Explaining Business Benefits of Central Finance

Objectives

After completing this lesson, you will be able to:

  • Outline common challenges faced by customers and how Central Finance provides solution capabilities to overcome those
  • Describe long term business benefits of Central Finance with regards to transformation, reporting and scalability

Highly customized legacy systems and moving to clean core

Historically, technology driven organizations have built customizations on top of standard functionality to meet business needs. However, maintaining legacy technology limits the benefits and elevates the costs of adopting innovative technologies. Organizations cannot drive next level business transformation with significant technical debt, as legacy technologies are slow to innovate, more expensive to update and riskier to operate.

Clean Core Concept

The core describes the main aspects of an ERP system namely extensibility, processes, data, integration, and operation. Capabilities of the core depend on the implemented software stack. Clean means transparent, consistent, efficient, optimized and innovation ready.

The image illustrates the core components of SAP's Clean Core Methodology. At the center is the CORE, surrounded by several key elements: Data, represented by a stack of servers; Processes, symbolized by an arrow icon; Operations, indicated by a magnifying glass; Integration, shown by connected blocks; and Extensibility, represented by a microchip or circuit icon. These components interact and work together to form the core functionality and capabilities of the system, enabling it to manage data, execute processes, handle operations, integrate with other systems, and provide extensibility for customization and enhancements.

SAP's Clean Core Methodology is a strategic approach to digital transformation aimed at guiding businesses in their transition to the next-generation business suite, SAP S/4HANA. The goal is to ensure that the "core" of your SAP system - the hub of essential business processes - remains as clean, efficient, and lean as possible.

Within this cleaner, more unified core system, businesses with heavily modular legacy systems can capitalize on innovative features, from predictive accounting to machine learning capabilities. This, in turn, provides an ideal platform for transitioning to a more streamlined, less intricate operation model.

A practical embodiment of the Clean Core methodology starts with a controlled, risk-averse transition strategy known as the Steppingstone Approach. Instead of abruptly switching to new systems, Central Finance enables organizations to gradually migrate their financial systems, limiting operational disruption. For example, a company could first streamline their accounts receivable processes before moving on to other financial operations.

Furthermore, real-time consolidation offered by Central Finance sharpens financial insight and reporting, providing instant access to a single source of truth for all financial data. As an example, a multinational company could seamlessly integrate and review financial data from different countries/regions, adhering to local compliance standards, all within the SAP S/4HANA universal journal.

The Clean Core Methodology hinges on four main steps:

The image depicts a four-step process or framework, presented as an ascending staircase or pyramid. The base level is labeled Simplify, followed by Innovate on the second step, Standardize on the third, and finally Reduce Customization at the top. This visual representation suggests a progressive approach to optimizing a system or process, starting with simplification, then moving on to innovation, standardization, and ultimately reducing customization to achieve a more streamlined and efficient state.

  1. Simplify: Revamp and streamline processes to create a leaner system. Pair this with Central Finance's ability to reduce IT complexity by gradually moving more and more operations to the cleaner SAP S/4HANA system.

  2. Innovate: Central Finance allows businesses to leverage SAP S/4HANA's innovative features like real-time analytics and predictive accounting capabilities, driving innovation and deeper business insights.

  3. Standardize: Adopt SAP's standard best practices. In this context, Central Finance facilitates the adoption of SAP S/4HANA's best practices, creating a uniform financial system landscape.

  4. Reduce Customization: Limit customizations to areas that provide competitive advantage. With Central Finance, custom code alterations and similar modifications remain in legacy systems, if preferred, thus contributing to a cleaner SAP S/4HANA core.

By integrating Central Finance into the Clean Core Methodology, SAP delivers a controlled pathway to a streamlined, efficient SAP S/4HANA core - a core that ensures optimized business performance while minimizing operational disruptions.

Highlight business benefits in longer term

Transitioning to Central Finance in SAP S/4HANA is not just a near-term solution but also a strategic, long-term investment that brings several benefits to a forward-thinking business leader.

