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edwin_geel
Advisor
Advisor

FINANCE FIRST with SAP

A very helpful discussion primer by Bruno Hoshino - Finance Architect @ SAP Brazil and Edwin van Geel - Finance Consulting Director EMEA. Co-authored by SAP Integrated Delivery Digital Finance Services Global Architect team

 

Where is Finance today?

The CFO and finance team are facing mounting pressure to deliver vital insights that drive business transformation. They play a pivotal role in capturing and overseeing transformation projects, and by 2025, half of FP&A leaders are expected to have an enterprise-wide data strategy as a primary responsibility.(3) The finance team, more than any other disciple in the company serves as navigator and influencer, leveraging data analysis to guide the organization through the complex and often turbulent seas of economic/politics environments with constant changes. Their role is of paramount importance, providing answers that enable C-Level executives to make informed decisions within their organizations. That is why Finance is a FIRST when it comes to making a transformation into digital.

Many CFOs are considering technology investments to expedite transformation. According to a 2022 Gartner survey, 92% of CFOs expressed plans to increase their technology investments. However, statistics reveal that only 30% of technology projects achieve success (3), mainly due to the existing and complex system landscape which makes it difficult to prioritize and to decide the most important capabilities to invest in. This outcome can have adverse effects on corporations, with over half of CEOs expressing dissatisfaction with the pace and value contribution of digital initiatives. (4)

At the same time, innovative  applications capable of supporting CFOs and their finance teams in guiding corporate evolution exist either in building strong data driven finance foundations, the use of business AI or automation to enable streamlining for efficiency.  These days it has become a question of “how to start right”, avoiding being paralyzed by indecision. (5)

 

Why innovate now?

In this manner, a right approach for a digital transformation is key for organizations to be able to convert information into effective actions and in this complex endeavor, companies often struggle to comprehend and prioritize which business capabilities to modernize. The key to successful transformation lies in adopting a value-centric perspective, rather than solely focusing on costs. Recognizing the finance department's pivotal role as both a partner and mentor to the business, Gartner Research "Deliver Finance First to Transform ERP With Purpose" (1) emphasizes the importance of prioritizing finance in ERP strategies. This approach enables organizations to assess their performance during transformation and yields potential financial improvements from the outset. Gartner's recommendations include delivering swift and accurate business performance insights through a finance-first approach, unifying stakeholders around core metrics to drive greater business value, and continuously modernizing ERP capabilities based on measured performance results.

From SAP portfolio, the finance area is the one that received the most innovative solutions in recent years. Moreover, ensuring a solid financial foundation is paramount when transitioning to SAP S/4HANA Cloud ERP (Public or Private). SAP's innovative finance solutions set the stage to aligning finance capabilities with an Intelligent Enterprise journey.

The new solutions built on SAP S/4HANA support both analytics and transactional processing in real time and at scale for end-to-end process efficiency and unified views of the entire company with one source of truth for the accounting data.

These solutions are designed to help companies improve their financial indicators and margin analysis in high-priority areas, such as ensuring optimal cash and capital, enabling streamlined closing and reporting, meeting compliance requirements while protecting the business.

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From: Leading in the Moment: The CFO's New Reality. SAP (2).

 

What solutions impact your business?

The SAP new Finance solutions are not only delivered in the ERP Core, but are extended to the SAP cloud platform, known as SAP Business Technology Platform (BTP). Those solutions enable organizations to manage finance and capital effectively while supporting business continuity and controls.

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SAP Business Technology Platform (SAP BTP) is the foundation of the Intelligent Sustainable Enterprise that brings together data and analytics, artificial intelligence, application development, automation, and integration in one, unified environment.

It addresses the challenge of evolution according to the business environment challenges and subsequent transformation. But as a continuous process and not a journey with a fixed end. As tomorrow’s world will require continuous change.

Given that monolithic ERP implementations are no longer justifiable, CIOs struggle to incrementally modernize capabilities with a business-driven approach to optimize value.

Deliver Finance First to Transform ERP With Purpose. Gartner Research, January 27,2021 (1).

This approach is based on a Clean Core principle. Unlike what happened in the past, where the developments required according to the specificities of each customer were carried out directly in the ERP core and which made upgrade projects more complex and costly, in the new approach, the crucial developments for the business are developed directly in a natively integrated platform that keep the core clean.  This allows companies to adapt the system to changing business requirements and to adopt new capabilities while ensuring permanent traceability and robustness in all areas of the core. Examples are highly adaptable workflows, customized calculations tailored to your unique business and way of organization and analytical capabilities.

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Through a Clean Core approach custom code can be decoupled from the system’s release cycles, upgrades and updates.

This platform, called SAP Business Technology Platform (BTP) is not limited to new technical team development capabilities or aimed at Professional Developers, but  with new low code/in-code tools in what is called SAP Build. These new tools (SAP Build Apps, SAP Build Process Automation, SAP Build Work Zone) empower business users (called Citizen Developers) to extend system functionality according to their needs in a more agile and productive way.

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SAP Build: Create and augment enterprise apps, automate processes, and design business sites, all visually.

For a true Clean Core, the best-case scenario describes an up-to-date system on the latest release with the possibility to leverage the latest innovations as, for example, solutions for Process Automation (RPA), Machine Learning (ML) and Business Artificial Intelligence (AI).

