Identifying the Finance & Risk End-to-End Processes

Objective

After completing this lesson, you will be able to identify the Finance and Risk End-to-End Processes

Finance and Risk Processes

Earlier on, we mentioned the different personas within the office of the CFO. These different personas are focusing on specific processes. As an example, the head of accounting looks into the record to report process.

The figure here gives an all-in-one overview of all finance related processes including the key steps within each process. This process design is also used by our engineering department to indicate where innovations specifically apply.

The illustrates various financial functions and their associated processes. It includes financial planning and analysis, which involves planning, budgeting, forecasting, management accounting, and financial analysis. The record to report function covers creating financial records, performing financial accounting, financial closing, and financial reporting. The invoice-to-pay function includes managing suppliers, processing accounts payables, processing payments, and managing payables financing. The invoice-to-cash function involves managing customer invoices, processing accounts receivable, managing and processing collections, managing customer credit risk, and handling disputes. Treasury management covers managing cash and working capital, analyzing and implementing treasury procedures and policies, managing payments and bank communication, and securing financial risk. International trade and global tax include managing international trade, indirect tax, and direct tax. Governance, risk, and compliance involve identity and access governance, enterprise risk and compliance, cybersecurity, data protection and privacy, managing legal matters, and managing sustainability performance. Each function is represented by a horizontal arrow with processes marked along it, indicating the flow and sequence of activities within each function.

Let's have a look at the different processes and what they are about.

Record to Report

Record to report (R2R) is a finance and accounting management process that involves collecting, processing, and presenting accurate financial data based on business transactions. This end-to-end process provides strategic, financial, and operational feedback on the performance of the organization, and is the foundation of management decision-making and shareholder communications.

The figure illustrates the SAP S/4HANA Cloud ecosystem, focusing on Record-to-Report (R2R) processes:

The figure illustrates SAP's comprehensive portfolio for the Record-to-Report (R2R) process, focusing on SAP S/4HANA Cloud as the central element. The diagram is divided into four quadrants: Record, Account, Close, and Report, each representing a critical phase in the R2R cycle. Record: This quadrant emphasizes SAP S/4HANA Cloud Finance, including revenue accounting, lease accounting, statutory reporting, and local reporting. Account: It highlights core financial functionalities such as General Ledger (GL), Asset Accounting, Accounts Payable/Receivable (AP/AR), and Accruals. Close: This section focuses on financial closing processes, featuring SAP S/4HANA Cloud for group reporting and SAP Advanced Financial Closing. Report: It underscores the importance of financial planning and analysis (FP&A) through SAP Analytics Cloud and SAP Disclosure Management. The outer ring includes value-added capabilities like SAP Build Process Automation, SAP Central Finance Transaction Replication, and SAP Intercompany Governance by Blackline.

Record Financials automates financial postings creation from various data sources, using mass upload tools or Robotic Process Automation for manual entries. All data is kept in the Universal Journal for a single financial truth. SAP S/4HANA Cloud for central finance is utilized by 34% of Global Top 500 companies for data integration. It's primarily for large, multi-system clients who want a centralized accounting and reporting system. Central Finance is exclusively an SAP RISE-only solution.

Financial Accounting automates postings in compliance with accounting standards and IFRS. It supports multiple ledgers, valuations, and currencies, reducing closing tasks. Key topics include contract and lease management, automated revenue and parallel accounting. The premium BlackLine solution extension boosts cloud revenue, demonstrating benefits of Cloud add-ons before, during, and after transitioning to SAP S/4HANA.

Financial Close employs AI for task automation and advocates early or event-based execution of crucial tasks. RISE with SAP facilitates closing orchestration and unifies operational and group reporting for corpoate financial consolidation. The emphasis is on AI automation and SAP Advanced Financial Closing as a key orchestration app. SAP S/4HANA for group reporting is SAP’s strategic financial consolidation tool featuring seamless integration and data model, shared user experience and accelerated time-to-close.

Financial Reporting offers flexible reports meeting diverse accounting and legal needs and enables KPI drilling down to transaction details. Additionally, SAP's statutory reporting capabilities include localized reporting templates, automated compliance, electronic filing, real-time analytics, comprehensive audit trails, customizable frameworks, data integrity, multi-GAAP and IFRS support, updated localization packs, and integrated risk management to ensure efficient and accurate compliance with global regulatory requirements. SAP Analytics Cloud and SAP Disclosure Management are utilized for reporting. The potential of partner solutions for sustainability disclosures is being explored.

