/wp-content/uploads/2016/04/picture2_928081.jpgWe are on the cusp of an information driven corporate finance reformation. That is an overhaul and restructuring of how financial information is placed “in context” with operational and machine generated information to allow the business user to:  monetize operations in terms of units, rates, drivers and sensitivities;   analyze and understand the financial and operational impact of decisions in real time;  and convert insight into action. This also elevates Finance’s role as a key partner/resource for monetizing operational decisions and strategies.

This is the first of a blog series that will explore the corporate finance reformation, including what has changed to make this possible, what it will require from finance departments and information technology and some of the key benefits.

In the past, different innovations have come close to resulting in a corporate finance reformation but have fallen short. Online Analytics Processing [OLAP] tools with their cached results and intuitive modeling techniques were one approach.  While they supported sophisticated models for analyzing “What If”, their data was too high level and not connected to the detail transactions where questions are answered, anomalies identified and action plans defined. Techniques used to link OLAP databases to the detail relational transactions proved fragile.

A second approach was to use relational accelerators to speed up relational query time and create a line of sight between summary totals and detail level transactions. The challenge with these solutions were twofold: first the speed still wasn’t fast enough; and complex data architecture became a challenge for the business user to navigate. Traversing data with inner and outer joins connecting 10 or 20 different tables to create a business view required a combination of IT and business acumen.

Both of these approaches along with the typical relational database/data warehouse approach suffer from data inflexibility. It required data/information to be architected in anticipation of the way business users wanted to look at the information.  If business users queried the data the way it was anticipated, the queries were fast. If the business user stepped outside the way the data was architected, the query was slow. 



Why is it different now? 

This reformation is fueled by in-memory technology and the data simplification that in-memory technology provides.  In-memory technology:

  • Provides the ability to organize data in columns and effectively makes each field (column) act as an index. It thereby removes the need for data architecture choreographed the way we want to query the data.
  • Enhances the speed of analysis. Eliminating speed as barrier to analysis enables simplification of data architecture.
  • Allows us to write transactions to the same detail table we do the analysis on and eliminates aggregated tables.
  • Eliminates the need to anticipate the questions being asked by the business user and provides a more “flexible and agile”[1] corporate climate.

The results of in-memory technology is a system architected without aggregate tables and without separate transaction tables that have to be maintained, reconciled and linked when creating reports or performing analysis. This concept is the core of S/4HANA Finance.

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The Universal Journal table, provides a single source of truth in accounting and controlling where:

  • All financial transactions are  written including transactions from accounts payable, accounts receivable, general journal, material ledger, asset accounting and COPA sub ledgers.
  • All reports are based, from high level financial statements to detail level accounts payable summaries and daily check log to apply against accounts receivable transactions.
  • Transactions can be tracked from original purchase order of raw materials to final sale of finished goods.



Why is it important for companies?

The real-time environment and the ever accelerating corporate “clock speed” demand an organizational capacity to respond in ever-shorter time frames with information and insight. S/4HANA Finance provides a business platform that incorporates a powerful predictive engine and facilitates decision making in the accelerated time frame.  It helps organization’s create and capture new economic value by merging financial transactions with their operational attributes to create integrated planning.  It helps to focus the company on the financial implications of operational decisions and provides the missing link for supporting data driven insights rather than basing decisions on assumptions or intuition. 

My next blog will dig deeper into “Why is it different now?” and focus on key features of “in-memory” technology that make this reformation possible.

 


[1] See the Harvard Business Reivew Article: “The Future and How To Survive It” October 2015, by Richard Dobbs, Tim Koller and Sree Ramaswamy

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  1. Jelena Perfiljeva

    Could you possibly elaborate on this part?

    Transactions can be tracked from original purchase order of raw materials to final sale of finished goods.

    I get it that there will no longer be a multitude of tables with accounting documents but just one huge table, which is a good thing. But I’m not sure how exactly this would improve the transaction tracking mentioned.

    In ECC 6.0 there are already accounting documents created for, say, goods movements or vendor/customer invoices. I doubt this will change in S/4HANA since it’s just an accounting practice. But those documents are normally not used for the reporting simply because such reports require more data than is available in accounting documents. So the reports have to read the Sales/Purchasing, etc. tables. Such tracking, while cumbersome, is possible in ECC 6.0, so it’s not really a breakthrough. What exactly will be majorly different in S/4HANA (besides speed) in this aspect?

