Approach

OK so now you understand some of the additional aspects of Renumbering to match an existing CoA, let’s discuss some of the benefits you get with standard delivered YCOA.

 

Benefits of YCOA

Comprehensive documentation of YCOA

One of the hidden gems of YCOA is the detailed documentation behind both the structure of the account numbering and also the individual GL accounts.

https://help.sap.com/docs/s4hana-best-practices/ycoa/list-of-accounts

michael_davies_4-1715327548200.png

Illustration 5. YCOA documentation

The SAP documentation describes:

  • The technical attributes of GL accounts
  • The Account Structure of how GL account mapping to Financial Statements reporting
  • GL account usage in Best Practise scope items
  • GL account usage in Account Determination
  • Best Practice Process usage and posting examples

It also includes the accounts used for additional scope items such as Joint Venture Accounting and Contract Accounting, as well as the additional GL accounts created for specific Countries.

Each GL account is described in detail in terms of its purpose and how it is used in business transactions, as well as the related accounts with similar usage.

The Account Determination information is particularly useful, with information on the automated postings from integrated processes from MM and SD as well as Finance transactions and Tax related items across supported Countries. Much of this information is not available elsewhere and this also means you don’t need to maintain a complete accounting guide for your users to explain the account usage.

This documentation is updated for every release of S/4HANA Cloud Public Edition, meaning it is always current and contains details for new scope items, including Country specific items.

All of this is based on the delivered GL account numbers in YCOA and would become redundant with a renumbered CoA.

BP accelerators

In addition to the Help documentation, there are Excel files available in Signavio Process Navigator in SAP for ME:

Preconfigured G/L account master data for YCOA (Global)

This provides the complete list of GL accounts at the CoA level and whether they are included in Company Code level for the delivered Country versions.

It also includes GL accounts created from non standard Scope Items and as Country Specific, along with details of GL usage in Account Determination.

Preconfigured G/L account master data for YCOA (Local) - Country specific

This contains the GL account information for a specific Country.

Best Practise Test Scripts

InSignavio Process Navigator, each Best Practise Scope Item includes a Test Script which typically covers:

  • Set up information including relevant configuration settings
  • Test steps including inputs and expected results

Only the delivered standard GL accounts are mentioned in these documents.

Whilst the Renumbering process will update the configuration in the system, there is no equivalent process to update the Test Scripts. If you or your customer are using them to understand the standard process, you will need to map any GL accounts to their new values.

Test Automation

You can also load the Best Practice scope items into the Test Automation tool.

How to perform automated testing using standard best practice automates in SAP S/4HANA Cloud Test Au...

Data used for the Test Process is managed with the Test Containers, including the relevant, the GL account numbers to be used in the test. When running the standard processes, the system will use the delivered YCOA GL account numbers. This reduces the effort to set up the test process and means they should execute correctly.

The Renumbering process does not automatically update the Test Containers. You will need to manually identify where GL accounts are used and then map to the new number.

Baseline Activation Service

The SAP Baseline Activation Service is an implementation accelerator which delivers a Fixed Scope of processes and Org Structure objects to kick start the project. This Service, delivered by SAP, provides a rapid foundation for the overall implementation delivered by the Partner. Partners are also able to develop and deliver their own implementation accelerators.

The Baseline Activation Service assumes that the standard processes and the YCOA settings are used out of the box. The Service includes Transports and execution of Processes in the Test system (which prevents subsequent Renumbering of the posted GL accounts). The expectation is that the implementation project will extend this configuration and not need to start again with a revision of the Chart of Accounts or retest the processes in scope of the service with new GL accounts.

Other SAP documentation

GL account numbers are mentioned across a wide range of documents and resources including:

All reference material from SAP will use the standard YCOA GL account numbers, which makes it simpler to reference to your own environment. This consistency makes it easier for consultants and users to move across SAP systems and it also makes it easier to learn new functions based on the common GL references.

Group Reporting

SAP solution Group Reporting uses Financial Statement Items (“FSI”) in the Consolidation process. In S/4HANA Cloud Public Edition, these FSI are mapped from the posted GL account number.

michael_davies_5-1715327548209.png

Illustration 6. Mapping GL account to Financial Statement Item

The FSI represents a more summarised view of the financial transactions and hence there is usually an N:1 relationship between the GL account and the FSI. The FSI are usually less digits than the GL accounts.

In the standard system, there is a logical alignment between the standard YCOA GL account numbers and the FSI, with a common first digit and often a common second digit. This makes it simpler to understand the relationship between the values in the GL and Group Reporting.

If you Renumber the GL accounts in YCOA, you will also need to determine whether to renumber the FSI. There is no equivalent automated Renumbering process so you would need to create the FSI and define the mapping from the GL accounts.

Broader Benefits

I would also argue that there are benefits in adopting a standard GL structure for both Customers and Partners beyond those listed above.

  • In an era of staff shortages and higher mobility, onboarding is easier where the S/4HANA Cloud Public Edition is maintained as close to standard as possible.
  • Skills and employees become more transferable rather than being constrained by the customer specific view of GL accounting and reporting
  • Support time and expense is reduced when working with a common consistent set of GL account numbers for each implementation, rather than each being a unique set up.
  • There is more opportunity for Partners to build and deploy automation tools and accelerators based on the delivered YCOA. This provides opportunity to add value for Customers , reduce costs and improve implementation outcomes.

 

YCOA enables transformation

YCOA is delivered as an integral part of a modern accounting platform supporting processes which were not available in legacy environments. It represents SAP’s collective experience in delivering Financial processes, with rigour, logic and structure.

The delivered GL accounts are “natural” accounts without reference to internal or external elements such as customers, products or channels. They work hand in hand with the broader SAP Organisation structures (Company Code, Profit Center, Cost Center etc) and Margin Analysis to provide a Customer and Product view. Where additional dimensions are required, these can be achieved with simple Extensibility solutions rather than through the creation of additional GL accounts.

Legacy systems and their CoA were not designed for a modern ERP or to support capabilities such as:

  • Ledgers supporting multiple Accounting Principles
  • Ledger supporting parallel valuations (Legal, Group)
  • Extension Ledgers for additional adjustments
  • Predictive and statistical Ledgers
  • Fully integrated subledgers (Bank, AR, AP, Assets, Material Ledger) in the Universal Journal
  • Fully integrated Margin Analysis
  • Event Based Revenue Recognition
  • Event Based Production Accounting for WIP and Variance
  • Advanced Valuations for GL closing

Moreover YCOA is constantly updated by SAP as new processes and Countries are released.

These enable new ways of managing the business and provide an opportunity to reimagine the end-to-end reporting processes with new metrics and KPIs.

I would also go as far as to propose that Renumbering and the use of customer specific GL Account numbers provides no distinct competitive advantage and just retains the legacy view of processes. Where required, the equivalent reporting outcomes can be achieved by retaining and extending the YCOA numbering.

Whilst this may add to the up-front business change impact, it will clearly signal that the new system is bringing transformation. It also means that the ongoing adoption of new functions, one of the pillars of the Cloud Mindset, can be enabled in a seamless manner.

 

In conclusion

It might be stating the obvious, but transformation (of processes and business outcomes) requires changes which can be challenging. However, expecting transformation without change is like sticking butterfly wings on a caterpillar and hoping it will fly!

Convinced? If nothing else, make sure your customers are aware of these impacts before taking their Electric Vehicle back to the Fossil Fuel age.

 

 

 

 

 

 

 

 

 

 

 

 

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Informative and Important Blog.