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The Winning Edge for Finance with mySAP ERP 2005

by SAP's Philip Say | SAPinsider

January 1, 2006

Many organizations have really pared down their financial departments -- so why is there such a renewed focus on financials in mySAP ERP 2005? SAP’s Philip Say explains all in this article. From a complete set of financial tools built on a unified platform to the integration of industry-specific processes with core financial management capabilities, mySAP ERP 2005 is the industry’s most comprehensive solution for effective financial management in the midst of changing business climates.
 



Philip Say
Director of Solution Marketing,
mySAP ERP Financials,
SAP Labs, LLC
QAt a time when organizations have really pared down their finance departments, why the renewed focus on financials in mySAP ERP 2005?

Effective financial management still remains a hallmark for any high-performing organization. Unfortunately, most financial managers are being asked to do more with less and address an entirely new set of needs that didn't exist a few years ago. So, at SAP, we're focused on helping finance leverage their existing resources and investments in order to address a changing business climate. With mySAP ERP 2005, we provide a single, integrated financial management platform that is flexible enough to address current and future needs in finance. We envision mySAP ERP 2005 as the "Swiss Army knife" for finance — a single solution that helps companies in multiple ways:

  • It's open and flexible enough to use in different markets and address different business needs.

  • It's one solution that enables companies to adopt best practices across the organization.

  • It's a single source of the truth for financial managers to set strategic plans and budgets and to make financial information transparent to the rest of the organization.

  • It's the one-stop shop to address financial compliance, manage internal controls, and deliver higher quality audits.

We see ourselves as the only provider that can give an organization a complete set of operational finance tools — in addition to a set of financial compliance, corporate performance management, and analytical tools — all built on a unified platform. The only one.

Q So SAP is, if you will, addressing the past, present, and future of financials: The "past" is the traditional financial tools and processes that will be optimized in mySAP ERP 2005; the "present" is the tools to make financial data and analysis and financial compliance visible to everyone based on their role; and the "future" is a single platform that can change and grow as you do.

Exactly.

Q Now, your standard financial processes — these aren't going anywhere. So more and more companies are looking to become more efficient and reduce the costs of running their day-to-day processes. What is SAP doing on this front?

Let's set the stage: The Hackett Group measures the average cost of finance in companies running at 1.26% of revenue.1 This year's percentage actually exceeded 1% for the first time in quite a while. The highest-performing organizations are running finance for a full third less, at anywhere between 0.7% and 0.8% of revenue. How are they taking that 0.7% and applying it? According to Hackett, world-class organizations spend less on technology, but not by using less technology. One way to do this is to standardize on a single enterprise platform, instead of continuing to employ multiple platforms and piecemeal applications.

SAP provides that single platform to enable our customers to get the greatest level of performance out of that less than 1% or so. We also give them the tools to master the small things, like closing books faster, getting down to a zero-day close, getting their DSOs 2 in the top-tier performance category within their industry, all while being able to strip out all of the IT costs associated with finance in terms of managing multiple systems and harmonizing data.

Q You spoke of making finance transparent to the rest of the organization, a capability promised by SAP as well as competitors. Do you have an example of what's different with mySAP ERP 2005?

One of the unique things about the mySAP ERP product line, including the 2005 release, is that it combines industry-specific operational processes with core financial management capabilities in one product. So what that means for a leading athletic footwear company, for example, is that they will have the ability, with one product, to support very specific operational processes for the footwear business. They can then take that operational data, map and marry it to the financial performance data, and create product performance models and reports for their executive managers and line managers — the people who understand where products are going, what the most profitable products are, and what designs are driving profitability.

Or take the example of an emerging mid-sized, consumer-technology company that looked to SAP for a single platform to address myriad operational challenges in finance, including the ability to produce reliable financial reports as they prepared for their Sarbanes-Oxley requirements. It's a very different game than a few years ago, when it was acceptable to implement standalone solutions for financial reporting and performance management. Today, companies are starting to see these capabilities as a mainstream activity of finance. SAP, with mySAP ERP 2005, recognizes this trend and gives you one solution for both operational and analytical aspects of finance.

