Describing Finance Integration

Financial transactions are used to record the consumption of budgets and a variety of other general ledger and operational processes in accounts payable and accounts receivable. PSM account assignments and other financial account assignments are required in these processes, and allow for the creation of financial statements on the level of company code and G/L accounts, as well as on the level of fund, grant and other common account assignment elements (for example, profit center, segment, and so on).

The universal journal (ACDOCA) is used to record financial transactions, and one (ledger 0L- leading ledger) or multiple ledgers can be used. The use of single or multiple ledgers depends on the need to report for different accounting principles (for example, GAAP, IFRS, GASB for full and modified accrual). For further information about accounting principles in public sector management, refer to the following course, ISPC3 (SAP S/4HANA Cloud Public Sector - Fund Accounting (USA), lesson Outlining Modified and Full Accrual Accounting Principles.

Many financial transactions either allow direct entry of account assignments and/or derivation based on other account assignments (see Unit 2, Lesson 2, Explaining Account Assignment Derivation). The document splitting functionality then inherits the relevant account assignments from expense or revenue lines to vendor or customer lines and subsequent bank in transit or bank accounts.

Besides entry and derivation of mentioned account assignment elements, it is also possible to reference earmarked funds in the financial transactions (Unit 5, Lesson 2, Introducing Earmarked Funds) or post follow-on functions like goods receipts and invoice receipts for purchase orders (see Unit 5, Lesson 3, Understanding the Integration With Procurement and Inventory Management). The account assignments on the referenced document line item are taken over to the journal entry line.

The financial transactions can also originate in other integrated components and are then reflected in the accounting applications such as General Ledger Accounting, Accounts Payable, and Accounts Receivable.

There are many other integrated applications which post to financial accounting and are relevant for use in Public Sector Management. For more information, refer to the following chapters in this unit.

In this lesson, we will have a closer look at general ledger accounting, accounts payable, and accounts receivable.

The chart of account YCOA and the general ledger accounts are predelivered in SAP S/4HANA Cloud. The definition of the general ledger accounts in YCOA not only contain important settings necessary for financial accounting and integration with other applications. They also contain vital settings for budget consumption and the ability to perform budgetary reporting and availability control.

The budgetary settings are specified in their own area of the general ledger account. While some of the attributes can be changed, others are not changeable as they ensure the consistency of the solution. There are also additional validations in place which help to ensure that changes to the general ledger account do not interfere with the transactions already posted on those accounts.

In the beginning of an implementation, it is possible to renumber the general ledger accounts and map them to a customer-specific number scheme. This can still be done using the chart of account YCOA, and keeping all of the attributes associated with the original general ledger account and other automatic account determinations in sync. In addition to of this general renumbering tool, there is also a best practice scope item that allows account mapping to US GASB accounts (Government Accounting Standards Board).

The following figure provides you with a sample screenshot of the Manage Operating G/L Accounts app showing the section Public Sector Management Data in the ‘General Information’ and an expense account - using the budget consumption type Expenses/Revenues (99).

Additional budgetary attributes are changeable, but only for accounts with budget consumption type Expense/Revenue (99) or CO Postings (95). In addition, the system also verifies if data is already posted in the productive system. If this is the case, most of the settings are not changeable and an error message is issued when you try to change them.

The budgetary attributes are explained in more detail in Unit 4, Lesson 1, Recording Commitments and Actuals.

For an explanation of the cash origin account, refer to IPSC3, SAP S/4HANA Cloud, Public Edition, for Public Sector (USA): Fund Accounting.

For an explanation of the sponsored class, refer to IPSC2, Implementation of SAP S/4HANA Cloud for Public Sector: SAP Grants Management.

In comparison, let's look at an account with budget consumption type Payments (57). Examine the following figure to view a screenshot of a bank account.

For the budget consumption type, Payments (57), none of the budgetary settings can be maintained as they are not relevant for a payment. Additionally, the cash origin account can not be maintained, as it is filled within the document flow process (see IPSC3, Introducing Cash Flow Reporting).

