Thank you for registering for this Q&A on new functionality for finance with enhancement package 7 and FI-CO best practices.
Review all of the online chat with Financials 2015 speaker Rohana Gunawardena in the chat replay, below, and read the edited transcript.
Kristine Erickson, SAPinsider: Welcome to today's Q&A with Rohana Gunawardena on the latest from enhancement package 7 for finance, and tips on fine-tuning your FI-CO processes!
Joining me today is QS&S’s Rohana Gunawardena, a long-time speaker at our Financials conferences and author for Financials Expert articles. Rohana is speaking at Financials 2015 in Nice this June, presenting a number of sessions on FI and CO. We’re looking forward to your questions.
Rohana, it’s great to have you here. Thank you for joining us!
Rohana Gunawardena: Kristine, thanks for the introduction. I am glad to see there is so much interest in this topic, with a lot of questions already entered. I will do my best to answer as many as possible in the next hour.
SAPinsider: Rohana, before you dig into the questions from readers, we’d like to start with a quick question on the new functionality in SAP ECC 6.0 EhP 7. What do you consider the highlights for Finance users?
Rohana Gunawardena: This matches well with a question I get asked frequently, “What is the value of installing an enhancement pack?” Given the testing effort involved in installing an enhancement pack there needs to be an ROI.
Here are the items in EhP7 I consider most beneficial:
- 25 additional SAP Fiori apps are available for common end user task. You can quickly deploy smartphone and tablet based apps your end users have been requesting, e.g., Confirm Production Orders, Report Quality Issue, My Quotations. This adds to the set of SAP Fiori apps introduced in earlier enhancement packs. (Note EhP 7 is a cumulative enhancement installation, so it includes everything from EhP1 – EhP6.)
- SAP G/L leading ledger migration, which allows you to change your leading ledger, e.g. currently leading ledger 0L has accounting principle US GAAP and non-leading ledger 1L has accounting principle IFRS, and your company decides that IFRS should be primary for group reporting you can make 1L the leading ledger and 0L a non-leading ledger, with integrated update to CO, CO-PA and AA.
- HANA data aging objects for SAP Business Suite, increases DB performance by moving less used data out of memory. Use the relevant SAP application to move data from the hot area to the cold area.
- SAP General Ledger post activation (go-live) population of account assignments, e.g. business area, segment, and profit center.
- Cumulative enhancement installation, so includes everything from EhP1 – EhP6.
SAPinsider: I’m sure we’ll have more on the impact of EhP7 today, as well as other topics. But we’ll let you get to the questions that have already been posted by readers!
Comment From Guest
What can we expect in the closing area of EHP7?
Rohana Gunawardena: To help accelerate closing SAP has two focus areas:
1. Simple Financials
2. HANA DB
Both of these are not close specific, but provide huge performance improvements which are most needed at critical times such as close.
EhP7 is the first enhancement pack to be optimized for both SAP HANA and traditional DBs. This reduces the adjustment effort required to migrate SAP Business Suite to the SAP HANA in-memory platform.
Given the overall performance improvement of the SAP HANA DB this should be your first choice for addressing log settlement runs, long currency revaluation runs, etc. which can slow down your close.
Let me know if there are specific close activities you are concerned about.
Comment From Khairul
I plan to remove CPS from our closing landscape and rely on FCC Job Scheduling. Is this recommended and aligned with the SAP roadmap on HANA?
Rohana Gunawardena: Khairul, thanks for posting a question. CPS by Redwood is a great job scheduling tool, but being a third-party tool incurs additional costs. I have worked at clients who chose to implement key job scheduling, for close only, using Closing Cockpit, the predecessor to the Financial Closing Cockpit Add-On.
FCC definitely can be used to manage all batch jobs, you do not need to use CPS, but will take some additional work to set up compared to CPS and there is a slight loss of functionality.
Regarding SAP’s roadmap, given the focus on Simple Financials, there will be greater emphasis on integration within Finance and Controlling modules and speeding up period-end Close, so I would expect FCC functionality to improve in the future.
Comment From Li
Hi Rohana, are you familiar with Tcode FAGL_SWITCH_TO_OPEN_ITEM and possible errors when running it in SAP 6.0? Some errors I have seen include:
1. Balance of ledger 0L differs from the account balance; Company code xxx is not considered for the activation.
2. ENTER A VALID TRANSACTION TYPE OTHER THAN 000 AND 010 (although I entered 100, not 000 or 010).
3. Ledger group-specific postings exist.
Rohana Gunawardena: Li, thank you for your questions. Transaction FAGL_ACTIVATE_IT calls ABAP report FAGL_SWITCH_TO_OPEN_ITEM. This is something I have spoken about previously at SAP Financials 2014 during a session entitled “Lessons and Tips for SAP General Ledger Configurations,” which even covered the Classic G/L version of the report RFSEPA02.