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Clean Core best case scenario describes an up-to-date system on the latest release, with cloud compliant extensions and integration, with optimal master data quality and with perfect process design.

SAP Business AI is deeply embedded in SAP business processes and analytics solutions, serving to accelerate processes, optimize decisions and multiply productivity. The integration of AI within financial operations is a critical aspect of the journey towards becoming an intelligent enterprise. By significantly enhancing efficiency, reducing errors, and facilitating real-time decision-making, SAP Business AI offers considerable advantages to any organization. Take, for instance, SAP Cash Application, which is designed to automate invoice matching - this alone has proven to save hours per year by automating bank statement processing and it also highly increases the accuracy of SAP Cash Application proposals for existing users (6)(7).

Moreover, the introduction of innovative technologies such as Joule, SAP’s digital assistants, exemplify the growing capabilities of SAP Business AI. Joule acts like an AI co-pilot that transforms the user experience by leveraging generative AI to empower users executing their everyday tasks more efficiently.

These intelligent capabilities play a vital role in an organization's digital transformation processes, enhancing their agility and competitiveness in a rapidly evolving business environment. The combination of automation power and the advantage of informed decision-making creates a formidable tool for navigating today's volatile business environment. The rapid availability in the SAP RISE / S4 platform allows modern Finance organizations to consume these advantages fast and at low costs.

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SAP Business AI approach: Relevant, Reliable and Responsible.

Another highly relevant topic that is important not only for the corporate environment, but for the world in general is the ESG (Environmental, Social and Governance) and for that, the new solutions in Finance as the Green Ledger (Planned 2024) can leverage the company to act with transparency in sustainability throughout the value chain.

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 Move from averages and assumptions to actuals and accurates towards transactional carbon accounting​.

All those already delivered solutions for finance and the planned ones are relevant depending on the maturity level of each corporation and the business environment. For instance, the companies that are focusing on Mergers and Acquisition (M&A) strategies can benefit greatly from solutions as SAP Central Finance, which is a S/4HANA system installed as sidecar, receiving financial accounting transactions via real-time replication from SAP or non-SAP ERP source systems. Through this solution, it is possible to centralize accounting reporting information from different systems, as well centralize crucial finance processes, for example, Central Payments and Central Asset Accounting.

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 Holistic Financial View in a Multi-System Landscape across your Enterprise

How do you move towards your transformation goals?

To help define which capabilities should be considered, the Process Insight from SAP Signavio can help to provide a clear understanding of how different finance activities are carried out, revealing inefficiencies and bottlenecks in a customer landscape.

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SAP Signavio Process Transformation Suite​

The Plug and Gain approach from SAP Signavio solutions, can be used as a predefined starting point to kick-start a transformation project based on the existing SAP ERP Central Component (SAP ECC) and SAP S/4HANA data. It accelerates the digital transformation journey by quickly understanding how the company’s business processes are currently running and determining what to keep and what to change.

Finally, to ensure successful implementations and consistent adoption of new solutions with the perception of their benefits, it is important to build transformation roadmaps and for that purpose, the SAP Professional Services assistance to lead the way with Finance as the strongest foundation for competitive and effective transition to a modern.

Services as the Business and Value Assessment Service for Digital Finance can leverage the right adoption of the finance capabilities once that, not only technical aspects, but the strategy of the organization can be considered in the analysis. This is key considering that it is crucial that all the stakeholders consider the same directions for the system evolution. And this is not always achieved, as 80% of CFOs believe they understand how financial management need to adapt to support enterprise digitalization, but only 55% of CIO agree. (8)

These studies can help the companies to have a direction of where they should go according to business objectives and not just technical criteria, in a cadenced way and using the gains already obtained from previous phases as insights for technological and business evolution. Finance is the first step on a continuous journey of transformation and growth.

 

References:

  1. John, D., Decker J.V. (2021). Deliver Finance First to Transform ERP With Purpose. https://www.gartner.com/en/documents/3995993
  2. SAP SE. Leading in the Moment: The CFO's New Reality. https://community.sap.com/t5/additional-blogs-by-sap/unlocking-financial-leadership-of-tomorrow/ba-p... 
  3. Gartner, Inc. (2023). Gartner Survey Identifies the Top 10 Priorities for CFOs in 2023. https://www.gartner.com/en/newsroom/press-releases/2023-01-10-gartner-survey-identifies-the-top-10-p...
  4. Gartner, Inc. (2023). The New Operating Model for Autonomous Finance. https://www.gartner.com/en/finance/trends/new-autonomous-operating-model
  5. Gartner, Inc. (2023). Drive Agility by Deploying a Composable Finance Technology Strategy. https://www.gartner.com/en/finance/trends/deploying-a-composable-finance-technology-strategy
  6. SAP SE (2023). SAP Business AI Reinventing How Businesses Run. https://www.sap.com/documents/2023/09/bac24f28-a57e-0010-bca6-c68f7e60039b.html
  7. SAP SE (2022). AI In Finance: All The Reasons to Dive In. https://www.sap.com/documents/2022/10/625f0f46-4c7e-0010-bca6-c68f7e60039b.html
  8. Wiles, J. (2022). How your CFO-CIO Partnership Drives Digital Funding - Or not. https://www.gartner.com/en/articles/how-your-cfo-cio-partnership-drives-digital-funding-or-not