Managing Balance Validation Rules

Objectives

After completing this lesson, you will be able to:

Interoperate the Structure of Balance Validation Rules.
Create a Basic Rule for Balance Validation
Simulate Balance Validation Basic Rules
Create a Compound Rule for Balance Validation

Balance Validation Rules Structure

Max now understands the basic concepts of Balance Validation and is keen to dive deeper into the process. Max has reviewed the Balance Validation process and understands that rules need to be created in order to analyze data against the desired criteria. This criteria could involve using calculations to figure out a change (either more or less) over a certain period of time for specific things, like a Cost Center or General Ledger Account.

The comparison type will depend on the data being analyzed. For instance, in the case of Bike Company, Max could analyze the company's expenses over time in the following ways:

By checking that the Cost Center's variance among Operating Expense accounts does not exceed a 5% difference from the preceding month.
By looking at individual General Ledger Accounts, like Payroll Wages, and confirming that the disparity is no more than 1.5%

For Balance Sheet accounts, Max can simply check the current balance. For example, if reviewing a fixed asset account balance, he may want to verify that the accumulated depreciation is not greater than the acquisition cost.

Note

Remember, rules differ based on a company's policy, and can either be created directly or imported. For example, SAP provides several sample rules in SAP Note 3322100 that can be adjusted for various purposes. For more information, visit the SAP Support Portal https://support.sap.com/en/index.html.

Diagram illustrating a compound rule, which is formed by combining two basic rules using a logical operator (AND, OR, NOT). The diagram shows (Basic Rule 1 and Basic Rule 2) connected by a dotted line to the logical operator AND connecting to Basic Rule 3. The result is = True or <> True.

In Balance Validation, there are two types of rules:

Basic Rules - These rules are expressions comparing two different formulas. The "left-hand formula contains the user-defined calculations for the data to be analyzed. The "right-hand formula" contains the data to be used as the validation criterion.
Compound Rules - These rules are made of Basic Rules connected by logical operators (AND, OR, NOT). Their validity is checked either equal to or not equal to TRUE.

Basic Rules for Balance Validation

Max now understands the concept of a Balance Validation Rule more fully. He wants to create a Basic Rule in the system based on the validation information that he has received from the Controller. He works with his Business Configuration Expert to get the rules into the system.

Balance Validation Considerations

Once the validation information is obtained, some items may need to be considered:

Do you need specific groups of objects to make it easier to create the rule?
Do you need to create a Global Hierarchy?
What level of detail should be displayed? This could be at a high overview level or detailed down to an individual object such as a Cost Center, General Ledger Account, Asset, etc.

A Basic Rule is comprised of two primary sections: General Information and Rule Expression. Additionally, it includes a supplementary Reference Link section.

General Information - tells us how the rule works.
Rule Expression - specifies the calculations for data comparison.
Reference Link - links any relevant external documentation.

General Information Section

The General Information section determines how the rule functions and contains the following fields;

Rule ID – an identifying name for the rule that can be up to 10 characters. This cannot begin with the letter "S" as this is a reserved namespace for SAP delivered items.
Short / Long Description – a meaningful description to identify the concept of the rule. The short description can be up to 40 characters and the long description can be up to 120 characters.
Data Source – this field is where the information is coming from and is defaulted to Accounting. The other possibility is Group Reporting. This course focuses only on the Accounting Data Source.
Group-By Fields – this field determines how the data is organized on the detail page of the validation result. You can have up to six different grouping criteria. The groupings are applied one after the other, and only the last field specified is validated.
Tolerance – defines the acceptable value and / or percentage. The currency can be defined here so that during the validation all values can be displayed in the chosen currency.
Process No Data As – how is the absence of data to be viewed by the system. The options are Success with Warning, Failed, or Zero.
Control Level - specify whether failure in passing the rule is acceptable in the validation result. The possible values are Error, Warning and Information.
Comments Required - select this checkbox if comments are needed to provide further explanations on the detail page of the validation result app.

Rule Expression Section

Screenshot of the Rule Expression tab in a rule editor interface, showing sections for Left Formula and Right Formula with dropdown menus for functions. Below, the Operand Expression Editor includes fields for Alias, Operand, Period, Where, and Value, with options to add or reset operands.

The Rule Expression section specifies how we calculate the data we want to compare, known as the Left Formula, and the reference data we want to compare it with, referred to as the Right Formula. The area between the Left and Right Formulas is called the Comparison Operator and determined how these two formulas are compared. it includes operators such as such as Greater Than, Less Than or Equal To, Does Not Equal, etc.

The Operand Expression Editor is the tool used to populate the formula boxes. Once the rule is created it needs to be saved and activated before it can be used.

There are a few restrictions that need to be addressed when creating expressions. When defining a filter based on General Ledger Accounts, you cannot use the Financial Statement Version (FSV) nodes that contain the following items.

Special Nodes such as Net Result: Loss, Net Result: Profit, and P&L Result
Nodes that are set to Contra Nodes of other FSV nodes
Duplicate G/L accounts due to settings such as Contra Node, bank account grouping and reclassification increment
Functional Areas

This is because these nodes contain special calculation logic that is not yet supported in the validation run. You can use other FSV nodes or use nodes from General Ledger Account hierarchies.

Creating a Basic Rule

To begin creating a rule, access the Manage Balance Validation Rules and Groups application. This application is used to create both Balance Validation Rules and Groups. We will discuss Balance Validation Groups later in this course. For now, let’s look at how we can create a basic rule.