All accounts that are defined as relevant for cash flow in the company code specific setting of the account are also defined as budget consumption type, 57. An error message is issued if the relevant for cash flow indicator is removed.

Additional validations that exist are as follows:

• A vendor reconciliation account (K) is always classified with budget consumption type Payables (54) or Down Payment (61).
• A customer reconciliation account (D) is always classified with budget consumption type Receivable (55) or Down Payment (61).

If the type of reconciliation account is changed, an error message is issued.

However, it is possible to have non-reconciliation GL accounts classified with budget consumption types Payables (54) or Receivables (55) .

These validations are in place to ensure the budgetary settings and the financial settings in an account are matching and the use in both areas is consistent.

Many apps in financial accounting contain the public sector account assignments such as fund, grant, budget period, and earmarked funds (with document item and item completed flag).

A few of them are explained in the following sections.

This Post General Journal Entries app can be used to post G/L transactions and includes all PSM account assignments. Account assignments can be entered or derived.

If a journal entry is recorded using this app or similar apps for the purposes of posting between two or more expense or revenue accounts, the document lines are updated using the budget consumption type FI Transfer Postings (66).

The following figure provides an example of the Post General Journal Entries app in which the account assignments like fund, grant, earmarked funds, and others can be entered in the Account Assignment section.

This app allows you to upload multiple journal entries from a spreadsheet or a CSV file. The standard template can be adjusted to include columns for PSM-specific account assignments. The Excel format displayed in the above figure shows how the existing template can be adjusted to include the PSM-specific account assignments. Note that as an example, the following field columns have been added to the template. The respective chapter in the general ledger accounting documentation contains a catalog of all the field columns that are available.

• GEBER Fund (20)
• GRAN_NBR Grant (20)
• KBLNR Document number for earmarked funds (10)
• KBLPOS Earmarked Funds: Document Item (3)
• PS_POSID WBS Element (24)

In this app, it is possible to see the journal entry and the entered or derived account assignments and other public sector attributes. The following figure also shows an example of the line item overview as well as a drill-down to a specific line item.

Note that while the Entry view only shows the account assignments, the Ledger view (in this example, 0L) shows all the attributes. The ledger view shows the data stored in the universal journal which is used for reporting in financial accounting and Public Sector Management.

Various reports in general ledger are available for reporting of the PSM account assignments and some of them also possess budgetary attributes. The global hierarchies for the PSM dimensions can also be used in the apps that provide this option. Some of the main reports are as follows:

• Trial Balance - account assignments only, hierarchy
• Journal Entry Analyzer - account assignments only, hierarchy
• Display Line Items in General Ledger - account assignments in layout and filter, budgetary attributes

Where relevant, apps in accounts payable contain the public sector account assignments such as fund, grant, budget period, and earmarked funds (with document item and item completed flag).

A few of them are explained in the following.

A central app for recording supplier invoices exists and can be used in the following way:

• With reference to purchase orders (see Unit 5, Lesson 3, Understanding the Integration with Procurement and Inventory Management)
• With reference to earmarked funds (see Unit 5, Lesson 2, Introducing Earmarked Funds)
• Without reference to a predecessor document

In posted journal entries for supplier invoices, vendor lines are classified as a Payable (54) budget consumption type (BCT), while expenses are classified as an Expense/Revenue (99) BCT.

The following figure provides an example of the Create Supplier Invoice app, in which the account assignments like fund, grant, earmarked funds, and so on can be entered in the Account Assignment section of the G/L account item.

The Import Supplier Invoice app allows you to import multiple vendor invoices from a spreadsheet. Public Sector Management-specific account assignments are included in the template and can be entered by unhidden specific columns. The PSM specific columns become available after they are unhidden:

• Fund (20)
• Grant (20)
• Document Number for Earmarked Funds (10)
• Earmarked Funds: Document Item (3)
• Completion Indicator for Line Item (1)

The following example illustrates an example of the process steps for down payments and also shows the posting example with debit (+) and credit (-), including the budget consumption type and updates which occur in the universal journal for actual line items.