Here are the two key transaction codes:
- FAGL_ACTIVATE_IT Activate Line Item Display
- FAGL_ACTIVATE_OP Activation of Open Item Management
Current official SAP guidance is to not use transaction FAGL_ACTIVATE_OP, but to create a new G/L account and transfer the postings. This happened in the past for the Classic G/L report RFSEPA02; the report is actually deactivated in the system. (Expect this to occur for FAGL_SWITCH_TO_OPEN_ITEM soon.)
This change in guidance maybe due to similar experiences to the ones you encountered. However in all the instances I have used FAGL_ACTIVATE_OP and RFSEPA02 at clients, I have not run into any insurmountable difficulties in converting accounts to Open Item Management.
However, I have come across accountants who insist on using existing accounts and corporate accounting departments that will not issue new account numbers. As is the case with all conversions, comprehensive testing of all business processes is required.
Regarding the three errors you list above:
1. Use transaction FAGLF03 to check SAP General Ledger FI data integrity. If there are differences identified by the report, raise an SAP Service Marketplace message for component FI-GL-GL-X. SAP can correct documents and balances in closed periods. SAP knows GL data integrity issues can occur and will address these for you. This is not a “consulting issue.”
2. We would need to perform more detailed analysis on your system to see what SAP considers “a valid transaction type” for your specific scenario.
3. The online documentation for the report states “Prerequisites: Caution: There are situations in which it is not possible to activate open item management automatically. Examples: Ledger-specific postings have already been made manually, and the balance of the account is therefore no longer identical in the different ledgers.” The full online documentation has some good tips.
Custom data conversions and activations of live data in productive systems is an area QS&S specializes in, we have our own tools and methodologies similar to SAP SLO to perform these conversions. Do contact me and I can provide more advice on your specific business scenario.
Comment From Li: Rohana, I heard about these two Tcodes, but the one I used in SAP SE38 was the switch to open item. We have the new GL/Flex Ledger tool since 2008, not the classic one.
Rohana Gunawardena: Li, you are correct the FAGL_ACTIVATE_IT is the code to enter in the Tcode box in SAP GUI. If you are going to SE38 then you will use the report name FAGL_SWITCH_TO_OPEN_ITEM. Either way you end up in the same place. This is the correct transaction/report for SAP GL, also known as New GL or Flex Ledger.
Comment From Guest: Thank you, Rohana!
Comment From Guest: How can I access the ABAP report FAGL_SWITCH_TO_OPEN_ITEM you mentioned earlier in 2014? Thanks.
Rohana Gunawardena: Those session materials are available as a download here on SAPinsider. What I would point you to is the SAP online documentation you already have, go to transaction FAGL_ACTIVATE_OP and press the information icon “i” next to the execute button in the tool bar and a documentation popup will appear. It is quite detailed.
Comment from Guest
Is there any significant improvement related to Real Estate REFX? Is the IFRS for Real Estate finalized and available for EHP7?
Rohana Gunawardena: When you state IFRS for Real Estate, I assume you mean the Leases Joint Project of the FASB and the IASB, which is currently underway and likely to update the current IAS 17 on Leases. Given the accounting bodies are still in discussion, it will be some time before there is an SAP solution available.
Here are the different business functions for real estate available with EhP7, including the EhP when they were first introduced. Hopefully some of this will be of use to you.
Controlling Integration with Real Estate
Corporate Real Estate
RE/FM Earmarked Funds
Real Estate 2
Real Estate 3
Do remember EhP7 represents a cumulative install of all previous EhPs.
Comment From Brian
Are there developments within SAP to improve the tax engine for VAT purposes — so the constant discussion about Onesource/Sabrix taking over as a tax engine within Europe can be stopped?
Rohana Gunawardena: Brian, thanks for posting a question. Tax determination in SAP is always a critical area with many tax jurisdictions and frequent changes. I have worked on tax both for US-based companies and Europe-based companies. In the US, the default approach is to use a third-party tax add-on such as Taxware or Vertex. One advantage of this approach is the providers are focused on tax and respond rapidly to changes in tax legislation. For SAP keeping up with all of the changes can be challenging.
Introducing a third-party tax data provider for Europe such as Onesource or Sabrix may not be a bad idea. Even though VAT rates in Europe do not change as often as sales tax rates in the US, there are changes in VAT determination for certain materials and some countries do change rates with short notice.
In general SAP’s current development approach embraces third parties more than it has historically, especially in areas where it would add customer value.
Comment From Dawn Hall
Hello Rohana, We are currently waiting to upgrade to EHP 7.0, and are building a roadmap to full Business Suite on HANA / S/4HANA, but are still on classic GL.
Do you have any insight as to whether it is truly best to convert to new GL first, as a big bang at the same time as moving to HANA? Or could we use the Datahub to switch to HANA first, and then leverage the in-memory capability and upgraded hardware that we will have to convert there?
We are a $15B company and at the last analysis our transactional database is so large that it would have required a 5-day down time to convert us from classic to new GL, hence why this has not been performed to-date.
Many thanks for any advice.