Here are the relevant products:

Perform Financial Closing

Perform Financial Reporting

Perform Financial Accounting

Create Financial Record

  • SAP S/4HANA Cloud

Financial Planning and Analysis

Financial planning and analysis (FP&A) involves budgeting, forecasting, and analyzing to measure an organization's financial health and set business strategy. This includes annual budgeting and regular forecasts to predict future performance, identifying profitability drivers, and analyzing trends and past results to explore growth scenarios.

Financial planning and analysis involves financial planning, budgeting, forecasting, and strategic planning. The process extends to supply chain, sales, marketing, human resources, and IT.

Simulation and Planning offers predictive and simulation capabilities, primarily using SAP SAC Planning. Customers can also store plan data in their SAP S/4HANA Cloud system.

Management Accounting in SAP S/4HANA Cloud includes real-time profitability analysis through embedded margin analysis. For large data volumes and complex processes, SAP Profitability and Performance Management (PAPM) is recommended.

In Financial Analysis, SAP S/4HANA provides built-in multi-dimensional reporting based on line items. Customers can also use SAC, partly embedded in SAP S/4HANA, and SAP PAPM for advanced analysis.

Enterprise Performance Management

Enterprise Performance Management (EPM) is all about managing the performance of a business through analytics, reporting, planning, and forecasting. It delivers a comprehensive perspective of consolidated financial outcomes and intercompany operations, strengthened by superior analytics and reporting skills, enabling businesses to comprehend their operations better. SAP considers EPM not just as a collection of technical abilities like planning, consolidating, and reporting, but as a comprehensive process. By integrating statutory, managerial, and tax perspectives, this approach allows for quicker and more insightful business decisions, rather than handling them individually.

The figure presents a sequential process of financial activities. Starting with Planning & Simulation, it integrates planning, budgeting, and operational drivers with financial outcomes. Next is Intercompany Management, focusing on transparent processing based on an integrated value chain. Close & Consolidation follows, highlighting automated financial consolidation. Disclosure & Analysis addresses financial, tax, and sustainability disclosures with multi-dimensional analysis. Bottom tiers emphasize statutory reporting, business steering, and tax management.

SAP acknowledges the increasing relevance of sustainability information, like carbon data, in steering organizational decisions. SAP treat carbon data in the same way as financial information, thus extending EPM processes to both forms of data. This helps consolidate the data and understand how decisions impact the sustainability footprint of the supply chain. SAP offers a superior EPM platform through its Business Technology Platform (BTP) and Cloud ERP finance portfolio, providing customers with an optimized, integrated approach to performance management. Those not preferring an ERP-centric approach can also use an SAP S/4HANA public cloud sidecar option.

Here are the relevant products per process area:

Perform Planning, Budgeting, and Forecasting

Perform Financial Analysis

Perform Management Accounting

  • SAP S/4HANA Cloud
  • SAP Profitability and Performance Management

Invoice to Pay

The invoice to pay (I2P) process in SAP S/4HANA Finance transforms procurement and accounts payable operations into strategic advantages through a fully integrated solution.

The image outlines a series of functions and processes aimed at optimizing procurement and finance operations. It begins with improving vendor relationships through Ariba-originated digital purchase orders and invoices, which accelerate processes, reduce errors, and cut costs. The next step is turning procurement into a profit center by operationalizing processes to take advantage of early payment discounts and favorable payment terms. This is followed by fueling and enabling business growth through automation, standardization, and workflow that supports growth without increasing team size. The fourth function focuses on running a cost-effective finance operation by using a digital bank communication network to eliminate manual processing bottlenecks and error sources. Finally, the process aims to optimize working capital and liquidity by providing visibility and control with fully integrated cash processes.

Purchase orders are based on procurement needs, and invoices from suppliers are verified by the Accounts Payable module against orders and goods receipts. This improves accuracy and compliance. The system streamlines discount and payment term processes, providing financial intelligence and enhancing profitability. Verified invoices are processed automatically, allowing for efficient management of large volumes of invoices. Payments are executed timely, supporting effective finance operations. With the system's reconciliation and reporting tools, payments get matched with bank statements to ensure precise financial records and real-time insights. Moreover, an integrated Cash and Working Capital solution optimizes working capital, ensuring financial stability.

During the I2P process, SAP S/4HANA Cloud's finance modules, including Accounts Payable, Payment Management, and Supplier Management, collaborate to simplify operations, bolster compliance, and offer real-time insights into financial data. The integration of these modules results in reduced manual work, lesser errors, and improved decision-making, thereby refining the overall I2P process.