The Manage Supplier Down Payment Requests app can be used to record down payment requests:

• With reference to purchase orders
• With reference to earmarked funds
• Without reference to a predecessor document/commitment

For down payment requests, or down payments referencing purchase orders or earmarked funds, the account assignments from the predecessor document are used. In the case of documents without reference, the account assignments are derived (for example, from cost center or WBS master) or have to be entered manually. Since the down payment is also relevant to budget consumption, it is necessary to derive a budget account. You can define this according to the document type in the configuration activity Derive Budget Account for Down Payments without Commitment Reference. The previous figure provides an example of the configuration. The configuration activity is used to derive both the budget account and the cash origin account. You can create new document types by copying existing document types in the FI configuration to allow different budget accounts to be used.

The following figure, Configuration - Derive Budget Account for Down Payments Without Commitment Reference, provides an example of the Manage Supplier Down Payment Request app in which the account assignments like fund, grant, earmarked funds, and others can be entered in the account assignment section of the item facet.

Down payment requests do not update the universal journal. They are used as a noted item and can be picked up in automatic payments using the Manage Automatic Payments app, or manually using the Post Outgoing Payments app.

The resulting document is a down payment journal entry in the universal journal, where the vendor line is classified as a Down Payment (61) BCT and the payment line is classified as a Payment (57) BCT. The following figure provides an example of the budgetary updates including the budget account derived.

The Create Single Payment app can be used to make extraordinary payments to a supplier without requiring an invoice to be used.

In technical terms, a down payment request is created, which automatically triggers a payment run and the creation of a down payment document. The account assignments are derived (for example, from cost center or WBS master) or have to be entered manually. As mentioned in the section manage "Supplier Down Payment Request", this payment is also relevant for budget consumption, and it is required to derive a budget account and a cash origin account. The same configuration activity, Derive Budget Account for Down Payments without Commitment Reference, which is also used for down payments can be used here.

Where relevant, apps in accounts receivable contain the public sector account assignments such as fund, grant, and budget period on the revenue or down payment account line item. Derivation of the PSM account assignments follow the same logic as for expense lines. In journal entries for customer invoices, customer lines are classified as a Receivable (55) budget consumption type (BCT), whilst revenues are classified as an Expense/Revenue (99) BCT. The down payment lines follow the same logic as supplier down payments and use the BCT Down Payment (61).

Some of the apps are explained in the following.

For the most part, invoices are generated in the sales and distribution system, and also in the form of Grant Billings. A SAP GUI-based app for manually recording customer invoices also exists.

The following figure shows an example of an entry screen for outgoing invoices.

This app allows you to upload multiple customer invoices and/or credit memos from a spreadsheet. Public Sector Management-specific account assignments are included in the template and can be entered by unhidden specific columns. Besides derivation (for example, from cost centers or WBS elements), PSM account assignment can be entered in the workbook using the following columns:

• Fund (20)
• Grant (20)

This app can be used to record customer down payment requests.

Unlike Manage Supplier Down Payment Requests, there are no documents which can be referenced and the account assignments are manually entered or derived (for example, from cost center or WBS master). A budget account also needs to be derived. You can define this according to the document type in the configuration activity, Derive Budget Account for Down Payments without Commitment Reference. Refer to the previously displayed figure, which provides an example of the configuration used for both supplier and customer down payments.

Down payment requests do not update the universal journal. They are used as a noted item and can be converted to down payments by using the Manage Automatic Payments app or manually using the Post Incoming Payments app.

The resulting document is a down payment journal entry in the universal journal, where the customer line is classified as a Down Payment (61) BCT and the cash line is classified as a Payment (57) BCT.

The apps and down payment process used in accounts receivable are very similar to the ones used in accounts payable. Refer to the Accounts Payable section for the processes and app display.