What are some of the business aspects in Finance with the SAP S/4HANA 1610 release? We will explore this in today’s blog of this series, in which we talk about business and technical aspects of several use cases that are relevant for the SAP S/4HANA 1610 release. In the last blogs, we talked about Integrated Quality Management and this week we will focus on Finance.
How to get visibility into the global business performance
With the latest release of SAP S/4HANA, 1610, you get a complete and comprehensive portfolio to manage the entire finance function, fully integrated with the SAP S/4HANA logistics innovations in one system.
If you seek for a system to maximize efficiency and compliance you will find an optimized and robust usability and business processes tailored to different roles in the finance function such as financials accounts, business analyst, financial exports and many more. Here is an overview of the major new capabilities and the related value:
SAP S/4HANA 1610 is localized for 63 countries in 39 languages to meet your local compliance, but also comes with a streamlined and consistent approach with the universal journal to take advantage of parallel valuation methods for legal, group and profit centers.
Internal Business Networks
SAP S/4HANA as the digital core connects easily with outside world, the vendors we are buying from or the customers we are selling to, through business networks. For many of our global customers business networks are actually about internal supply chains, for example in larger groups we find 80% of the goods movements are intercompany goods movements that means only 20% of them are with their external vendors and customers. As a consequence, what is actually an internal supply chain is represented as a series of sales and purchasing processes between affiliated companies and systems with legal valuations only.
Multiple Profitability Valuations
However, from a corporate perspective the group CFO is interested in an overall view of the different units acting as one company. Thus, the requirement is to have two views in parallel: the legal view by legal entity and a group view where intercompany profits are being eliminated and currencies being aligned. In the example below, cotton is picked in the US and shipped east where it is twisted into yarn. It is then shipped to China where cloth is weaved and forwarded to South America where it is stitched into shirts. After that, it is transferred to Europe where it is sold to the consumers. The material and value flow is depicted in red and the values in blue represent the profit w/o intercompany and currency profit. Some of our customer are going further to a profit center valuation where they try to build large divisional blocks with management prices for intercompany valuations.
Solution with SAP S/4HANA 1610
With SAP S/4HANA 1610 you have the ability to represent the product and value flows throughout business transactions, such as purchase order / sales orders and intercompany billing documents that trigger the revenue postings. With those multinational groups can report profitability for the group in total and for the individual units based on operational flows based on actual transaction data stored in the universal journal of SAP S/4HANA.
- Legal view focuses on the intercompany pricing agreement and legal tax requirements
- Group view focuses on eliminating intercompany profits and acting as “one company”
- Profit Center view focuses on management prices agreed e. g. between divisions
In addition, the new real-time consolidation of SAP S/4HANA 1610 is delivering on top of that to cover the whole business of ownership relationships (“who owns what”, “is it a fully owned subsidiary”) and the related process to conduct the consolidation with the additional steps of a complete group close.
Stay tuned when we take a closer look into the technical aspects of the Finance in the next blog.
Discover the full scope and benefits of SAP S/4HANA 1610
- SAP S/4HANA 1610 Release Highlights Brochure
- SAP S/4HANA 1610 Release Information
- Discover SAP S/4HANA
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Here the link to Part 6b:
Link to the series: