Which Solutions to Use for Financial Closing

udo_werner · ‎10-17-2023

Summary

In this article I describe alternative options of SAP solutions to cover Financial Closing out of SAPs product portfolio.

Business Requirements

The monthly, quarterly, or yearly financial closing process of a company requires the execution and synchronization of many tasks of multiple roles and different parts of the company. Goal is to provide and complete and correct picture of the financial state of the company, early after the end of the period. Examples of typical steps would be settlement of production orders and projects, asset depreciation runs, running allocations cycles to distribute overhead costs and revaluating materials, assets and debits and payables and receivables in foreign currencies.

The requirement to a solution would be to plan, execute and review all these steps and providing a status of the overall process.

Requirements are very similar in the process of local financial closing (closing by company or country) and group financial closing where all numbers of the whole group are brought together for a consolidated statement.

Solution Options

Out of the current SAP product portfolio there are two products to cover the requirement:

SAP S/4HANA with its application areas in Finance and Controlling
SAP S/4HANA Cloud for advanced financial closing

SAP had earlier solutions in predecessor products such as the Financial Closing Cockpit, but they are not longer offered in the current portfolio.

There are also 3rd party products trying to cover the requirements. We will not include them into this consideration.

Characterization of the Solution Options

SAP S/4HANA

SAP S/4HANA has all the capabilities to plan and execute all the required steps and to review each one of them. With built-in features like scheduling jobs and bringing them into a sequence the whole process can be mastered. Many companies have done that successfully for many closings and have developed the means and collected the experience to be successfully without having to exploit an additional solution. A central oversight will usually be missing, and the process relies very much on the people involved, oven causing some level of stress.

SAP S/4HANA Cloud for advanced financial closing

SAP S/4HANA Cloud for advanced financial closing is an add-on solution, not part of any deployment option of S/4HANA. It is a public cloud solution and licensed as such. The solution has its focus on the synchronization and oversight of the tasks of the closing, while the actual closing steps still run as programs in S/4HANA finance itself.

Besides orchestration and oversight, it provides also templates so that a company does not have to start at zero when setting up a closing process.

Criteria to determine the most suitable target solution

As already described, this is mostly a buying decision where budget and costs have to be compared with the benefits of the add-on solution. Some question that can help for some orientation:

Does the business see the closing process as pain point?
Is it efficient?
Do people involved complain about the stress level?
Do they use a predecessor or 3rd party add-on solution for the task?
Is acceleration of the closing process a target of the CFO? (fast close)
Did the department suffer from mistakes made and had to repeat steps or even the whole process?
If the feeling is that the process somehow is managed today, will that be the case also in future? Might key people not be available forever?
Will the task become more complicated or bigger in the future?
How much will you have to invest to set up a closing template from scratch?

Conclusion

In the past, companies using SAP often managed the closing without add-on solutions and some will continue to do so, but many recognize the need to better control the process and make it more efficient. For these companies SAP S/4HANA Cloud for advanced financial closing S/4 is a ready-to use cloud option to complement the basic S/4HANA capabilities.