Central Finance: The First Step on the Road to S/4HANA

October 30, 2020

I want to write a few articles on the data challenges (and opportunities!) associated with SAP Central Finance. But to do that I first have to answer a few questions being asked by many CFOs and finance teams:

  • What exactly is Central Finance?

  • What does it do?

  • What value/benefits does it promise?

Obviously your own level of understanding/awareness of Central Finance is going to depend on where you are on the ‘buyer journey’, and whether you’ve made the move from initial problem recognition to analysis of the available options.  That said I do need to start somewhere, so let’s jump in with a quick overview of the technology.

 

How Central Finance Acts as the Foundation for an S/4HANA Deployment

S/4HANA is SAP’s next-generation business suite, making it the point of destination for all existing SAP customers. However, as with many tasks in life such a transition is easier said than done – and many companies are reporting that the move is proving complex and highly invasive.

 

Central Finance however is seen as a stepping-stone to a full S/4HANA migration, thereby taking much of the risk out of the equation. As for describing the solution, this is technology that comes with the following headlines:

  • It’s a major component to S/4HANA 

  • The solution can be implemented on premise, in the cloud, or as a SaaS solution

  • It replicates financial documents into a central system, giving you a real-time, organisation-wide financial view

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Migrating Enterprise Data to SAP S/4HANA Central Finance Delivers Business Value 

Looking at the ‘central’ part of the offering, the obvious benefits here are related to the age-old pursuit of a single source of truth. This is a key output of Central Finance:

  • Users can create a global, common reporting structure by mapping accounting entities from existing systems into one consistent set of master data (e.g. general ledger, profit centre etc.)

  • Finance can then generate harmonised reports to support future decision-making

  • Central Finance contains all universal journal postings, making it more effective in managing tasks such as financial close, rebate calculations, and revenue recognition 

Of the value thus delivered, arguably the biggest advantage is the ability to move away from needing multiple systems to manage accounts payable, accounts receivable, and payroll. Instead, users can utilise real-time planning data that facilitates proactive and predictive financial reporting capabilities.

 

Central Finance Acts as a Stepping Stone to Data Governance

Turning to the data aspect of deploying Central Finance, the solution is designed to provide a non-disruptive approach to overcoming a disparate and fragmented data landscape:

  • Central Finance acts as a hub into which new entities can be integrated without imposing fundamental changes to the main accounting system

  • All transactions are stored once (single source of truth) in a central financial transaction-level data repository

  • The technology enables you to bring in a transaction and then map the business object included in the transaction for adjusted posting in the central instance

Developing your Central Finance instance also provides the opportunity to rationalise and improve the quality of key data elements, with the master data shared between the solution and existing ERP systems – and all kept in sync through SAPs Master Data Governance functionality.

 

Be Prepared to Address Challenges While Migrating to SAP Central Finance

All sound too good to be true? Maybe so, as the act of integrating source ERP data into Central Finance can often turn into a complex undertaking. Particularly when it comes to data mapping and harmonisation. Yet here too opportunity exists, with the potential to automate processes and ensure all available data is clean and true.

 

Exploring these in more detail will be the subject of two future articles. 

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Master Data Management and Successful Central Finance Migrations
Master Data Management and Successful Central Finance Migrations

Centralizing a Global View of Financial Information and Insights

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