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As finance professionals, one of the more significant values we add to the business is providing insights to line of business managers and other professionals about the performance of their business unit or department. This is beyond dry managerial accounting, I’m talking about intuitive analytics that can provide detailed information on why profit margins are declining, which products are selling, what regions or channels are driving the greatest sales volume and why.

As we all know, this is often easier said than done. We can deploy expensive and complex data warehouses with analytic dashboards that can slice and dice accounting data at precise levels of detail. However, the Achilles Heel in this mix if often our single source of the truth—the general ledger. Over the years we’ve had to adapt the GL’s chart of accounts to enable the capture of detailed postings at more granular levels to support profit centers, cost centers and the like. Often this means expanding the chart of accounts so much that it becomes unwieldy to the point that it becomes a hindrance to basic accounting processes like closing the books. It also increases the likelihood of errors.

I know many finance professionals agree that what we’ve gained in being able to analyze critical business data at more and more granular business dimensions, we’ve had to trade off by making the COA more and more complex. In a sense, we’ve woven a very tangled web.

There Must be a Better Way

With SAP Financials OnDemand, we’ve taken a completely different approach. We start with the organizational unit that we want to measure—it could be a segment, profit center or cost center. To each of these organizational units, we attach a chart of accounts. Notice we’ve already simplified the GL by not embedding the segment, or any other organization element for that matter, in the main chart of accounts.

Enabling More Granular and Actionable Reporting

Beyond simple organization unit reporting, we often want to analyze information for other business dimensions such as customer, channel or even a project if we’re a professional services firm. With SAP Financials OnDemand, that’s easy too—we do it at the transaction level. When creating a journal entry, you can assign dimensions at the line item level through tagging. For example, when we sell a Widget, we create a debit entry in accounts receivable and a credit entry to a revenue account. This is where it gets interesting. With each line item, we “tag” the transaction by assigning a value such as cost center, department, sales organization, customer number or channel. This allocates key data such as the revenue generated, the type and quantity of product sold and other important attributes that are posted in the system’s in-memory data store, to various departments and individuals who need that information via reports, dashboards or KPI’s on their mobile devices. In other words, we’ve turned the general ledger into a system that serves the entire business, not just the accounting function.

This also enables the finance organization to accelerate strategic execution for their business. At the same time, SAP Financials OnDemand boosts their operational efficiency by providing a simplified, trusted, single source of truth that’s designed to drive action from superior insight.

By the way, if you want to see SAP Financials OnDemand’s analytics in action check out this video http://youtu.be/zz-X3JOU3ZA

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9 Comments

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  1. Jarret Pazahanick

    Just curious if SAP’s strategy to market this product is just to stand up on every soapbox possible and say it is great and “best of breed”, or is it to compare it to the SAP ERP FI solutions so customers can see the differences or is it to compare it to other SaaS competitors like NetSuite and Workday.

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    1. Jim Daddario Post author

      The “strategy” is to create buzz for a new cloud-based product that presents a formidable challenge to Workday and NetSuite. SAP has a strong brand in the Financials space. We run the financials for over 23,000 of the world’s largest and most complex corporations. We’ve also built a great product that is based on the same design principles that made R/3 and ERP Financials the successes they are along with some great technological innovations. We’re proud of it!

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      1. Jarret Pazahanick

        Thanks for the response but important to note that SAP runs SAP FI for those 23K largest and most complex organizations and it would be a stretch to say that the new SAP Financial OnDemand will offer similar functionality until it has had a chance to mature. Please correct me if I am wrong.

        FI is not my area and will leave it to experts like Greg below but have seen WAY to many cases where the technology isnt mature enough to support the “buzz” SAP attempts to create for it and customers ultimately become disappointed. Hopefully another level of detail is planned at the upcoming events where this is unveiled as to the real benefits this product can offer large enterprise customers today (not on the roadmap) that its SaaS competitors cannot.

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        1. Jim Daddario Post author

          Yes, I know. I came from the ERP Financials side of the house. I never said Fin OD is functionally comparable to ERP FIN. That WOULD be a stretch. However, I did say that we based Fin OD’s design on that of our market leading Financials application. So for customers who are looking for a cloud-based financial management solution, they now have one from the market leader and for large enterprises who have cloud on their IT roadmap, we plan to co-innovate with them. Hopefully that clears up any confusion you may have.

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          1. Gregory Misiorek

            Jim,

            to Jarret’s point. currently, i can look at two ledgers in the cloud (via VPN to be exact), they are on premise somewhere, but not in my home office for sure. how is the new solution better from what i can look at now? especially, i would like to know these things (at the risk of repeating myself):

            1. how does it integrate with federal and state income tax filing software?

            2. how does it integrate with banking payments systems like SWIFT?

            2. how does it shorten my close cycle?

            my end users ideally would like to use spreadsheets and emails rather than input screens and workflow.

            above all, what is the sandbox url, that is not going to be blocked, similar to workplace, where i can go and create records on my own?

            regards,

            greg

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            1. Jim Daddario Post author

              I’m not sure I understand the point you’re trying to make–so you can look at two ledgers in the cloud, what’s the difference? How does it integrate with tax filing software–we’ll I don’t know. Perhaps you could enlighten me on what those packages are and what sort of APIs they have. How does it integrate with SWIFT–well it depends on the particular message type (there are many more than just payments) but it supports the ISO 20022 standard which, as I’m sure you know, is the one SWIFT uses. Again, I don’t know what your motivation is. I studied accounting, practiced accounting and have worked for financial software companies for almost 20 years. My intention was not to create a blog to explain every nuance of what the application does, 3rd party software with which it integrates or technical standards it supports. Rather, my goal was to share information with my fellow finance professionals about a novel way in which we use the GL for reporting. Thank you for reading my blog.

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              1. Gregory Misiorek

                Jim,

                thank you for answering some of my questions. my motivation is very simple. how do i tell my clients that on demand is better than “on-premise” system they already are using, especially when it won’t change how debits and credits are created and reported on?

                glad to hear the new system supports ISO 20022, but i’m assuming there isn’t any url in the works for anyone to test drive it if they chose to do so.

                best regards,

                greg

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  2. Gregory Misiorek

    Hi Jim,

    i don’t mean to question your approach, but i always thought that the most important organizational unit in financial accounting is the legal entity (company or ledger code). segments, cost centers and profit centers are of lesser importance for statutory reporting. tags remind me of values for coding block or attributes for the fact table. what am i missing?

    thx, greg

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    1. Jim Daddario Post author

      They are for set up. So the organizational units I described would indeed be company codes in the GL. These are the main structures in the ERP GL its similar in Finance OnDemand. However, Finance OnDemand uses tagging to create attributes that can be used for reporting.

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