Manage Payables product pages

Invoice to Cash

The image illustrates a series of financial processes and their corresponding SAP solutions. The processes include checking credit, issuing invoices, handling payments, collecting cash, settling and reconciling accounts, resolving disputes, reporting and analyzing, and financing receivables. For each process, specific SAP solutions are recommended. Customer credit risk assessment is managed by SAP Cloud for credit integration. Customer payments are handled by SAP Digital Payments. Customer credit, collections, and dispute management are facilitated by SAP S/4HANA Cloud for receivables management. Cash application and reconciliation are supported by SAP Multi-Bank Connectivity and SAP Cash Application. Lastly, receivables finance is managed by SAP Taulia Receivables Finance. The image aims to map out the end-to-end financial processes and the corresponding SAP solutions that support each step.

Invoice to cash covers different solutions to automate receivables management in an efficient way.

  • SAP S/4HANA Cloud for receivables management handles credit, disputes, and collections, evaluating creditworthiness and automating collections task prioritizing.
  • SAP S/4HANA Cloud for credit integration assesses customer credit risk, importing credit reports and monitoring changes.
  • SAP digital payments add-on efficiently processes payments, reduces cash reconciliation efforts, and integrates payment procedures into sales channels.
  • SAP Multi-Bank Connectivity consolidates multiple banking relationships in one interface, offering secure data transmission and transaction monitoring.
  • SAP Cash Application uses machine learning for payment clarification, streamlining payment processing.
  • Taulia Receivables manages receivables financing, optimizing cash flow and balance sheets.
  • SAP Enterprise Service Management for Finance Automation extends SAP S/4HANA with AI-driven cases, automating payment advice processing and manual accrual and ledger postings.

Manage Receivables Products and pages

Note

Engage with this interactive value journey that explores the Order-to-Cash (Finance View) with SAP S/4HANA Cloud through dynamic personas.

Treasury and Working Capital Management

The treasury and working capital management capabilities help to manage liquidity and mitigate financial risks by maintaining appropriate bank accounts and releasing cash for payables on time. This process integrates cash flows, transactions, commodity positions, and market data.

The image is a circular diagram centered around SAP S/4HANA Cloud, illustrating various treasury pillars and solutions. The inner circle lists key components: Cash, Financial Risk, Payments, and Working Capital. Surrounding circles detail specific offerings: SAP S/4HANA Cloud for Cash Management (account management, cash position, forecast), Advanced Payment Management (approvals, tracking, in-house banking), and Treasury & Risk Management (debt, investment, risk management). Other tools include SAP Analytics Cloud, SAP Datasphere, SAP Market Rates Management, SAP Trading Platform Integration, and multiple payment solutions such as SAP Multi-Bank Connectivity and SAP Digital Payments Add-On. The color code reflects treasury pillars, core capabilities, and value-added solutions on the SAP Business Technology Platform. Notations indicate licensing details.

It includes three main products:

  • Cash and Liquidity Management

    SAP S/4HANA Cloud for Cash Management simplifies and automates daily cash operations, providing instant insights through an intuitive, device-independent interface, helping treasurers and cash managers maintain appropriate bank accounts and release cash for payables on time.

  • Payment and Bank Connectivity

    • SAP S/4HANA Cloud for Advanced Payment Managementchannels payments from all sources, formats, validates, monitors them with user-friendly tools, and updates cash forecasts. It offers end-to-end visibility of payments with built-in exception handling and in-house bank capabilities.
    • SAP Multi-Bank Connectivity connects banks and financial institutions with corporate customers on a secure network, automating financial transactions, reducing payment rejection rates, easing reconciliation, and improving visibility with rich remittance data access.

  • Treasury and Risk Management

    • SAP S/4HANA Cloud for treasury and risk management optimizes liquidity and financial investments, ensuring margin protection against currency and interest rate fluctuations. It provides timely and accurate cash information to pursue lower borrowing costs and higher returns on investments.

    • SAP Trading Platform Integration automates and integrates trading activities with platforms like 360T and FxAll, covering inbound and outbound communication for various financial instruments.

    • SAP Market Rates Management provides accurate market data for valuing financial transactions and reporting, ensuring correct valuation and compliance with market standards. This service helps companies maintain connectivity with different market data providers, enabling precise mark-to-market valuations and financial reporting.

Quote to Cash

The image illustrates the Quote-to-Cash process. At the center, it highlights four key offerings: Subscriptions, Products, Services, and Projects. Surrounding these offerings is a circular flow that represents the continuous cycle of the Quote-to-Cash process. Starting from the top and moving clockwise, the stages include Offer, Quote, Order, Bill, Collect, Recognize, and Evolve.