When looking at the Rules tab, you can click create and choose the type of rule you are creating. We will focus on a Basic Rule for now.

Create a Balance Validation Basic Rule

You have been asked to create a Balance Validation basic rule that analyzes Cost Center values between the current month and previous month. In a previous exercise, you used the Manage Global Hierarchies application to create this group of Cost Centers identified as BVCCH###. The rule needs to determine that the amount in each of the Cost Centers are not greater than 120% of the previous period.

ExerciseStart Exercise

Balance Validation Basic Rule Simulation

Max has now created a Basic Rule, but he needs to test the rule out to make sure that it’s working as expected. Max uses the Simulate Validation functionality for the rule that he just created.

Basic Rule Simulation Setup

In order to simulate a Basic Rule, you need to be on the detail screen of the rule by choosing the Navigation arrow at the end of the row. By choosing Simulate, you can begin the process.

You will need to specify the relevant criteria for the data to be analyzed such as Company Code, Cost Center, Profit Center, Ledger, Currency, Fiscal Period and Year.

Navigate to the Detail Screen:
- Click on the Navigation arrow at the end of the row to go to the detail screen of the rule you want to simulate.
Start the Simulation Process:
- Click on the "Simulate" button.
Specify the Relevant Criteria:
- Enter the Company Code.
- Enter the Cost Center.
- Enter the Profit Center.
- Enter the Ledger.
- Enter the Currency.
- Enter the Fiscal Period.
- Enter the Year

In the upcoming exercise, you'll have the opportunity to simulate a basic rule yourself. Follow the steps to test the rule and ensure it performs as expected.

Simulate a Balance Validation Basic Rule

You have created a Balance Validation Basic Rule and now want to test this rule to confirm that it is correctly constructed. Use the Simulation function to complete this task. In preparation for the Simulation, you need to enter data into the system using the General Journal Entry Upload program with an existing file.

ExerciseStart Exercise

Compound Rules for Balance Validation

Max now has an understanding of the Basic Rules for Balance Validation and wants to gain knowledge of Compound Rules.

Compound Rules are composed of Basic Rules connected by logical operators such as AND, OR and NOT. In this case the validation is different from the Basic Rule as it compares 2 different rules. The result can either be TRUE or FALSE. If it's true, that means the validation passes. If it's not true (or false), then that indicates a validation failure.

As an example, when posting provisions, an entry in the provisions liabilities account and provisions expense account should exist. You can create single rules that validate that the Provisions amount is not zero and that the Provisions Costs are not zero. Then to determine that the balances are valid, you create a compound rule that validates that both of the single rules are true.

Similar to the Basic Rule, a Compound Rule contains 2 main sections, General Information and Rule Expression and a Reference Link section to connect any outside documentation. However, the fields are more limited due to how the rules are created.

Screenshot of a New Rule interface for creating a Compound Rule, showing sections for General Information, Rule Expression, and Reference Links. The Rule Expression section includes text boxes for Left Formula and Right Formula, with options to add Basic Rules and logical operators, while the General Information section contains fields for Rule ID, descriptions, and control level.

General Information Section

The General Information section determines how the rule functions and contains the fields:

Rule ID – an identifying name that can be up to 10 characters. This cannot begin with the letter "S".
Short / Long Description – a meaningful description to identify the concept of the rule. The short description can be up to 40 characters and the long description can be up to 120 characters.
Control Level - Specify whether failure in passing the rule is acceptable in the validation result.
Comments Required - Select this checkbox if comments are needed to provide further explanations on the detail page of the validation result app.

Rule Expression Section

Rule Expression section determines how to calculate the data to be compared.

Left Formula -will display how the Basic Rules are compared.
Right Formula - is static and is always set to TRUE.
Comparison Operator - This is the space between the Left and Right Formulas. It tells how to compare the data, like "Equal To" or "Does Not Equal". Change the Comparison Operator if the comparison should be FALSE.

The Operand Expression Editor is the tool used to populate the formula boxes.

Note

It’s important to note that the Logical Operators AND and OR have the same priority in the formula and is calculated from left to right. NOT has a higher priority. To change the order of evaluation, use brackets.

The Logical Operators work as follows:

AND – Returns a value of TRUE if both basic rules connected by the operator evaluate to TRUE
OR – Returns a value of TRUE if ANY of the two basic rules connected by the operator evaluate to TRUE
NOT – Reverses the evaluation of the result of the basic rule that follows this operator.

Once the rule is created it needs to be saved and activated before it can be used.

Creating a Compound Rule

To begin creating a rule, access the Manage Balance Validation Rules and Groups application. This application is used to create both Balance Validation Rules and Groups.

When looking at the Rules tab, you can click create and choose the type of rule you are creating. We will now focus on a Compound Rule.

Key Takeaways

Basic Rules are expressions comparing two different formulas.
Compound Rules comprise of Basic Rules connected by the logical operators AND, OR, NOT. The result of these rules is considered either true or false.

Create a Balance Validation Compound Rule

You need to create a Balance Validation rule that determines that if Provision Liabilities exist that the expense item has been entered as well. In order to do this you need to first determine if the Year-To-Date amount of each category does not equal zero. These are basic rules that have already been entered into the system by another colleague. Your task is to create a Balance Validation Compound Rule using these two Basic Rules and validate that both items are TRUE. Save your rule, but do not activate it.

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