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Understanding SAP S/4HANA Central Finance: Part-2

In my previous blog post of this series, Understanding SAP S/4HANA Central Finance -Part1, we have seen the basic understanding of SAP S/4HANA Central Finance, the need for Central Finance and the overview.

Previous blog post of this series:

https://blogs.sap.com/?p=829776

 

In this blog post, we will take one more step forward into understanding Central Finance and will visualize some flavors around its architecture.

I tried to keep this blog post series – simple and easy to assimilate.

Objective of this blog post  – is to provide a perspective about Central Finance in SAP S/4HANA

.Hope, this blog post  – meets its objective.

SAP S/4HANA for Central Finance is a component of SAP S/4HANA System which is installed,  also called as Side car approach – which receives the accounting transactions (FI/CO)  through Real time replication approach from SAP or Non-SAP ERP Source Systems.

Things to remember:

  1. Side Car approach
  2. Real time replication
  3. Need SAP Landscape Transformation  – as a staging area of data
  4. Having Central Finance accounting interface, business mapping framework and Application Interface Framework for error handling on target system SAP S/4HANA
  5. It is a one step forward to move towards Innovation products of SAP S/4HANA for digital transformation.

Now, let us see a quick over view of business benefits, though covered in my previous blog post. The business benefits are varied depending on Customer/Business IT landscape, type of business operations, Geographies of Operation, volume of transactions, type and mode of reporting and its use – as such the benefits of Central finance captured below, is  for illustrative purposes and is at a very high level.

 

Benefits of Central Finance in SAP S/4HANA at high level

Following are some of the benefits, business can leverage using Central Finance on SAP S/4HANA.

  1. Single Source of Truth – As the data gets replicated on to SAP S/4HANA system – businesses can have only one single source of truth for Financial/Management reporting, with a universal Journal.
  2. Fast Closing – Central finance coupled with FCC(Financial Closing Cockpit) provides a new centralized view to organize the sequence and governance of closing tasks across multiple ERP systems.
  3. Non-disruptive adoption, simplification and innovation without upgrade
  4. Ability to realize a common chart of accounts and simplified governance of master data
  5. Potential for Central process execution and shared services
  6. Capability of dedicated central reporting instance connecting with SAP and non-SAP ERP systems.
  7. Move towards SAP S/4HANA

The benefits are indicative and will further depend on Customers’ requirements and use cases.

The baseline of Central Finance Approach consists of three elements:

  1. First, the customer is operating multiple ERP systems, which can continue to be the ERP systems of record.
  2. Second, the customer has identified a list of business scenarios and master data to be consolidated and centralized by its operations.
  3. Third, the customer has identified and prioritized  the selected business processes, to consolidate – to ensure the quality of master data, organizational unit data and posting rules for documents. As well as their line items for the selected scope of scenarios and the harmonization of processes across the group’s entities.

As I mentioned earlier, the objective of this blog post  is to provide a basic understanding about Central Finance without a deep dive discussion on design, business scenarios or use cases  as it varies and depends on each Customer requirements.

 

We have seen all through this blog post  about the term “Central Finance” – now its the time to visualize  its design flow  – the Architecture, which is quite interesting once we do a deep dive.

High level overview on the Architecture

 

Based on the above graphical overview – Central Finance Architecture, contains mainly three systems:

  1. The first system is the Source System, where the actual business processes run and a FI/CO document is created.
  2. The second system is SAP SLT  layer – it is a integration platform which reads and replicates the FI/CO documents from Sender(Source) Systems.
  3. The third system is the Central Finance on  target system SAP S/4HANA – the system where FI/CO documents are posted and information is stored in Universal Journal

Hope, it gave a conceptual design of Central Finance in a nut shell.

As a part of design, Central Finance is able to replicate Cost Objects as pre-requisite for FI/CO postings.

The above diagram indicates, that we need to know the definition of components relating to architecture namely, SLT, Central Finance Interface, Business Mapping, AIF.  Once we know these components, it would be easy to understand, how these components would facilitate the posting of FI/CO documents into Universal Journal. These would be covered in my next blog post at high level.

And further, SAP S/4HANA Central Finance and SAP System Conversion into SAP S/4HANA – both are different topics – its purpose, design, implementation methodology, technology requirements, process requirements – are different.  SAP System Conversion/Migration into SAP S/4HANA is one of the other Innovations from SAP, which is not in the scope of this blog series.

Following are some of the pointers for SAP documentation relating to SAP S/4HANA and SAP S/4HANA Central Finance.

This reference,  will  help us in understanding some of SAP Innovations in the areas of SAP S/4HANA and SAP S/4HANA Central Finance.

Please refer for SAP S/4HANA

https://help.sap.com/viewer/product/SAP_S4HANA_ON-PREMISE/1809.002/en-US

 

SAP Notes and information relating to Central Finance.

https://help.sap.com/doc/00ead8cc278c4f01a0262efb5ff397e5/1809.002/en-US/PDFloio4857c0540cf5ef05e10000000a4450e5.pdf

Central Finance: Implementation and Configuration SAP Note# 2148893

FAQ on Central Finance SAP Note# 2184567

Please always refer to latest SAP notes depending on the release requirements – Component: FI-CF

 

To sum up – what we covered so far in these two blog posts of this series: 

  1. The need, objective, purpose and benefits of Central Finance
  2. Illustrative diagram about the need, business benefits and Architecture – at high level.
  3. Reference Documentation to support for further readings.

What can we expect in my next blog post which is the final part of this series:

  1. Definition of terms such as SLT, CFin Interface, Business Mapping Framework, AIF.
  2. Illustrative diagrammatic representation with a daily life simile – to keep the understanding very simple.
  3. Closing comments

 

Thank you for reading this blog post.

 

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