Author: SAP Product Engineering
First version: May 2017
Revision: May 2020
This article describes SAP Development's strategy for SAP S/4HANA for group reporting, our next-generation product designed to meet financial consolidation and close requirements. For over 30 years, our customers have trusted us to help them run their group close process covering data collection, consolidation, analysis and publication. Today, we are building the consolidation software of the Intelligent Enterprise. From a functional/process perspective, S/4HANA Finance for group reporting draws from our heritage solutions for consolidation. From a technology standpoint, our new consolidation software embeds recent innovations such as in-memory database, artificial intelligence, machine learning, predictive algorithms and chat bots to further improve your consolidation process. Our consolidation software is available in the cloud and on-premise, and can be used either integrated with the general accounting in S/4HANA or in a standalone mode.
Please note this article and SAP's strategy is subject to the Legal Disclaimer at the bottom of this page. In particular, the information in this article is not a commitment, promise, or legal obligation to deliver any material, code, or functionality.
HELP IMPROVE YOUR CONSOLIDATION PROCESS
A lot of companies are running a disjointed finance landscape with separate system silos for entity close and group close. The inherent inconsistency in this approach has profound implications to the efficiency of financial close:
• Data replication
Finance professionals working for company subsidiaries need to close their local books first and then provide corresponding data to headquarters to support the corporate close. This typically involves two distinct data models and two distinct close processes necessitating data extraction, extensive reconciliation and multiple manual adjustments to align the accounting books.
• Data aggregation
The granularity of financial data available to business analysts on a corporate level is limited hindering in-depth data analyses and requires extensive interaction and handover with IT to address new reporting requirements. In addition, a lack of detail on the corporate level hampers processes such as intercompany reconciliation leading to repeated back-and-forth data queries between headquarters and the subsidiaries.
• Data unintelligibility Transactional and master data from operational accounting are invariably mapped to aggregated group accounting data with opaque logic which is not transparent to the finance user. Drilling down from the consolidated financial statement to the underlying operational transactions is not a seamless process but requires extensive data gathering between corporate and subsidiaries to build this audit trail.
S/4HANA Finance for group reporting helps address these shortcomings. SAP’s next-generation software helps you deliver your entity and group close processes on a single system facilitating drill down directly to the document level for fast analysis and better decision-making. You run financial consolidation on real-time transactional data, rather than in a separate consolidation application.
SIMPLIFY YOUR ARCHITECTURE
S/4HANA Finance for group reporting is one part of S/4HANA Finance integrating financial, managerial, and operational data into a single source and accelerates performance with real-time processes and analytics. In addition, overall integration of local close and group close helps you simplify your financial architecture. The foundation for this simplification is the S/4HANA Universal Journal, forming the basis of an integrated accounting system combining general ledger accounting, asset accounting, controlling and material ledger (see below).
The Universal Journal enables a radical simplification of your finance landscape, as depicted in the diagram below.
Traditionally entity close and group close are performed in separate silos. At the end of the fiscal period operational data is aggregated, mapped to a different data model and replicated into the group close system. This process typically comprises multiple stages and multiple copies of the original data into spreadsheets or data warehouses. Finance must devote inordinate effort on time-consuming reconciliation to ensure consistency between the entity close and group close data and IT must constantly monitor the connectivity and accuracy between the separate systems.
Right diagram SAP’s new architecture uses S/4HANA Universal Journal as the single source of truth for all financial data. Within the Universal Journal, financial and management accounting data are recorded in a single chart of accounts. Since this accounting data is in the same accounting record, no reconciliation between financial accounting and management accounting is ever required. The integration of financial and management reporting enhances your ability to meet financial regulations, such as the requirement to include operating segments in statutory reports.
UNIFY LOCAL CLOSE AND GROUP CLOSE
S/4HANA Finance for group reporting software unifies local close and group close. Unification of data helps you:
• Ensure data quality
Local close and group close share the same master data and rules. You can continuously check postings against central validation rules.
• Accelerate your group close process
You can post adjustments locally and results are provided immediately for group reporting. Having one shared environment for local close and group close allows you to fast-track certain processes such as currency translation (see the "Help shorten your group close process" section below).
• Achieve transparency and auditability
You benefit from a fully enabled drill-through from group reporting to the operational accounting journals instead of transformation in multiple systems. In addition, since consolidation rules uses the same data model as operational accounting, the dimensionality in your consolidated reports is not restricted to a subset of attributes allowing you to make sophisticated and detailed data analysis.
CONTINUOUS ACCOUNTING HELPS SHORTEN YOUR CLOSE
Moving to the Intelligent Enterprise is not just a technical upgrade. The real value comes when companies leverage innovative approaches such as agile methodologies to reimagine business processes.
For consolidation, the universal journal is a catalyst for rethinking your financial close schedule. The universal journal represents the single source of truth: integrity of financial data is guaranteed by design, streamlining reconciliations and ensuring instant availability of the most current data. You can leverage it to accelerate the time needed to close your group books based on a mindset we term "continuous accounting".
In S/4HANA Finance for group reporting, you can fast-track time-consuming consolidation steps such as intercompany reconciliation or currency translation which traditionally needed to be delayed until the end of the fiscal period. You can also control data quality before entity close based on the same validation rules without repetitive correction processes.
LEVERAGE PREDICTIVE ACCOUNTING
SAP is providing new innovations to extend the reach of continuous accounting and provide more accurate forward-looking data on your organization’s financial performance.
Using predictive accounting you can incorporate future insights based on sales orders and commitments already in your S/4HANA environment for more accurate managerial reporting. These predictive postings are isolated in a separate “extension ledger” and can be combined with actual accounting data for more forward-looking consolidated results anticipating your company’s future margins.
DECENTRALIZED DATA COLLECTION AND DATA MAPPING
SAP’s integrated data collection app makes collecting financial data from subsidiaries outside of SAP S/4HANA a lot easier. The app leverages S/4HANA Group Reporting master data and includes predefined and custom-built input forms to gather financial data for each company or group. The data is validated on input and can be automatically supplemented with additional derived dimensions.
In addition, a Data Mapping app helps you map your ERP systems into S/4HANA Group Reporting which accelerates the onboarding process for newly acquired companies. In legacy data mapping processes, subsidiaries manually map (typically in an Excel download) from local chart of accounts to group chart of accounts. They often rely on judgement or audit experts and the process needs to be repeated with changes in accounting regulations, new local systems or acquisitions. With our intelligent data mapping, we plan to embed machine learning algorithms into our app, to suggest mappings based on description of accounts and attributes. Our objective is to provide 80% of pre-filled mapping and deliver quality check of manually created mappings. Our AI innovations strictly follow SAP Guiding Principles for Artificial Intelligence, as defined by the SAP AI Ethics Steering Committee.
GIVE CONTEXT TO DATA
Non-financial data is gaining increasing importance in corporate reporting and SAP provides “context to data” to assist in the design, input, analysis and retrieval of non-financial measures and qualitative data required for your financial consolidation process. SAP is planning to ship flexible forms and questionnaires for collecting structured and unstructured data as part of the supplemental information to your monthly, quarterly or annual reports. The animated picture below illustrates the planned combination of structured and unstructured data for data collection:
CLOUD, ON-PREMISE OR HYBRID
Following SAP's cloud strategy, S/4HANA Finance for group reporting is available on the cloud, on-premise or using and hybrid model. You can use it by running third-party public cloud services from providers such as Amazon Web Services, Google Cloud Platform, IBM Cloud, Microsoft Azure etc. – or within an SAP data center. You can also opt for a hybrid model of public cloud, private cloud, and on-premise solutions from SAP and third-party vendors – for maximum flexibility.
SAP provides yearly software updates for the on-premise version, and quarterly updates for the cloud version, so you always have access to the latest innovations in areas such as machine learning, AI and predictive analytics.
BUILDING BLOCKS FOR AN INTEGRATED REPORTING
To ensure flexibility, SAP S/4HANA Finance for Group Reporting has been developed based on a building block methodology. SAP S/4HANA is the central block integrating local and group close and is available both in the cloud and on-premise. Additional building blocks are available in the cloud, such as the data collection app for gathering information from your decentralized subsidiaries or SAP’s planning and reporting apps in SAP Analytics Cloud. Going forward SAP is planning a disclosure app for company filing. Finally, we aim to enable our partners and ecosystem to build custom apps integrated with S/4HANA Finance for group reporting.
Legal Disclaimer The information in this article is proprietary to SAP and may not be disclosed without the permission of SAP. This information is not subject to your license agreement or any other service or subscription agreement with SAP. SAP has no obligation to pursue any course of business outlined in this article or any related presentation, or to develop or release any functionality mentioned therein. This article, or any related presentation, and SAP’s strategy and possible future developments, products, and platforms, directions, and functionality are all subject to change and may be changed by SAP at any time for any reason without notice. The information in this article is not a commitment, promise, or legal obligation to deliver any material, code, or functionality. This article is provided without a warranty of any kind, either express or implied, including but not limited to the implied warranties of merchantability, fitness for a particular purpose, or noninfringement. This article is for informational purposes and may not be incorporated into a contract. SAP assumes no responsibility for errors or omissions in this article, except if such damages were caused by SAP’s willful misconduct or gross negligence. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and they should not be relied upon in making purchasing decisions.