FP&A is impacted by the way we do business
From a business perspective there is a real paradigm shift ongoing, which we should focus on from a management accounting side: the high-speed change in the way we do business, like service and subscription-based business models. Also the evolution towards the circular economy, the importance of understanding the impact of sustainability aspects and how this all influences the financial performance of organization is crucial to understand for today’s FP&A professional.
With the launch of SAP S/4HANA a key architectural change with the universal journal as single financial truth was realized. But the current business environment has led us to think about how to further take advantage of this simplified architecture within SAP S/4HANA. ONLY focusing on traditional business models is a thing of the past.
https://www.youtube.com/watch?v=jY1tvlCKWzQ
360 view on financial performance
This evolution means that, for instance, products are not necessarily sold but kept on the balance sheet. Getting a 360 view on your organization’s financial performance is no longer limited to P&L alone. One of the reasons for the shift from classic “COPA” to Margin Analysis, which also includes the ability to analyze specific balance sheet accounts, like work in progress, in the same way as your P&L.
To have maximum business user-driven flexibility to report and analyze, SAP heavily invests in the way multi-dimensional reporting can be run. The evolution from the so-called design studio-based reporting towards webdynpro reporting providing the same flexibility but increased logic in the way selection criteria, variants, alerting – as shown in this example - and so on can be handled in a simple way by the end-user.
A second major evolution is the SPEED of change… and as a result the speed at which FP&A professionals need to support business steering. Hence SAP’s focus on the concept of “event-based” processes.
Scenario analysis and simulation
Proactive business steering does not stop with having quick access to actuals. As one can only take the right decision when going beyond classic planning and budgeting. To answer the growing need of scenario analysis and simulation, SAP has linked planning, simulation, and predictive capabilities closely to actuals.
Technically speaking, this is all about linking SAP Analytics Cloud and SAP S/4HANA. An evolution which has also been recognized by Gartner… who see a growing interest in getting to a single solution for planning & recording transactions. At SAP, we take it even further by integrating the consolidation solution as well, eliminating the typical data replication… and therefore reconciliation… to deliver insights on group level.
Highlights of what’s been added include:
- the integration between demand and sales & operations planning with financial planning as part of the predelivered content, integrating SAP Integrated Business Planning and the planning content delivered with SAP Analytics Cloud. This emphasizes the evolution towards more and more integrated planning approach (extended planning and analysis or xP&A),
- the evolution towards scenario analysis, by embedding of predictive models – while keeping the business user in charge of the logic to be applied.
- Predictive modeling based on AI is one option but within SAP S/4HANA we also provide the ability to predict the financial impact on confirmed operational transactions, extending the reach of financial insight without applying algorithms or trend models. This already existed for sales orders but has been extended for travel expenses (through the integration with Concur) and additional scenarios like predictive accounting journal entries based on purchase orders will follow.
Transparency in allocations
With the latest release, further enhancements are also delivered related to the flexibility to model and transparency to analyze allocations. Possibly the most important one is the enablement of cross entity allocations - for instance for intercompany recharges. In line with best practice organizational setup, these allocations can be executed within a single controlling area. Inter- and intracompany allocations are split into different cycles.
Resource related intercompany billing resulting from the intercompany allocation will be added in an upcoming feature pack. Initially for scenarios without mark-ups, followed by scenarios including mark-ups.
Increase in global value chain complexity
Allocation topic is only one aspect of the growing complexity in global value chains. That’s why the simplification of the S/4HANA architecture is crucial. While not always visible at the forefront, this delivers a significant increase in flexibility to support:
- The use of multiple accounting principles, not just for legal accounting but for managerial purposes as well. This allows to evaluate business processes in parallel and in real time per required accounting principle as well as for group purposes.
- Increase the end-to-end transparency into value chains
- And as a result, delivering improved decision support through real-time group level profitability.
With the Universal Parallel Accounting, a harmonized and simplified way of managing parallel valuations is being introduced in SAP S/4HANA, providing:
- A universal solution for the general ledger and all subledgers
- Full alignment between financial and management accounting
- Currency management
- A different ledger per accounting principle.
This is currently available for SAP S/4HANA Cloud and will be rolled out in the Private Cloud Edition as well as S/4HANA On Premise going forward. Initially concentrating on new implementations. Do stay tuned as we’ll be releasing specific updates.
If you want to learn more about what SAP S/4HANA offers for financial planning and analysis, please check
www.sap.com/finance.
If you want to learn more about new features in SAP S/4HANA Finance Release 2021, we invite you to have a look here:
url.sap/finance21
