Q&A with Claus
Heinrich, Executive Board Member, SAP AG
Q. Most SAP Insider subscribers are employed by companies
listed on the stock exchange. In the wake of the recent, highly publicized
accounting scandals and the laws set in place to shore up investor confidence,
their CEOs and CFOs now have to affix their signatures to financial reports,
and their companies will have to disclose those quarterly and yearly reports
a lot faster than they have in the past. How would SAP, in its role as
an advisor to so many of these companies, suggest our readers prepare
themselves to support these market mandates?
Executives will want to exercise relentless scrutiny over the
figures they are attesting to, so you need to achieve greater transparency
and control of your financial systems. With regard to hastening the processes
by which you close the books, you will find that your SAP systems offer
you ample opportunity to do this.
Note that achieving a fast close isn’t
just about complying with emerging market regulations. It’s good
business. In this economic climate, you can’t afford to have a problem
go undetected for the entire duration of a lengthy closing period.
And don’t stop there. Once you
have applied the right technology and processes, leverage that increased
transparency to deliver more timely, accurate financial data to the investment
community. In so doing, you demonstrate that you adhere to “trusted
accounting” principles. Reports indicate that fund managers are
willing to pay as much as 20% more for firms that do this.1
Q. Aren’t greater speed and increased accuracy two reporting
goals that are at odds with one another?
Timeliness and greater accuracy need not, and should not, be
competing goals. They are, in fact, inextricably linked. Think about it.
What stands in the way of a fast closing of the books? Poor quality of
figures, multi-layered reporting structures, differences in accounting
principles across subsidiaries, insufficient checks and balances, and
so forth. Solve these problems and you also improve the accuracy and transparency
of your reporting.
Q. Why is transparency across a financial landscape so inherently
Most companies have complex and constantly changing organizational structures.
The very nature of these structures gives rise to the types of obstacles
I just cited. Add to that the different types of systems that are typically
in place, and the result is massive intransparency. This is why,
in designing our solutions, we start with the assumption that organizational
change is ever-present and that a financial system must be able to integrate
with new systems and allow for clear views across a constantly changing
Q. What toll does intransparency have on audit processes?
Lack of transparency across financial systems
makes for complicated, error-prone audit processes.
Working with literally thousands and thousands
of financial teams, we are continually asked
to advise them on ways to achieve better internal
and external audit practices with their SAP
systems. We tell them to start by wielding
the SAP tools they’ve got — DART
(DAta Retention Tool), AIS (Audit Information System), and so forth. They’re
free for our customers, and they are proving
to be extremely effective.
Q. Can customers leverage the fast close for more than just transparency
or legal reporting?
Absolutely. We advise them to leverage the
expedited flow of information across planning,
monitoring, forecasting, and budgeting activities.
SAP is unique in this regard, much further
ahead than any others in the field of enterprise
performance management and financial analytics.
Take planning, for example. The financial planning
process typically utilizes a set of methods
for research, forecasting, target setting,
and budgeting. Your SAP systems now help you
to do quite a bit of this. Financial planning
in CO offers you cost center planning, internal
order/project planning, profit center planning,
and profitability planning. Based on the Business
Information Warehouse (BW), SEM takes this
to a whole new realm, with support for planning
as a company-wide phenomenon, a single planning
environment for different planning sections,
and unprecedented data modeling, analysis,
and simulation capabilities.
When referring to these business intelligence
offerings, Gartner says, “Despite the economic downturn, SAP has
managed to outperform all the other BI platform vendors and become the
largest BI platform provider in the market.”2
And it’s true. The extent of our analytics, particularly financial
analytics, is daunting. SAP financials are regarded as the most reliable,
and our analytic solutions are as well.
Q. Does the notion of achieving greater speed or transparency
apply to a financial supply chain? While it may lack the sophistication
of their supply chain, our readers all have a financial supply chain of
sorts. How would you suggest they optimize the activities that take place
there, and what is the payoff?
The key is reducing unnecessarily complex
or cumbersome practices and, above all, reducing
working capital. You wouldn’t tolerate
egregious inefficiencies in your supply chain,
and yet many accept them in the financial supply
chain that mirrors the supply chain. When you
optimize inventory levels, what happens? You
save money. When you reduce working capital,
integrate accounts payable and accounts receivable
activities, aggregate activities across your
subsidiaries, or establish your own internal
house cash system, you do the same thing. You
can do all of these today with your SAP systems.
Let me end this comment with a quick,
eye-opening example. A British financial services institution recently
came to us with a problem they had regarding cash-in-transit. Cash that
was sent between subsidiaries for routine clearing was estimated to amount
to £10 million on average. With the use of SAP, this customer was
not only able to eliminate much of this cash-in-transit, it was also able
to close down some clearing centers.
| mySAP Financials Encompasses Three
Pillars of Finance
Q: With CEOs and CFOs in the hot seat, and the financial landscapes
they preside over clearly in need of optimization, how, specifically,
can mySAP Financials help?
The hot seat metaphor is an apt one, so I’d like to continue
with this concept. The idea is to take these executives out of the hot
seat and put them in the driver’s seat. CEOs and CFOs need to do
more than just maximize revenues and lower costs. They need the ability
to detect and react to problems, monitor performance, guide critical business
decisions, and exercise sound decision making. This requires a pervasive
degree of control and visibility across your financials systems. To rely
solely on your accounting system for these things would be akin to looking
in the rearview mirror as you attempt to drive forward. That’s why
mySAP Financials encompasses three, not one, pillars of finance —
accounting, strategic enterprise management, and financial supply chain
management — because in addition to
accounting, CEOs and CFOs need optimization
and predictive capabilities, too.
So I strongly encourage SAP customers
to talk to us and understand how SAP solutions such as FSCM and SEM can
bolster their current financial landscape. I don’t think finance
functions can remain mired in existing practices. Finance is in the spotlight
(or hot seat!), and that’s a phenomenon that is not going away.
You need to improve the efficiency with which your finance processes operate
and the degree of control that management can exercise over them, because
finance is inevitably the backbone of your company’s operations.
According to PwC partners Bernd Saitz and
Joachim Wolbert. For more on trusted accounting
and fast close, see the article “How Timely, Trusted Reporting Can Drive Your Company’s
Value” in this issue of SAP Insider (www.SAPinsider.com).
Intelligence: Software Titans Upset the Market,” 15