  1. Future-Proofing: Transitioning to Central Finance positions your company to adopt future innovations from SAP as SAP S/4HANA is their go-forward strategy. This ensures that your system is always up-to-date with the latest advancements in technology and functionality.

  2. Continuous Improvement: Central Finance provides a platform for continuous operational improvement and digital transformation. As legacy systems are phased out and more processes migrated to SAP S/4HANA, you can optimize processes, reduce complexity and cost, and increase efficiency in the long run.

  3. Enhanced Decision Making: Central Finance provides real-time, harmonized financial data from all source systems, enabling high-quality, data-driven decisions. Over time, this ability to make quick and accurate decisions can lead to improved business performance and better outcomes.

  4. Scalability: As your business grows and complexities increase, having a streamlined, unified financial system like Central Finance can offer flexibility and adaptability. It makes it easier to integrate new systems, acquisitions, or business units.

  5. Enable More Advanced Functions: With Central Finance on the latest S/4HANA, you can benefit from the latest features in S/4 Finance, provided the scope fits the replicated data from Central Finance.

Remember, transitioning to Central Finance is a journey. The immediate benefits like standardization and real-time insights are just the tip of the iceberg. The real value comes from leveraging it as a platform for relentless improvement and innovation in the long run.

Tie Central Finance to downstream solutions like Group Reporting, or SAP Analytics Cloud for planning

The foundation set up by Central Finance is extremely beneficial for driving value when using downstream solutions such as SAP’s Group Reporting and SAP Analytics Cloud for planning – solutions focusing on planning, budgeting, and financial reporting.

The image illustrates a centralized finance system using SAP S/4HANA, which integrates data from various source systems for both corporate group accounting and global/local operational accounting. The central finance system is supported by SAP Group Reporting for data collection from non-SAP sources, non-financials, and notes; SAP Analytics Cloud for dashboarding, analytics, and planning; and SAP Disclosure Management for online publishing, printing, and electronic submission of financial information. This centralized approach enables the consolidation and harmonization of financial data from multiple sources, providing a unified view for reporting, analysis, and disclosure purposes.

Here's how Central Finance implementation ties and supports with SAP Analytics Cloud for planning and Group Reporting:

SAP Analytics Cloud for planning

  • Data Integration: SAP Analytics Cloud for planning uses the integrated data from Central Finance for planning, budgeting, and forecasting activities. SAP Analytics Cloud for planning uses this consolidated financial data to provide accurate insights for future financial strategies. Central Finance offers transferring and transforming data from source systems to the new plan-data table ACDOCP of the universal journal.

  • Interoperability: Companies can leverage live data connection between Central Finance and SAC to drive real-time analytics, planning, and predictive analysis across multiple dimensions, fostering a truly data-driven business culture.

  • Enhanced Analytics: SAP Analytics Cloud for planning utilizes integrated data for advanced analytics, scenario planning, and decision-making. It enables increased financial transparency across business operations, providing a solid base for SAC to perform predictive analytics, create accurate forecasts, and deliver detailed business intelligence reports.

Group Reporting

  • Real-time Consolidation: Group Reporting focuses on real-time consolidation and financial reporting. It complements Central Finance by offering advanced features for group-wide financial close and consolidation processes, consuming the financial transactions replicated to Central Finance from both SAP and non-SAP Systems.

  • Unified Reporting: Group Reporting enhances financial reporting capabilities by providing standardized templates and processes. It ensures that financial reports comply with regulatory requirements.

  • Interoperability: Group Reporting with Central Finance results in seamless access to integrated financial data for consolidated reporting, and analytics, by ensuring data consistency, reducing data replication, and simplifying the reporting process.

In summary, Central Finance acts as the integration hub, consolidating financial data from different systems, while SAP Analytics Cloud for planning and Group Reporting leverage this integrated data for planning, budgeting, consolidation, and reporting purposes. Together, they provide organizations with a comprehensive financial management solution.

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