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Adaptive Finance — Transforming Finance with Innovative Technologies

by Martin Naraschewski and Birgit Starmanns | SAPinsider, Volume 15, Issue 2

April 1, 2014

While finance organizations must continue to meet regulatory requirements and process financial transactions with efficiency, the real opportunity is for them to become a more strategic partner to the business. Innovations such as SAP HANA put finance in a position to make this transformation. Learn about the new financials add-on for SAP Business Suite powered by SAP HANA, which is designed to provide finance organizations with consistent information, instant insight, and better foresight.

 

Today’s volatile economy requires finance organizations to become more adaptive to change. While finance must continue to meet regulatory requirements and process financial transactions with efficiency, the real opportunity for this organization is to become a more strategic partner to the business. Technology innovations, including in-memory computing with SAP HANA, mobility, and analytics, can make what was formerly impossible, possible. 

The new financials add-on for SAP Business Suite powered by SAP HANA, delivered with SAP enhancement package 7 for SAP ERP 6.0, was built to take advantage of the power of the real-time SAP HANA platform, providing finance organizations with consistent information, instant insight, and better foresight.

Ensure Consistency of Financial Information

Most organizations have a heterogeneous system landscape, which often requires significant effort to ensure that their systems stay in sync. They carry out many manual reconciliation processes that can only take place at the end of a period, after batch processes have been run. This causes delays in the ability to take action based on the results of the period, and to take appropriate action when sudden changes occur in the economy or in the business.

With the financials add-on, SAP HANA becomes the single, central data repository for transactions and analytics, as well as for actual and plan information. This eliminates data redundancies in storing financial and operational information across different applications. As an example, SAP ERP, SAP Business Warehouse, and SAP Business Planning and Consolidation will all use the same information on SAP HANA, which avoids delays caused by periodic transfer of data between applications. In addition, a central journal collects all necessary journal entries from heterogeneous systems in one environment on SAP HANA.

A logical view of financial documents reduces the distinction between the financial accounting (FI) and management accounting (CO) modules. Finance teams will no longer need to run separate reports for general ledger, cost center, profit center, and profitability information, for example. Journal entries will be displayed in a logical view that brings together FI and CO documents. And there will no longer be a need for tables with summarized, or aggregated, data. With the speed of SAP HANA, transactional data can be accessed and totals can be calculated in real time — and the data can be used for analysis.

This one source of the truth benefits finance with increased data consistency across finance, management accounting, operations, planning, and analysis. In addition, it reduces the need for manual processes and reconciliations.

Provide Instant Insight and Drive Finance Efficiency

Each finance team member, from executive to manager to analyst, needs to have accurate information available quickly to react to changing business conditions. If a large transaction is posted, that information may be critical to responding to market conditions or resolving an issue with a customer or vendor.

With SAP HANA, this data will be available as soon as a financial entry is made, without time delays due to batch and manual processes. Gone will be the days of waiting to run period-end processes, so an instant snapshot of key indicators will be available in a consumer-grade user interface. The role-based applications enable personal analytics, with which each team member can then choose the most relevant financial indicators needed to manage issues. These key performance indicators are calculated in real time and allow finance to optimize key business drivers such as working capital, receivables, and payables. In addition, finance can drill down into detailed dimensions to identify the root causes of issues.

And by moving toward continuous processes, instead of batch-driven programs that are run at period end, finance can reduce delays by executing these time-consuming processes throughout the period. For example, by being able to perform goods receipt/invoice receipt reconciliations at any time throughout the period, a soft financial close will be possible at any time, giving finance the ability to understand the company’s financial position at any moment.

Analyze the Financial Impact of Business Decisions

When the business environment changes, or when a company is looking to grow its market, it can choose from many options, including mergers and acquisitions, investing in a new product line, or redesigning or retiring an older product line. Each decision has a financial implication.

Changes in strategy need to be reflected in planning, forecasting, and budgeting. With integrated business planning, static plans will be replaced with continuous, event-based planning. SAP HANA will be able to bring together data from across the organization, including financial, sales, and production plans, as well as plans across subsidiaries and business units. The benefit is that plans, budgets, and forecasts will no longer be out of date, but are continuously updated. Finance will be able to gain instant insight into the impact of changing operational plans on the bottom line. An integrated enterprise plan that can be dynamically adapted, and that allows for predictive modeling and simulation, enables finance to have a better understanding of the financial impact of potential business decisions.

When determining a business strategy, multiple options need to be evaluated. Historically, these evaluations were done on spreadsheets, and there was typically not enough time to evaluate each possibility, but only those considered as the top few options. The availability of simulation and predictive technologies with SAP HANA will make it possible to evaluate each opportunity, using detailed dimensions that help identify the most profitable options. Finance will be able to understand profitability drivers with up-to-the-minute information across the dimensions of customer, product, geography, and channel.

In addition to profitability drivers, finance will also have the capability to simulate and model options of strategic decisions, such as mergers and acquisitions and new product investments, to determine the financial impact of business decisions, and to recommend a course of action to support corporate goals. Sophisticated logic will be applied, using outcome ranges instead of point estimates, to help identify patterns and scenarios that may require contingency plans.

With the technological innovations available with SAP HANA, finance will be in a position to be the catalyst to transform from a reactive organization into a proactive one, and to become a more strategic advisor to the business.

Learn about the Engineer-to-Order process with period-end postings in the latest article from presenter Birgit Starmanns, author at Financials Expert.
 

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Martin Naraschewski
Martin Naraschewski

Vice President
Finance Solutions
SAP


Birgit Starmanns
Birgit Starmanns

Senior Director, Product Management
SAP S/4HANA and SAP Fiori
SAP



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