SAP S/4 HANA - Central Finance: A Complete understanding about Central Finance

[Shakeel_Ahmed]

# Overview of SAP Central Finance:

Central Finance is there in the market for quite some time, now additionally it can be seen as an approach to adopt SAP S/4HANA. It enabled FI documents to be replicated in a new Central Finance system which running on S/4HANA. Central Finance is relevant in an organization where there are multiple older SAP ERP instances or other Non-SAP Finance applications.

Central Finance exploits the capabilities of HANA i.e. real-time, speed and agility to replicate financial documents into the central system, giving a real time organization-wide financial view. In short, Central Finance allows you to create a common reporting structure for an organization.

 

# SAP Central Finance Features:

1. You can use the central finance to harmonize master data and replicate posting


2. You can map master data from several source systems (SAP & Non-SAP) to harmonize master data in central finance system either manually or using SAP MDG (a separate license for MDG).


3. For enabling the transfer of data between your source systems and central finance, you need to maintain mapping that defines the relationship between data in the source systems (SAP and Non-SAP) and data in central finance. Mapping is used during the initial load and day to day transactional data transferring to central finance system.


4. Profitability segment data of an accounting document can also be transferred to central finance system. ACDOCA is updated with profitability document number and reporting on PA can be achieved in central finance system.

5. Intercompany Reconciliation with Central Finance: AR and AP are replicated into Central Finance, intercompany reconciliation (ICR) can access these receivables and payables directly in the Central Finance system. ICR is compatible with central finance system.

6. Document Relationship Browser: Using the document relationship browser, you can see the document flow of an FI document and can access the all link documents (CO, SD, MM) in origin/source system

All documents related to a transaction are available in the document relationship browser, provided the source system is an SAP system.

Document can be navigated in relationship browser; you can use the following transactions:

Controlling Documents: Actual (KSB5), then choose àEnvironmentàRelationship Browser àDisplay Document (FB03), then choose à Environment Document Environment à relationship Browser

7. Harmonized Financial Reporting: Central Finance system collects data from different system and provides harmonized reporting in a single system

The picture below shows how data is replicated from the source systems to the S/4 HANA Central Finance system:



Following interfaces feed data to central finance system:

• An interface for reposting Financial Accounting/Management Accounting (FI/CO) postings


• An interface for reposting secondary CO postings


• An interface for cost object mapping

8. Integrated Business Planning: Integrated Business Planning for SAP S/4 HANA, on premise edition (IBP) can be combined with S/4 HANA Central Finance to provide a central and consistent view of the planning process.

IBP covers the following:

• Expense planning


• Profitability planning


• Profit and loss planning

 

# Central Finance Challenges:

1. Cost of Acquisition: From a business perspective there is a challenge around how to justify the additional cost associated with a central finance approach. There would be two systems running to reflect financial transactions.

2. Technical Challenge: Maintenance for the central finance system and the existing source systems; a number of other components are necessary; including the SLT server, as well as associated updates to the source systems

1. Clear Master Data Governance Strategy and capability plan is always a challenging task for the organization

# Integration with SAP & Non-SAP Systems with S/4 HANA Central Finance System:

The Picture below shows how the systems integrate with each other.

 



Note1: Central Finance system can be used out-of-the box,  for those customer who are still in maintenance i.e. SAP ERP 6.0. or onwards.

Note2: Releases such as SAP R/3 4.6C to SAP ERP 5 are still possible; for this special services or discussion with SAP would be required.

 

# SAP Central Finance Landscape

1. SAP S/4 HANA Finance and Central Finance can be used with SAP Landscape Transformation Replication Server (SLT) and SAP Master Data Governance (SAP MDG).


2. The SLT server collects data written to database in the source systems and feeds this data into the corresponding Central Finance Accounting interface.


3. After the data is mapped, the system uses error handling to log the details of any errors encountered. You can choose to make corrections and repost the item or process the item again after, for example, you correct the mapping rule of adjust incorrect values in the document.


4. The internal accounting interface sends the financial accounting (FI)/Management Accounting (CO) document to SAP S/4 HANA as a universal journal entry.


5. After the data is mapped, the system uses error handling to log the details of any errors encountered. You can choose to make corrections and repost the item or process the item again after for example, you correct the mapping rule or adjust incorrect values in the document.

# Licenses to use SAP Central Finance:

1. Central Finance – Obviously separate license


2. SAP Landscape Transformation Replication Server - separate license


3. SAP MDG attracts a Separate license too. It’s not mandatory but it is very much recommended as manual handling of mapping of master data is mammoth work.


4. Source Systems with a 3rd-Party Database with a Runtime License

# Technical/Functional Information:

1. You have to activate the Central Finance (FINS_CFIN) business function.


2. You have activated the following business functions for error correction:

• 
  
  
  
  • Error Correction System (Reversible) (FIN_GL_ERR_CORR)
  
  
  • Error Correction and Suspense Accounting (Reversible) (FIN_GL_ERR_CORR_SUSP)
  
  
  
  

3. Required customization/configuration for Central Finance need to be done under Financial Accounting (New). It is as good as you do configuration for any company code within S/4 HANA from Finance area perspective.


4. You have to install SAP LT Replication Server

1. You have to install the following SAP notes in your source systems:
   
   
   
   1. 2111634
   
   
   2. 2108225
   
   
   3. 2115885
   
   
   
   

6. Central Accounting Interface is used to harmonize master data and replicate postings


7. System is identified with sender logical system & sender document number in central finance’s universal journal (ACDOCA).


8. Monitor and Error Handling is done with Transaction code /AIF/ERR

 



9. Master Data Governance (MDG) is done with Transaction code /MDG_KM_MAINTAIN. It will lead you to MDG FIORI Screen as shown below.



#

Recommendations

1. It is very much recommended to use MDG since manual handling of mapping of master data is mammoth work


2. It is recommended that tax reporting should only be done from your source systems rather than the Central Finance system.


3. Central finance is generally used where landscape is very complicated, such as, organizations which have different ERP systems (SAP and Non-SAP) and organization into mergers and acquisitions. Central Finance allows you to create a common reporting structure.

# Summary

Central Finance represents a route to ERP system consolidation and migration to SAP S/4HANA at low risk. It delivers various benefits, however there are various challenges also (mentioned above under challenge section).

The Central Finance is not for all it is used where landscape is very complicated, such as, organizations which have different ERP systems (SAP and Non-SAP) and organization into mergers and acquisitions. Central Finance allows you to create a common reporting structure.

 

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