The quote-to-cash process refers to the journey a company takes from offering a product or service to receiving payment for it. It's important for businesses, especially those with recurring revenue models (like subscriptions), to automate this process. It covers more than just billing—it's about ensuring the customer is satisfied throughout their relationship with your company, so they keep renewing and buying more.

Here are the 7 capabilities that you need to support subscriptions and recurring revenues:

  1. Offer - Flexibly creating bundled products, services, or subscriptions with varying pricing plans, e.g., mobile phone plans.

  2. Quote - Use of tools to expedite quoting a price to customers, which includes guided selling, contract change management, and sales automation.

  3. Order - Fast and correct order processing for immediate accessibility is ensured, along with efficient fulfilment and provisioning of customer entitlements.

  4. Bill - A meticulous billing system addressing various charges, combining data from numerous systems for a detailed singular bill, and confirming accurate payments to partners.

  5. Collect - Automated payment collection for on-time payments, a unified system for handling receivables, collections, credit, and automating partner revenue-share settlements.

  6. Recognize - Adherence to accounting rules for correct revenue reporting, including integrations with financial systems for ASC 606, IFRS 15, and tax regulation compliance.

  7. Evolve - Utilizing customer data for creating new products and encouraging purchases, supporting renewal, upsell, cross-sell initiatives.

Here is an overview of SAP solutions for quote-to-cash management that are pre-integrated with S/4HANA Cloud Private Edition.

The stages are labeled as Model + Price, Quote + Sell, Order + Provision, Rate + Invoice, Collect + Settle, Recognize + Report, and Learn + Grow. The chart includes modules such as SAP CPQ, SAP Billing and Revenue Innovation Management, SAP Entitlement Management, SAP Convergent Mediation by DigitalRoute, SAP Cash Application, and SAP Digital Payments. Each module is represented by colored bars indicating their involvement in specific stages of the process. SAP CPQ is involved in the Model + Price and Quote + Sell stages. SAP Billing and Revenue Innovation Management spans from Quote + Sell to Collect + Settle. SAP Entitlement Management covers Model + Price, Order + Provision, and Rate + Invoice. SAP Convergent Mediation by DigitalRoute is involved in Order + Provision and Rate + Invoice. SAP Cash Application is involved in Collect + Settle, and SAP Digital Payments is involved in Collect + Settle and Recognize + Report.

The modules are mapped according to the Q2C process that is covered by the application. This means that based on your requirements, you may need one or multiple modules. As your business requirements change, the modular architecture allows you to add other modules to get more capabilities. And since the modules are pre-integrated with SAP S/4HANA Cloud, you don’t need to worry about integrations into an ERP system.

With this approach you can:

  • Grow recurring revenues faster by quickly launching innovative offerings using a variety of pricing, billing, and bundling options​
  • Maximize customer lifetime value with customer-specific offers and options delivered seamlessly and automatically​
  • Scale for growth and complexity by streamlining with an integrated quote-to-cash process for products, services, projects, subscriptions, usage plans, and more

Here are the relevant product pages for the process:

Global Tax

SAP S/4HANA Cloud offers a platform for growth that enables tax transparency and seamless tax compliance with processes standardized worldwide.

The image illustrates the integration of various SAP solutions to achieve corporate objectives and streamline business processes. At the core is SAP S/4HANA, which supports the entire business lifecycle from design, buy, supply, make, maintain, sell, service, finance, to people management. Surrounding this core are several SAP solutions that enhance specific functions. SAP Risk and Assurance Management helps assess risks and optimize tax controls. SAP Document and Reporting Compliance streamlines supplier electronic invoices, standardizes statutory reporting, and automates customer electronic invoices. SAP Responsible Design and Production, combined with SAP Document and Reporting Compliance, governs environmental impact. SAP Profitability and Performance Management simplifies income tax calculations. Finally, SAP Analytics Cloud monitors compliance and supports board reporting. This integrated approach ensures comprehensive management and reporting across all business functions.

At the heart, with its localized content, it allows to embed tax in each transaction to capture tax-relevant data and offers a single source-of-truth that can be leveraged to manage tax compliance end-to-end. This is the foundation for gaining control of tax data quality, for seamlessly complying with different types of regulatory requirements in all local jurisdictions, for automatically calculating direct tax, and ultimately, for enabling strategic tax management.

