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SAP Central Finance – Its more than “JUST” Technology

Organizations have not invested in technology from years and some from decades and present systems and processes are loaded with outdated technology, redundant code, limited functionalities, and customization blocking upgrades. SAP S/4HANA is a fair choice given the SAP product portfolio, existence n market and strong presence across sectors and delivered value in past but the move is difficult to plan.

Organizations who are running end to end business with core as SAP ECC and several other products connected for business operations cannot just move from current state to target state in matter of speed rather this move has to be planned, aligned and communicated within the organization.

With this the first thing comes into mind and of course SAP proposes is SAP Central Finance to quick start the transformation journey and start with S/4HANA without business disruption.

When we say implementing SAP Central Finance, it seems we are only talking about technology but that’s not the reality. CFIN is just a way to kick of transformation.

Below explains how the transformation journey looks like. Duration of journey will depend on the current

  

There are many blogs explaining the technology and you can deep dive to the level you want as that’s not the purpose of this log.

Benefits of SAP Central Finance on organization

   

This blog will explain that such transformation is not just about the technology rather its more about PPOT (People, Processes, Organization & Technology)

People – This is purely the impact on people within the organization. If introducing new system is bringing some benefits then it might also come with some drawbacks or limitations.

Lets say in current organization the ERP set up in per country (or group of countries) and the decision is to transform to S/4HANA with Central Finance then the first immediate impact will come when data replication starts is the need of the people who will manage those reconciliations, who will manage the AIF errors and it is more at the centralized model and sometimes at shared services but does not impact the local organization.

Now moving to next step when Central payment is activated for lets say 4-5 counties then the payment function of those countries is centralized. People making payments locally are now redundant and needs to find the new role. So here to sustain upskilling is needed. If manual work is reduced then people get opportunities to automate and learn/upskill for future. Same thing goes for month end closing and several other processes which will be executed from one system rather making them from several systems.

In summary the people are impacted with such changes which are result of the transformations. Such programs do not happen every year in an organization. Previously it was ECC and upgrade was happening from release to release but it was not impacting people drastically. Very focused change management team is needed to ensure each change is well identified, planned and accommodated so that it does not impact the people negatively.

 

Processes – With introduction of central finance in the organization, it changes the processes. Again, we can take example of payments, credit management, month end closing or reporting. All key processes are impacted:

  • Procure to Pay – Core component of the process stays in source while the Financial part moves out to S/4HANA which may result in come inconsistencies in the process as there is no clearing or payment information being going back from S/4HANA to the source system (unless too much customization is done). The process on the source side is broken and end-to-end flow needs TWO systems access.
  • Order to Cash – Its similar to the PtP where payment is in S/4HANa while the main logistics process stays in ECC (sales order, delivery, and billing). In addition to this if the central credit management is planned to be used then the system connection is important as the Sales order creation in ECC needs access to S/4HANA in real time to check the credit limits and same goes with FSCM.
  • Record to Report – this is heavily impacted as the General ledger remains in ECC while the payment details are in S/4HANA. Therefore, the real financial statements can only be taken from S/4HANa while the Asset sub ledger is in ECC. So for end to reporting of financials organization still needs 2 systems (or even more)

Technology – You will agree the fact that you are changing the technology so this is heavily impacted. Decisions have to be take on below items but not independent as technology rather together with business

  • Are you going cloud or premise with valid reasoning and future vision?
  • What is your interfacing methodology? As you need to interface several cloud & non cloud applications on top of S/4HANA to execute end to end business processes
  • What is you interim architecture and how the end state of architecture looks like?
  • What it will take in terms of cost and time to reach target architecture and what will be achieved along with the number of sacrifices.
  • Are you going to sunset all source systems in future? Is this supported by business strategy
  • How much debt can you take on new system in term of technology to meet the changing & evolving business needs?
  • If the global architecture aligned with local requirements?
  • Upgrade strategy as SAP is coming with the release every year (cloud is more fast – 3 months)?

Organization – At the end everything is under this bucket. Organization has to take care of Customers, partners, employees, budget, planning, and of course, in line with change market priorities and emerging dangerous conditions like COVID which will have long lasting impact on market. So all the threads of People, processes and technology has to be taken together along with the priority to the customers and keeping the cost in mind.

Benefits of the transformation should be visible as early as possible so that the door of investing in the transformation is getting the air of value. Foundation of the house cannot be built for several years but also at the same time the foundation has to be strong and in this case the Central Finance implementation is like a foundation – has to be organized in terms of time, well driven and showing the value benefits and on top of this the main building of end to end process transformation will be built which will give broader benefits to the customer.

So any SAP Central Finance transformation has lot of pressure due to the delivery of benefits, they are always too costly to execute given the scope, and size so well planned delivery is the must along with well embedded agility and flexibility to adjust the path as the water flows.

Abbreviations:

AIF –  Application Interface Framework

ECC – Enterprise Central Component

CFIN – Central Finance

Source Systems – SAP & Non-SAP

I hope this will help the readers to assess the impact and plan the transformation. Its just the summary of my experience what I have seen over last several years with different organizations (small to large)

Any questions, feel free to comment and of course any feedback please add from your experience

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