Q What about the ability to anticipate change and roll out solutions quickly and effectively? Can you give us an example of that?

Anticipating and being prepared for new business challenges is where the whole concept of Enterprise Services Architecture (ESA) really becomes meaningful from a business standpoint. What it means for a finance organization is effectively being able to add a new process or capability without having to install an entirely new family of software products, or having to worry about how any current piece of software is going to work with any future piece of software. It's more about how to apply a process that they had seen within their industry or perhaps from their competitors, how they can emulate that within their own business, and how their IT environment can support that process.

Here's a practical example in the area of corporate governance and compliance: Phase one of the Sarbanes-Oxley compliance challenge was the documentation exercise around Section 404 in order to support the sign-offs required by Section 302. We acknowledged that yes, that's a mission-critical process, and we provided that capability within the platform. But what quickly happened, as companies now look at phase two Sarbanes-Oxley challenges, is that they identified an area like segregation of duties, which is a very painful, expensive process that involves extensive testing and subsequent reporting. The SAP platform affords customers the ability to take a partner solution, for example, combine it with their existing mySAP ERP environment, and plug in a Web application that specifically addresses segregation of duties testing. Now, the results are reported over into the SAP Management of Internal Controls (MIC) product. It's a perfect example of how, if you made the early commitment to SAP, it opens up your options and also lowers the total cost of implementing these new software services to address a new challenge.

Q What are the easy opportunities for finance teams to gain an edge with mySAP ERP 2005? Where will the innovations of 2006 come from, so to speak?

One pressing pain point we're hearing from our customers is the ability to — in an almost frictionless manner — transfer data and financial information between their organization and other organizations. This is very expensive and painful for some companies.

As an example of what I mean, let's look at traditional accounts payable, accounts receivable, and cash management processes. It's amazing to me that even with the advent of electronic business processes for order entry, purchasing, and inventory management, the vast majority of companies still rely on paper and the mail system for payments. These paper-based, manual processes remain ripe for innovation and represent "low-hanging fruit" opportunities for cost savings in finance.

I see components in mySAP ERP 2005, like SAP Invoice Management, SAP Biller Direct, SAP Dispute Management, and SAP Treasury and Risk Management, combined with core order management and inventory management capabilities, as providing a powerful combination that can reduce transactional costs, accelerate payment cycles, and reduce days sales outstanding for companies in many industries.3

Or if you look in the areas of treasury and cash management, getting a real-time pulse of what your cash position is still remains a major issue, especially for global organizations. The pain point is typically around the exchange of information between an organization, its subsidiaries, and the respective banking organization. It's a very expensive process to get bank information and real cash position information mapped back into the corporate books. Typically, this doesn't happen on a daily basis — it happens probably on a weekly or monthly basis. Companies compensate by carrying higher levels of working capital than they need to. Within mySAP ERP 2005 is the ability to improve the efficiency of managing complex global banking relationships, which, over time, will enable large organizations to optimize cash positions more effectively and drive down the cost of working capital.

Q Enabling data and information to flow more freely will place even greater importance on fraud prevention and audit control, right? We have heard a lot of noise about financial compliance and Sarbanes-Oxley. Where does compliance rank in terms of SAP's focus?

We see compliance as core to any business. If you fail compliance, you're out of business. For executive managers, this means possible jail time and heavy fines — it's serious business. SAP is doing a lot of things to help companies in this area. First, we are adding new capabilities for audit management, internal control documentation, and better financial reporting. Second, and probably more importantly, we are leveraging our application platform technology, SAP NetWeaver, to bring partner solutions into the fold. We provide a new solution called SAP Compliance Calibrator that works as an extension of mySAP ERP 2005, and with it we enable other compliance management vendors to support customer needs in the areas of compliance and fraud prevention.

