Integrated Financial Planning - An Overview

hartmut_koerner · ‎10-18-2022

Introduction

"Integrated Financial Planning for SAP S/4HANA and S/4HANA Cloud" is the content package for SAP Analytics Cloud that covers the complete area of financial planning. This package already exists several years now, it was enhanced step by step in the last years and with the 2022.Q2 release it was migrated to the "New Model" in SAC. With this blog post I want to create a single entry point for all important information around this topic.

The content package consists of five integrated planning areas:

Operating expense planning manages the expenses for different areas of responsibility within the company, e.g. cost centers or projects. Expenses can be planned and allocated between the respective cost objects. In a quantity driven approach, expenses can be combined with activity quantity planning and an iterative activity price calculation

Product cost planning has the task to calculate the costs of a product. The two main ingredients of product costs are the raw material costs and the activity costs, for example machine costs. Cost center planning is one important input for product cost planning because it determines the activity prices (e.g. for a machine hour) to calculate the activity costs

Sales and profitability planning calculates the revenues, deductions and costs based on the planned sales quantities. Product related costs originate from product cost planning whereas product independent costs like administration costs originate from cost center planning directly

Capital expense planning allows to plan asset additions and depreciations. The depreciations are an important input for the cost center planning and the asset additions can be rolled up into the financial statement planning

Financial statement planning brings together all the detail plans and creates an equated balance sheet and cash flow statement

The five modules of integrated financial planning can be used altogether to cover the whole financial planning process from an operational to a strategic level. On the other hand they are loosely coupled and can be used easily standalone. E.g. in a non-manufacturing industry like professional services, one would leave out the product cost planning module. Concentrating on a high-level financial plan, one could use the financial statement planning even standalone.

Integrated Financial Planning covers all different business roles that are engaged with financial planning in a company: Corporate controlling or corporate FP&A that set up and manage the planning process in the company and set the targets, the single planners in financial accounting, regional controlling and even sales departments (cost center managers, production controller, sales planner) that manual enter their plan data and the planning administrators that run planning functions across the different modules.

Looking at the legacy planning solutions of SAP, Integrated Financial Planning covers both the "classical" planning in the FI/CO area of SAP ERP and S/4HANA as well as a model driven BW/BPC based planning solution be it BPC Optimized embedded in S/4HANA or a BPC planning solution in a standalone BW system.

Integrated Financial Planning can handle different currencies (global, local, transactional), different time granularity, fixed or rolling time horizons and it can be used tightly or loosely coupled to S/4HANA data and processes. It supports both a bottom-up and a top-down planning approach and a combination of both leveraging a powerful version management.

Integrated Financial Planning also is part of the xP&A suite and very well integrates out-of-the-box both with other SAC based planning applications like HXM Workforce Planning and Consumer Products Sales Planning and non-SAC based planning applications like SAP Integrated Business Planning.

Steering business towards a decarbonize economy is a major goal today. Greenhouse gas (GHG) emission planning that is part of this content package extends integrated financial planning by the carbon dimension. It evaluates the financial plan with carbon emission factors and calculates the future carbon footprints of the organization. The financial plan data, including expenses, activities, and sales quantities, serves as the foundation for calculating carbon dioxide equivalents (CO2e). The same plan structures, such as the quantity structures and allocation rules used for cost allocation, can also be reused to allocate CO2e to respective cost objects, such as cost centers and products. The integrated financial planning model enables the impact of greenhouse gas emissions to be simulated based on various driver parameters, such as emission factors for raw materials or energy sources.

Product Architecture and Strategy

SAP Analytics Cloud is the recommended financial planning solution for SAP S/4HANA Cloud and On Premise. Integrated Financial Planning consists of three pillars:

The planning tool "SAP Analytics Cloud" that provides
- generic data input and data import capabilities
- a planning engine powered by SAP HANA
- a full blown modeling environment for planning models, input layouts and data actions like allocations and advanced formulas
- surrounding functionalities like commenting functions and a planning calender
A dedicated connector for SAP S/4HANA Cloud and On Premise
- that can read all relevant data from S/4HANA and write the plan results back to S/4HANA via OData services
Pre-delivered Financial planning content package "Integrated Financial Planning for SAP S/4HANA" that can be
- used as-is. Feel free to use the content productively
- adapted. You can copy & enhance the content to meet your requirements in a better way. It is obvious, that not all planning scenarios can be covered by the sample content that SAP provides
- used for inspiration. You can build your own content from scratch next to our sample content being inspired from it. This is possible by using the complete SAC modeling environment

For details see slide deck https://dam.sap.com/mac/u/a/1f9kqVY.htm, slides 4 to 8 for the architecture, slides 9 to 24 for the planning tool per se, slides 25 to 33 for the S/4HANA integration and slides 34 to 121 for the business content.