    And I didn’t get this part at all, is there a typo? What are the reports based on?

    All reports are based, from high level financial statements to detail level accounts payable summaries and daily check log to apply against accounts receivable transactions.

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    1. Jens Krueger Post author

      Thanks for your questions, Jelena. The answers to both questions are part of a future blog. The short answer is the Universal Journal table. Technically, it is called the ACDOCA table. It combines content from many of the different sub-ledger table like Material Documents table, Fixed Assets, General Ledger, COPA. It has over 300+ fields, although not all fields are significant for all transaction tables. It simplifies data navigation so users don’t have to navigate all the different transaction tables and merge them to provide a combined view. The records are stored at the detailed transaction level, so providing that in-memory allows for fast aggregation on any of the attributes that are important to you. While it, Universal Journal, is accounting centric, it provides the hub for a simplified method of connecting the dots to master data and related transactions from other systems. We are also adopting this “Universal Journal like” concept for other SAP systems like Logistics.

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      1. Jelena Perfiljeva

        Well, I get that it’s a cool table and, as an ABAPer I would love to get out of the BSID/BSAD hell as soon as possible. And I do understand the advantages you’re writing about (easier/faster access, we can stuff all we want into the database, yippie), which pertain to the database in general, not to FI specifically.

        But what exactly is the connection between that and the highlighted statement (“Transactions can be tracked…”)? They can be tracked in ECC 6.0 today. Different table, but same thing otherwise. Slower, obviously, but speed was already mentioned.

        It would probably make more sense to find some functionality that is not available at all currently and then talk about that as an advantage. Otherwise a question creeps into the SAP customers’ mind: is there actually any new functionality in S/4HANA or is it, in reality, just “a faster horse”? 🙂

        The second part was not really a question. Does that sentence make sense to you? Sorry, I can’t get any meaning from it, just seems like a random collection of words.

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        1. Gregory Misiorek

          Hi Jelena,

          if you are looking for something that would replace the good old debits and credits than i wouldn’t hold my breath. acdoca as a replacement of bseg seems like a natural progression if you ever wanted to do realtime and not necessarily monthend reporting.

          for more accounting concepts i would recommend this source:

          Лука Пачоли. Трактат о счетах и записях (you can ignore the javascript flash popups if you can as the text and annotations behind them are much better).

          wishing that you could get off BSID/BSAD soon enough and never had to reconcile,

          greg

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          1. Jelena Perfiljeva

            I studied Accounting at University and even got a passing grade. Have a diploma to prove it. 🙂

            I’m not expecting some breakthrough in the accounting practices and I know very well that new table is, essentially, BSEG replacement. That’s exactly why I feel skeptical when such grand announcements about “transaction tracking” are made.

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            1. Scott Thompson

              I agree the sentence is a bit tortured – and takes some thinking about. Try it this way: “All reports are based from high level financial statements, down to detail level accounts summaries, daily check logs and individual transactions.” It’s not what’s written, but it’s what I get out of is as implied.

              In other words, and depending on what’s needed, it works from a top down summary to the underlying “lurid” details. Of course not everyone finds FI/CO exciting. 😛

              I admit to being quite curious to what’s actually in ACDOCA – what metadata is transferred over. Are all the cost collectors referenced (CC, OR, PS, COB, etc.) or not? Which if not, would still require tedious joins and kills some of the gains I’m hoping to see.

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              1. Jelena Perfiljeva

                Don’t mean to beat this to death but is “based from” even grammatically correct? AFAIK it’s “based on” or “based upon”. Also when someone is using “from” and then “down to” (e.g. “from the top level down to the detail level”)  that’s where the thought normally ends. But here it’s “down to …” and then it just keeps going. I’m quite envious you were able to make any sense of it. 🙂

                Well, I hope the author gives it a bit more thought next time.

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                1. Jens Krueger Post author

                  Regarding your question about a typo, please read the individual bulleted lines in context of the header line:  “The Universal Journal table, provides a single source of truth in accounting and controlling where: .. All reports are based, from high level financial statements to detailed levels accounts payable summaries and…

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                  1. Jelena Perfiljeva

                    Yes, obviously the problem here is with the readers reading the text incorrectly. Ok, I give up. If you don’t want to improve the writing and be understood it’s not my problem. Whatever.

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