Q All of these innovations speak to where enterprise finance is going, to a world where the boundaries between what is traditionally finance and what is within the realm of the rest of the organization are breaking down. If financials is changing, how must the organization change?

Let's talk about analytical insight for a second. As you know, in the world we live in today, we're constantly wishing we had some data or research to support a particular decision. So typically what we do is call on finance or an analyst to spend a week or two creating a managerial report for us to consume. If we can compress that decision cycle, make it real-time, make it a matter of minutes instead of weeks, that's a fundamental shift — that's how we effectively disperse the capabilities of finance into the hands of employees.

If I think about it from a finance-centric point of view, that really changes the responsibilities of what finance needs to deliver to the enterprise. They have to collect the right information and subsequently distribute that information to the organization. As you can imagine, that's not an easy challenge. It's very easy to distribute all the information, but it's very tough to distribute just the right information that will guide decisions in the proper way, consistent with corporate strategy.

So in many ways it's a twofold change: Line employees will have the ability to think like finance people, and finance people are going to have to think very carefully about what kind of information, KPIs, and metrics they need to provide to their organization in order to set the right strategy.

Tools of the Trade

Thanks to several key enhancements, such as consolidated planning and better integration with Microsoft Excel, mySAP ERP 2005 improves the efficiency and automation of standard financial functions while at the same time offering tools and analytics to break outside the boundaries of traditional finance departments. The result? Getting the right information into the hands of the right people to enable them to make the right decisions, regardless of where they may sit within an organization.

The new features and functionality of mySAP ERP 2005 include:

  • Express Planning — Express Planning is a guided process that automatically unites financials with people and projects, and integrates with the business planning and simulation functions of SAP NetWeaver Business Intelligence. mySAP ERP 2005 also enables workflow to handle the approval process, so that the entire planning process is captured within the ERP system.

  • Role-based analytics — Role-based work centers provide employees with access to their inbox, task lists, and transactional capabilities, as well as process-specific analytics to aid decision making. For example, mySAP ERP 2005 provides credit managers with a tool that enables blocking or unblocking of customer orders based on an analysis of customer behavior (risk, credit status, payment status, etc.).

  • Adobe Active Forms — mySAP ERP 2005 utilizes Adobe "active-form" technology in order to streamline and improve the usability of certain financial processes, such as budget entry, invoice management, purchasing, and order entry.

  • Business insight — Since mySAP ERP 2005 is built on SAP NetWeaver, customers can access all the advantages of SAP Strategic Enterprise Management (SAP SEM) and SAP NetWeaver Business Intelligence through one solution. This has major implications for customers seeking to improve financial consolidations, budgeting and planning, and corporate performance management with a single solution.

  • Financial collaboration — mySAP ERP 2005 also looks beyond the bounds of the company for the latest collaboration approaches. SAP Invoice Management and SAP Biller Direct can be used to automate accounts payable (A/P) and accounts receivable (A/R) processes and improve collaboration between customers and suppliers. As a result, companies can lower error rates in payments, eliminate duplicate payments, speed up payment cycle times, and lower the overall cost of A/P and A/R.

  • Mendocino — mySAP ERP 2005 will be the first SAP solution to take full advantage of the Microsoft Office integration capabilities delivered by Project Mendocino. Customers will be able to improve travel and expense management processes, improve distribution of analytical reports, and streamline other financial self-service capabilities through improved access from the desktop.4


1- The Hackett Group, 2005 Book of Numbers (2005).

2- Days sales outstanding, a measure of efficiency of a finance organization, compares sales against accounts receivable within a given period.

3- See "Transform Your Cash Flow Processes with Financial Supply Chain Management" by J|rgen Weiss in this issue of SAP Insider (www.SAPinsider.com).

4 - See "SAP as Easy as Opening Email? Introducing Project Mendocino" in this issue of SAP Insider (www.SAPinsider.com).

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