Meet Max. He's an employee working in the Finance Department at The Bike Company. As part of his duties, Max needs to ensure the accuracy of financial balances during the month-end close process for informed business decisions. This is known as "balance validation".
A specific task he is required to undertake is validating whether the depreciation of a particular fixed asset has not exceeded its acquisition value. If this kind of discrepancy arises, additional review and corrections are essential, which need to be documented and executed diligently. This instance is an example of SAP Balance Validation in action.
Essentially, Max is cross-checking data within the finance module of the SAP system. The aim is to ensure that all financial transactions are recorded accurately and consistently. Balance validations, like the one Max performs, help identify and rectify any discrepancies or errors in the financial data. This helps Bike Company to make more informed decisions and ensures they comply with financial regulation and reporting requirements.
Balance validation is required to ensure data quality during period-end close of a business entity. It validates data completeness, correctness, and compliance of balance sheet and profit and loss accounts based on user-defined rules.
Balance Validation steps:
Defining Validation Rules and Groups – Validation Rules contain the parameters of the validation. Once the Validation Rules are defined, they are then placed in Validation Groups.
Exporting Rules and Groups (optional) – Validation Rules and Validation Groups can be exported to a spreadsheet. This will allow them to be entered into a test system for validation.
Importing Rules and Groups (optional) – After exporting the Rules and Groups from a test or development system, they can be imported into a target system.
Executing Validation Groups – Once the rules are activated and the groups have been created, the Validation Group can be executed. This can be performed manually or scheduled to be completed at a later time. During execution the system will calculate the rule and document the results.
Viewing Validation Results – Once the rules have been executed, the system will set a status of pass or failure. Any validations that fail need to be reviewed and any follow-up items need to be documented.
The creation of Validation Rules and Groups can begin in a Test System and then exported into a spreadsheet. The spreadsheet can then be imported into the target system.
Let’s look at the entire process with the following video.
In the upcoming lessons, we'll delve deeper into the Balance Validation process. We will explore how to Manage Global Hierarchies to make it easier for you to group your data as per your balance validation requirements. We will also take a look at Custom Fields, which could exist in your current accounting structure and could be helpful for data grouping or data segregation in Balance Validation scenarios. Lastly, we'll cover the critical aspect of Assigning Security. This is crucial in gaining access to the necessary applications and data required for Balance Validation tasks and analysis.
Key Takeaways
Balance validation refers to the process of ensuring the accuracy of financial balances during the month-end close process.
Balance validation helps a company to identify and rectify any discrepancies or errors in the financial data.
- The Balance validation process involves defining validation rules and groups, exporting rules and groups, optionally exporting then importing rules and groups, executing validation rules and viewing validation rules.