History

SAC content innovation release 2022.Q2
The integrated financial planning content was migrated from the classic account model to the "New Model" in SAC. Some background information is described in this blog post New Model – Configuration Options

SAC content innovation release 2022.Q3
Features like integration with Predictive Accounting, integration of Consumer Products Sales Planning and quantity unit conversion were added. Details can be found here

SAC content innovation release 2022.Q4
Financial statement target setting, currency conversion between group and local currency and enhanced sign logic were added. Details can be found here

SAC content innovation release 2023.Q1
A story to demo the end-to-end planning process and the allocation of sales & admin costs were added. Details can be found here

SAC content innovation release 2023.Q2
The reporting stories have been enhanced with dedicated KPI views and actual data for comparison. The public dimensions now provide additional features like row source information and multi-language support. Details can be found here

SAC content innovation release 2023.Q3
The new cost break down in operating expense and product cost planning uses an easy configuration for the granularity of the cost allocation via a flexible account mapping. Financial statement planning was enhanced with FTE based KPIs and DSO/DPO calculations. Details can be found here

SAC content innovation release 2023.Q4
Raw material planning was introduced that allows to distinguish between planned raw material consumption for production and purchased raw material. The difference can be taken over to the balance sheet as raw material inventory changes. Details can be found here

SAC content innovation release 2024.Q1
Greenhouse Gas Emission Planning was introduced. It evaluates the financial plan with carbon emission factors and calculates the future carbon footprints of the organization.
Details can be found here, in this blog and on slides 99 to 121 in https://dam.sap.com/mac/u/a/1f9kqVY.htm

Integration with SAP S/4HANA

Besides the technical integration with SAP S/4HANA one also needs to look at the integration from a business process point of view. When the financial planning round is finished, plan results can be written back into SAP S/4HANA for different purposes:

Write-back expense planning to be used in Universal Allocation. This option will be used when overhead allocations for plan and actual shall happen on the same level of granularity with the exact same rules. When it is more important that the plan allocations are embedded seamlessly into the whole planning process, they will be done in SAP Analytics Cloud

Write-back activity cost rates to be used in cost estimates and actual activity allocation

Write-back plan results to be used for Embedded Analytics (Plan-Actual Reporting), Group Reporting or availability check

These processes are visualized in the slide deck https://dam.sap.com/mac/u/a/1f9kqVY.htm on slides 6, 7 and 122 to 127.

Additional integration with SAP S/4HANA On Premise and Private Cloud

In S/4HANA On Premise and Private Cloud, the "classic" financial planning transactions known from R/3 and SAP ERP like KP06 and KP26 still are available for compatibility reasons. Integrated Financial Planning for SAP Analytics Cloud can be combined with the classic planning transactions and also with BPC Optimized using the so called "transfer programs". This allows for a smooth transition from the legacy planning world to SAP Analytics Cloud. The key element is the planning table ACDOCP that can exchange data with the "classic" planning tables like COSP and COSS and that is accessed also by BPC Optimized.

Typical scenarios are:

In a transition phase, migrate some planning areas to SAP Analytics Cloud and leave others with classic planning

Move planning results from new planning to classic planning to be consumed in processes like activity confirmation or cost estimate

Use calculated future depreciations for existing assets or assets under construction

Use classical activity cost rate calculation with cost component split

For details see slide deck https://dam.sap.com/mac/u/a/1f9kqVY.htm slides 122 to 127, the presentation Transfer Programs, the documentation Transfer Data for Financial Planning and also note https://launchpad.support.sap.com/#/notes/2270407.
Note https://launchpad.support.sap.com/#/notes/3118397 describes the availability of the transfer programs in the different S/4HANA On Premise releases.

First Impressions

The landing page provides a central entry point for all planning stories of the different planning areas:

A typical planning story has central story filters, triggers for planning functions and a table for data entry:

The planning results can be visualized in analytic stories:

Further Information

General Application Documentation

The documentation for Integrated Financial Planning in SAP Analytics Cloud can be found here:

For SAP S/4HANA Cloud
Open the Help Portal and search for product "SAP S/4HANA Cloud". Go to "Product Assistance" -> Finance -> Management Accounting and Marging Analysis -> Financial Planning -> Financial Planning in SAP Analytics Cloud or directly at Financial Planning in SAP Analytics Cloud

For SAP S/4HANA On Premise
Open the Help Portal and search for product "SAP S/4HANA". Go to "Product Assistance" -> Enterprise Business Applications -> Finance -> Financial Planning and Analysis -> Financial Planning -> Financial Planning in SAP Analytics Cloud or directly at Financial Planning in SAP Analytics Cloud

In addition, in particular when you want to adapt the pre-delivered content and learn about the modeling capabilities of the SAC tool, have a look at the SAP Analytics Cloud documentation

For more information about the product assistance concept for Integrated Financial Planning have a look at this blog post.

Overview presentations

You find two overview presentation on S/4HANA Financial Planning with SAP Analytics Cloud (SAC) in https://dam.sap.com/mac/u/a/1f9kqVY.htm and https://dam.sap.com/mac/u/a/AdmAoKy.htm?rc=10

Videos

Best Practices

Integrated Financial Planning for SAP S/4HANA is assigned to scope item 4RC and documented in the Best Practice Explorer https://rapid.sap.com/bp/#/browse/scopeitems/4RC

Technical Integration Guide

The integration between planning models in SAP Analytics Cloud and SAP S/4HANA On-Premise is managed by the SAP Cloud Connector. The setup and configuration is described in detail in this Technical Integration Guide.