In addition, further automation can be achieved by seamlessly integrating with the following solutions:

  • SAP Risk and Assurance Management: Offers a holistic approach to financial controls, from Sarbanes-Oxley Act of 2002 (SOX) to tax compliance. With automated checks across the whole company, the application enables you to systematically detect your compliance issues, improve the quality of tax data, manage corrections, and promptly mitigate the risk of non-compliance.

  • SAP Document and Reporting Compliance: Provides peace of mind to manage all types of mandates, from electronic business documents to statutory reporting worldwide, enabling seamless adoption of constantly arising legal reforms while reducing cost of tax compliance operations. With its localized content, the product supports over 500 scenarios across more than 55 countries.

  • SAP Profitability and Performance Management: Establishes a modern environment for managing corporate income tax. With seamless integration with SAP S/4HANA Cloud and scenario-based simulations, it accelerates tax accounting, enables compliance with key regulations such as OECD BEPS Pillar 2, and empowers tax experts to optimizes the tax strategy.

Here are the products that are relevant:

Manage Indirect Tax

Manage Direct Tax

Manage International Trade

Governance, Risk & Compliance

Here is an overview of SAP’s broad portfolio for Governance, Risk & Compliance solutions that are integrated with S/4HANA Cloud mapped to key GRC capabilities:

The image outlines the various functions and processes involved in enterprise risk management, business controls and compliance, identity and access governance, and security and data protection. It includes assessing risks, optimizing audit and assurance, executing controls, fraud and compliance, governing global trade and taxes, managing identities and access controls, efficient user authentication, data protection, and security monitoring. Specific SAP solutions are mapped to each function, such as SAP Risk Management, SAP Audit Management, SAP Process Control, SAP Global Trade Management, SAP Access Control, SAP Identity Access Governance, SAP Enterprise Threat Detection, and SAP UI Data Protection Masking, among others.

Each module addresses a specific aspect, allowing organizations to tailor their GRC framework according to their unique requirements. This modularity ensures flexibility and scalability as businesses grow and face new challenges. And, with GRC insights directly integrated into S/4HANA private edition ensuring a seamless flow of information between GRC processes and core business operations, decision-makers have a holistic view of the organization's risk landscape. This integration facilitates informed decision-making by aligning risk and compliance considerations with strategic business objectives but also eliminates silos, enhances data accuracy, and improves overall efficiency in managing governance, risk, and compliance.

SAP GRC solutions offer a transformative approach to risk management, presenting a unified platform that integrates various critical capabilities. Collectively, they provide companies with a comprehensive view of risk, enabling effective prioritization and early mitigation.

  • Risk Reporting and Monitoring for real-time insights into potential risks and ongoing monitoring.
  • Enterprise Risk Management for holistic risk assessment and strategic planning.
  • Security and Data Protection to help ensure the integrity and confidentiality of sensitive information.
  • Identity and Access Governance for managing user access and permissions to reduce security vulnerabilities.
  • Business Controls and Compliance to support adherence to regulatory requirements and internal policies.

By having these capabilities seamlessly integrated:

  • Companies gain a consolidated view of risks, breaking down silos and fostering a holistic understanding.
  • Prioritization becomes more efficient, allowing for the identification and mitigation of critical risks in their early stages.
  • This proactive approach not only safeguards the company but also opens avenues for identifying and capitalizing on new business opportunities.

Here are the relevant product pages:

Manage Enterprise Risk and Compliance

Perform Identity and Access Governance

Manage Cybersecurity Data Protection and Policy

International Trade Management

Global trade departments are integral to business operations, collaborating across key functions to meet operational and financial goals. SAP solutions for International Trade Management streamline global compliance, integrating sales, procurement, logistics, and finance.

The image displays a flowchart for International Trade Management in SAP, detailing both the sales and purchasing processes. The sales process involves steps such as product and business partner master data, sales orders, delivery, and pro forma invoices, with steps for product classification and export compliance checks. The purchasing process includes product and business partner master data, purchase orders, shipping notifications, and goods receipts, along with product classification and import compliance checks. Reporting and analytics integrate both processes.

These SAP solutions enhance:

  • Customs Management: Oversee import/export documentation, duties, and product classification, optimizing cost through trade strategies.
  • Compliance Management: Ensure export/import compliance, manage licenses, and handle embargo checks with transactional blocking/release.
  • Sanctioned Party Screening: Screen for sanctioned parties across operations, with automatic blocking and efficient review workflows.
  • Trade Preference Management: Utilize free trade agreements with automated product qualification and manage declarations.
  • Special Customs Procedures: Address specific customs needs such as foreign trade zones, China's processing trade, bonded warehousing, and Intrastat compliance.

Here is the relevant product page:

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