Name: Managing Accruals and Deferrals in SAP Accruals Management with SAP S/4HANA Cloud Public Edition
Uploaded: 2024-2-6
Duration: 603 s
Description: In this microlearning, you learn the business context of accruals and deferrals and how SAP S/4HANA Cloud Public Edition helps to automate the process of managing accruals and deferrals. Watch the demo to see how it works in the system.

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<div><div><div>In this microlearning, you learn the business context of accruals and deferrals and how SAP S/4HANA Cloud Public Edition helps to automate the process of managing accruals and deferrals. Watch the demo to see how it works in the system.</div></div></div>

Managing Accruals and Deferrals in SAP Accruals Management with SAP S/4HANA Cloud Public Edition

Managing Accruals and Deferrals in SAP Accruals Management Hi, I'd like to give a short introduction to accruals management and how this is realized in SAP S4HANA Cloud. We'll be talking about both purchase order accruals and deferrals. This micro-learning is intended for business users and consultants as well as for anyone interested in learning more about accruals management. So here's how we're going to proceed. First, I'll introduce the underlying business situation of accruals management. Second, I'll show you the overview of the solution in SAP S4HANA Cloud. Third, I'll give you a short system demo. And finally, fourth, I'll share some additional information that's important for this process. Accruals management business context. Accruals accounting recognizes revenues and expenses when they're earned or incurred regardless of when cash is exchanged. When we're talking about accruals management in SAP, we're generally referring to the expenses part of accruals accounting, while the revenues part is covered by revenue recognition functions. Accrued expenses are costs that a business has incurred but hasn't yet paid. For example, if a company receives goods or services from a supplier but hasn't received the invoice by the end of the accounting period, the business would record an accrued expense. Deferred expenses, also called prepaid expenses, are payments a business makes for goods or services that it will receive in the future. For example, a company might prepay its rent for the year or prepay its insurance premiums. The financial impact of these two accounting concepts typically appears on the balance sheet as liabilities for accrued expenses and as assets for deferred expenses, and it appears on the profit and loss statement as well as expenses when they're recognized. Both accruals and deferrals are integral parts of accruals management, and just like with purchase order accruals, you want it to be possible to calculate and post purchase order deferrals in an automated manner. And in some business contexts, accruals and deferrals interwork with each other seamlessly. Business Context for Purchase Order Deferrals Insurance is a typical example of a deferred expense. When a business pays for insurance, it's often paid in advance for a period of time. So, for example, a company pays 12,000 euros up front for a year for their insurance classifying this as a deferred expense. Each month, 1,000 euros of this prepaid expense is recognized as an insurance expense on the profit and loss statement. Here's a visualization of this example using T accounts. accounts. In the traditional approach to accruals management, customers face many business challenges like high manual efforts, high error rates, and a lack of transparency with regard to the status of the process and how accruals and deferrals influence their overall KPIs. Process overview. SAP accruals management is designed to support customers along the entire process of accruals and deferrals, from collecting inputs and calculating the correct amounts, to allowing accountants or stakeholders to review the proposed amounts and posting of the journal entries. It helps to automate the process and provide a reliable outcome. We create the accruals object automatically from the purchase order data. We unify the accrual data with one structure, and then flexibly determine how to calculate and post the accruals and the deferrals. Throughout the entire process, accountants work in a unified environment and embedded analytics give them full transparency and auditability. Have a look at this table. This table summarizes the use cases and calculation methods that are offered with purchase order accruals and deferrals. Now we're obviously not able to explain them one by one, but if you're interested you can pause this screen as a reference and take a look offline. So over the next couple of minutes for this demo, we'll take a look at accruals and deferrals are originating from a purchase order and how seamlessly they work together in this solution. So here's our scenario. Company A has signed the contract for training services to be delivered over a period of three months, from June to August. The services are going to run at four hours per month over these three months, and the hourly price is 100 euros per hour. Expenses are going to be booked immediately upon receipt of the invoice. In the first month, let's say June, four hours of training services have been delivered but they've not yet been invoiced, so the system automatically posts the expense as an accrued expense. In the second month, here July, four hours of training services were delivered, and in the middle of this second month, on July 15th, the invoice was received for the full amount of 1200 euros. Full costs are posted, the accrued amount is canceled, and deferred expenses are also posted. So, to begin this process, we'll open the Manage Purchase Orders app and create a new purchase order by copying from an existing purchase order. We'll change the information that we need for our new purchase order And here we are, we have a new purchase order created for our purchase service. Our accruals object has been automatically generated. We can take a look at it through displayPurchaseOrderAccruals. Here, it's important to note that our accruals object number is the same as the purchase order number. When we look at our item in the display purchase order accruals app we see the planned costs according to the performance period as laid out in the purchase order. The accrued amount is automatically calculated but has not yet been posted. Next, we'll schedule a job to post the accruals or deferrals at the period end of the first month, in our case at the end of June. So we'll open the Schedule Accruals job app and the hourly price is 100 euros per hour. We'll select the job template Purchase Order Accruals, Post Periodic Accruals, and we'll set the job to run for period 6, corresponding to June, which is the first of our three months. The job runs, and here we see that the document was successfully posted. If we look in the accruals object itself, we see that the accruals amount of 400 euros has been posted. To do this, we're in the Create Supplier Invoice app. We need to set the invoice date. We'll set the company code and the posting date. And in the gross invoice amount, we enter the entire invoice amount. And our new supplier invoice has been created. Returning to display purchase order accruals to look at the accruals object, we can see that the actual costs have been posted and the costs have been recognized. So, once again, we access the Schedule Accruals job app, we select Job Template Purchase Order Accruals, Post Periodic Accruals, and we'll run the job for Period 7, which is our current period, July. There we are, the job runs, and we see that the document was successfully posted. If we return to the accruals object, we can see that the previously posted accruals have been cancelled and the deferrals for the third month have been generated. We see a debit for prepaid expenses for training services for the deferral. We see the corresponding credit for training expenses. And a corresponding credit for prepaid expenses for training services, the deferral. And we see a debit for training expenses. That's how seamlessly the accruals and deferrals work together in the accruals management process in SAP S4HANA Cloud. Here are some helpful links that provide you some additional information and additional resources on SAP Accruals Management, including help documentation, demos, videos, and blog posts in the SAP community. We hope this microlearning has helped you, and we thank you for watching.