In every project, irrespective of its size, nature, output and the organization we have seen challenges. Whether it is an app development, Merger of an entity or a large scale IT driven business transformation. In this blog we will focus on IT driven business transformation inclining towards SAP Central Finance implementation.
SAP Central Finance implementation should be the first step towards the overall transformation resulting in:
- Serving your customer better
- Empowering the employees
- Process Standardization & simplification
- Cost Rationalization by removing redundant steps and roadblocks in processes
The implementation always looks like the IT project but its actually a business transformation driven by IT investment so we can say it’s a Co-ownership of IT and Business towards organizational transformation journey which has to be in line with the strategic vision of the organization.
When we implement CFIN the complexities depends on several factors like:
- Number of ERP systems presently
- Maturity of the existing landscape
- Alignment with future vision
- Is the organization supported by Shared Service organization?
- Is future based on Cloud?
….and several other factors.
Let’s discuss some of the key challenges which I have seen till date. Based on my experience with several CFIN projects I can summarise the same as below:
- Strategic
- Technical
Lets discuss the Overall strategic challenges first:
Objective of implementation – this is the very first challenge which comes even before implementation. This is relate to the business case preparation for SAP Central Finance. Investment goes in millions so it has to be aligned with future vision but at the same time its important to realise the need of this transformation.
- Is it just that SAP came up with SAP S/4HANA? What will happen I SAP comes with new product in next 5 years?
- Is it just because ECC support is phasing out and version is in sunset mode?
- Is it because you have not invested in IT systems from last few years?
- Is it that you have several ERPs due to present business strategy and you want to bring together the systems?
- Are you doing because industry/competitors are doing such transformation?
- Is it that you are investing a lot today and you want to simplify the landscape?
- What business benefits you get with CFIN?
Answer to this business case will not be one of this or may be not all of this but should include the strategic vision and based on that it should be planned.
Deployment Planning – Now since you have business case approved it important to work with SI on planning. Again planning as to be aligned with strategic timelines, other key projects and IT transformation vision. It is important to understand how CFIN deployment looks like. CFIN is not traditional project where you move from one ERP to other rather here you still live with current ERP and introduce a new ERP in the landscape.
Planning also depends on what you want to achieve & what is planned for future:
- Only Data Replication & Reporting
- Finance processes in SAP S/4HANA & Centralisation of processes based on shared service model
- Automation of processes including RPA
- When the logistics process will be introduced?
Based on the success stories of CFIN it has to be sequential planning. Not all the items listed above should overlap with each other to a larger extent. If replication and business process implementation is going in parallel it brings complexity in landscape and managing the deployment. Data Replication, AIF processes should be stabilized first before processes are implemented and when process implementation starts then process-by-process automation can be planned if that’s part of the scope but do not plan processes until replication is started and kind of stabilised. CFIN gives good starts in shared service environment where capabilities to support future business model can be built from business and IT standpoint.
Master Data Strategy – I always talk about this as Master Data strategy is the lifeline of any CFIN implementation. Do not underestimate it. Also the sequence of events should be structured, master data should be organized first and then CFIN should be discussed as CFIN assumes that master data is taken care off. If Master Data Implementation and CFIN implementation overlaps then it add complexity to delivery but it always has to be Master Data running ahead of CFIN implementation as MD strategy gives foundation to the implementation. Options available may be:
- Centralised approach
- Decentralised approach
Please read this blog to explore more of Master Data Strategy & CFIN alignment.CLICK HERE
What after CFIN – this is another strategic question which needs to be answered and based on this the CFIN deployment need to be planned. After CFIN implementation:
- Are you going to stop?
- Are you going to sunset source systems?
- Are you going to implement logistics processes and if yes how many years?
- When and how you will get the ROI of CFIN investment.
- Are you going to redefine the whole architecture as it is the right time?
- How can you simplify the landscape and moreover better serve your customers?
All these will determine planning for next steps including the time & investment needed.
Now let’s start with Technical aspects. They are not discussed in technical language but have impact on over all implementation.
SAP Organization Structure – When you plan to implement SAP S/4HANA Central Finance now you look at a foreseaable future and implement the processes, data structure in a harmonized way which was a challenge in source systems as systems are part of long lasting legacy which asks the demand to have an organization structure supportive to the business strategy and alignment with old/legacy organization structure is always complex as that be may be existing due to the old business model, acquisitions etc. It is critical to design new organization structure and align it with old. For example:
- Business Area is no more used in SAP S/4HANa and is normally present in all ECC installations. How you plan to replace business area from ECC?
- Internal Orders will not be supported in future and WBS will be the way to go. How you plan to use the existing processes which are dependent on internal orders?
Don’t underestimate the technical design complexities…
COPA Alignment – almost all SAP ECA installations have Cost based COPA which is not the case with S/4HANA. SAP supports new Margin Analysis which is based on Account based COPA model. How do you transform the existing processes based on Cost based COPA to Account based COPA without losing the granular visibility to the reporting components. There are scenarios in Cost based COPA where data related to COPA & GL postings happen at different time in system and also there are condition types in the SD billing cycle, which post data into COPA but not into GL. So these complexities needs to be considered during implementation and design workshops with business.
Transactions – Still SAP Central Finance is not matured to support end to end business processes and is one the path to evolve. It still lacks lot of functionalities which are key to transformation so those limitations needs to be considered when planning for the transformation. Some key functionalities are:
- WBS Elements created in SAP ECC can be just replicated to SAP S/4HANA via standard CFIN approach but they can not be settled. Settlement drive the financial process in SAP S/4HANA. IF you cant settle the WBS then you need wait to implement business processes related to this
- Asset Accounting is still out of CFIN scope. Full reporting of financials is still not possible from SAP S/4HANA deployed as CFIN as P&L and Balance sheet is fine but Assets are the key components to the financial reporting and drive several reports relevant for USGAAP and IFRS and this still needs to be continued from source systems.
- N:1 Company code mappings is another challenge which is still visible in the product. We can map company codes as N:1 (Multiple company codes in source to one company code in CFIN) but this does not work from process standpoint in CFIN and fails when intercompany document comes into picture. If the results are not as desired what is the use of mapping company codes in N:1 logic?
So in a way product limitations can also be the influential component of your strategy towards transformation.
As a bottom line, we can conclude that CFIN implementations should be carefully planned and right from business case till technical aspects these are pieces of puzzle which needs to be brought together for successful planning, deployment and transformation reaping the business benefits which are desired.
Abbrevations:
CFIN - Central Finance
ROI - Return on Investment
WBS - Work Breakdown structure
COPA - CO-Profitability analysis
RPA - Robotics Process Automation
All this is based on my personal experience and may or may not be same for your projects coming in future or the projects you have worked with. Do share your experience in comments as it may help me in learning as well..
Learning is a journey…
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