R2R Series Blog #4: Ignite Your Growth of Bottom L...

elizabeth_milne · ‎08-27-2021

This is Blog #4 in our Record to Report Blog Series. You can find the complete series outlined HERE.

Author: Javaid Awan, Global Solution Owner & Machine Learning at SAP

Good Receipt and Invoice Receipt Reconciliation, process also known as GR/IR, is traditionally a bookkeeping task that tries to match the total value of goods and services received against the total value of invoices received from the supplier. It is a key control within the finance function. The procurement department tends to focus on buying and the finance department on controls. This creates a gap in process orchestration between finance, procurement, and stores/inventory. The gap creates risks around compliance, liability management and one truth for financial statements. These risks arise in normal course of business events. The key driver for scale of risk driven by volumes; is the larger the volume of transactions, the larger the risk. Value plays a key role, but low volume and higher value can be dealt with less effort against higher volumes and overall value across procurement of goods and services.

These business risk arise for the following reasons:

Quantity differences between what has been ordered against what has been received or billed by the supplier.

Price difference between purchase order price and the invoice price.

Currency differences where the purchase order is not the operating currency of the organization.

Payment of invoices for goods that have never been received or partially delivered.

Purchase orders amendments for price, quantity, delivery dates etc.

Goods that were ordered not being the same ones that were delivered

Lack of visibility of data with no business controls

Traditionally, the finance function has no capability to drive controls across the supply chain. The only mechanism has been the creation of control accounts to monitor the movement of goods and invoices. These movements would generate a negative or positive balance but would rarely balance due to a range of factors including those defined above. Thus, it has not been possible to link the control account movements against the purchase orders that generate the commitments and the eventual liabilities without a manual effort. There are no drill downs, no reconciliation against multiple criteria or an analytical approach to problem resolution. Business risks generated by these issues require a fix for purposes of controls, accuracy, compliance, and liability management. In term of value, this is a high value item that needs to be managed by the finance capability of the organization.

To mitigate these risks, SAP has created the SAP S/4HANA GR/IR monitoring application that allows organizations to rethink the good received and invoices received. Rethinking is about unlearning with S/4HANA the legacy process and adopting the out of the box GR/IR analytics in SAP S/4HANA across supply chain and finance rather than the legacy method of significant manual human intervention. It is about consuming the data rather than finding the data. Rethinking leads to unlearning which in turn leads to consuming oriented behavior driven by data. Traditional approaches to good received and invoices received have required co-ordination across departments, geographies, and external stakeholders. SAP has developed the good received and invoices received application that connects departments and geographies across and improves collaboration internally and the eco-system of the organization.

The good received and invoices received application is available to any organization that buys good and services from external or internal suppliers (inter-company purchases). The solution works across the procure to pay (P2P) process. It is composed of two components. Firstly, the good received and invoices received monitor and secondly, the good received and invoices artificial intelligence. Both require SAP S/4HANA as a pre-requisite. A summary of features, benefits, and deployment options is given below.

Key Features of GR/IR solution:

Fully integrated process from purchase order to invoice receipt.

Connect the monitoring capability with artificial intelligence to exploit data.

State of the art analytics with full drill down.

Business process intelligence to allow process flow visualization and process mining.

Turn your month end task into a daily minute by minute process.

Work in a shared service set up of at a legal entity level.

Filter results with most frequently used queries.

Collaborate with purchasing, finance, and shared services real time.

Work with recommended actions from artificial intelligence to reduce manual effort.

Quickly workout out your variance at purchase order item level across products, suppliers, locations and many more criteria.

On the fly reports such as aging, supplier analysis, mis-matched items, etc.

Ability to carry out single or mass processing for proposed items.

Root cause analysis for variances.

Benefits:

Risk management and financial controls remain the most important benefit of this solution with S/4HANA. Further, benefits accrue regardless of size, industry, value chains and operating models deployed an organization. A brief exegesis yields a real return against investment as the solution can generate business savings through incremental deployment or a big bang approach with very little change management.

Given risk management is a key aspect of any organization, business leaders can connect more with people, processes, and data to control the key parts of the business that drives the highest OPEX spend in an organization. The analytics provided by the application is delivered with speed. However, this benefit of speed is a choice that drives an outcome. The outcome here is bottom line growth through savings achieved in one of the most critical areas of the balance sheet. Specifically, the following are some of the business-driven benefits that the application offers.

Risk mitigation for liability management.

Improvements in the business controls framework.

Business savings when dealing with supplier related disputes and negotiations.

OPEX savings for spend management.

Traceability and tax improvements.

More Collaborations and communication between departments.

True digital experience of the P2P process.

Reusability of existing processes and data.

Analysis of process using process-based graphics.

Identification of fraudulent transactions.

Perform better variance analysis.

Automation of actions based on artificial intelligence recommendations.

Minimize time required to manage process and manual effort.

Prioritize high value movements.

Analyze repeat offenders internally and external suppliers.

Move from a periodic process to a daily outcome.

Deployment options:

GR/IR application is available in the SAP public cloud, SAP private cloud or with a hyperscaler using the traditional on-premise deployment mode. The solution is designed to be flexible around customer needs and its desired mix of OPEX v CAPEX. For customers looking for a true OPEX approach, the SAP public cloud offers the most suitable experience.

SAP is the Difference

SAP brings together data, process, and people for this solution for a true digital experience with reusability of existing process by focusing on data with minimal change management. The deployment options are available to suit customer needs and the implementation can be done in a matter of weeks. The GR/IR monitor coupled with artificial intelligence allows an organization to evolve on a continuous improvement cycle every day.

Call to action: To learn more about process efficiency in the Close, join us and customers at the virtual event for Financial Close and Reporting.

R2R Series Blog #4: Ignite Your Growth of Bottom Line with SAP S/4HANA GR/IR

Call to action: To learn more about process efficiency in the Close, join us and customers at the virtual event for Financial Close and Reporting.

Useful documents on SCN

Evolution of ABAP

Analytics in S/4HANA - real shape of embedded analytics and beyond embedded analytics