Rohana Gunawardena: My first recommendation is to perform the two conversions separately.
1. Move to SAP Business Suite on HANA
2. Move from Classic G/L to SAP G/L
This is due to the complexity of these two conversions and the downtime required as you note.
Regarding the order what you suggest - moving to HANA DB first — makes sense to have a faster DB available for the SAP G/L conversion. However you need to look at the timing of the SAP G/L conversions relative to your Fiscal Year and your business requirements.
Both of these conversions are ones QS&S has worked on multiple times and have our own conversion accelerator tool. My fellow director at QS&S Mitresh Kundalia is the author of the book Segment Reporting with Document Splitting in the SAP General Ledger. Do contact me directly at Rohana@QSandS.com for further details.
Comment From Dawn Hall
I just attended a session on the RAR 1.0 add-on for the upcoming regulatory requirements for US GAAP vs. IFRS for Revenue Recognition, and there is a lot of documentation out there from a technical standpoint, but not much in regards to how the ramp-up is going. (I believe SAP is using Ariba as a pilot implementation for this.)
What can we really expect in regards to (extra) efforts this may impose on business resources? At quick initial read, it looks like almost every customer engagement requires a "contract" of sorts in order to determine when revenue should be recognized. Do you have any insight into this?
Rohana Gunawardena: Dawn, thanks for posting.
The new revenue recognition rules will have attracted a lot of attention from business users and was a big topic of discussion at SAPinsider’s Financials 2015 Las Vegas conference in March. In your question you have really identified the key issue, how to define contracts and the related business rules for Revenue Recognition.
Once these projects get started I believe the business effort will be greater that the technical effort to implement. Business users will have to confer with external audit, internal audit, accounting policy teams, tax departments, legal departments, etc., to make sure their interpretation of the new Revenue Recognition rules are correct, then implement them in SAP.
I believe then once business users can clearly explain how to recognize revenue the SAP functionality can meet their needs.
Do expect the product to be buggy, as it is new, and to have to send a few incidents to SAP Support.
I will be starting a pilot Revenue Recognition project at a QS&S client in a few months’ time, which will involve getting the customer up and running on existing SAP Revenue Recognition, VF44, etc., and then preparing them to move to the new Revenue Recognition.
Comment From Mahesh Valleru
How do we manage common cost allocations, which are accommodated at the Plant level, to specific products like Price diff on raw materials, if these materials are not activated for Actual Costing?
Rohana Gunawardena: Mahesh, thanks for your question, Material Ledger (CO-PC-ACT Actual Costing) is an area that I frequently present on at the SAP Financials conference. Most recently was at SAP Financials Singapore 2014.
In your question you state “if these materials are not activated for Actual Costing.” Material Ledger is activated on a per-plant basis for all materials in the plant. From this statement, I am going to assume you do not have Material Ledger active for the specific plant.
The type of cost allocation you request is quite complex and is one of the reasons SAP developed Material Ledger. Without knowing the exact requirements for your cost allocation it is hard to recommend a solution. Sometimes I have seen users develop custom processes and once they add on custom reporting tools they may have been better off implementing Material Ledger, given all the other benefits they would derive.
You can e-mail me directly if you have more details and I can try to provide some more suggestions to you.
Comment From Mahesh Valleru
In CO-PA we have alternative UOM. If we activate that then irrespective of the material type we have to maintain the same for all the materials that we do billing from SD. Is this a best practice?
Rohana Gunawardena: Mahesh, glad you submitted this question. I have spoken about Units of Measure previously at the SAP SCM conference.
Generally alternate unit of measure is a property maintained in the material master to allow sales processing of a single material using different UoM, e.g., customer UoM vs. Vendor UoM.
In the material master there is always a Base Unit of Measure, sometimes referred to as Stock Keeping Unit of Measure.
In CO-PA the values should be stored in Base Unit of Measure to allow consistent reporting, e.g., avoid total of “5 Kg 7 lb.” If you do see the multiple UoM issue in your CO-PA reports, you may need to look at your value field (quantity) setting, and ensure material costing checkbox is on, and that the value field is mapped to SD field FKLMG, and Billing quantity in stockkeeping unit.
Maintain alternate unit of measure is a per material decision, no need to maintain for all the materials that you bill from SD.
Additionally, I would highly recommend contacting my fellow director at QS&S Mitresh Kundalia, who has written multiple CO-PA articles for SAPexperts. You can reach him at Mitresh@QSandS.com.
Comment From Mahesh Valleru
In CO-PA derivations we have a scenario where we offer warranty on the products that we sell for a period of 60 months. If any claim comes, we take the scrap as a sales return with a different part number, and then later we issue a fresh product to the customer. In CO-PA, we have to maintain one-to-one relationships. So in that case we maintain derivations at product level.
The challenge here is, at times, we have to give the product A for replacement of either Product B or Product C. But in derivations it maintains one to one relationship only. Practically the organization might take call to settle warranty claims with one product for different products that are being offered.
How should we handle this situation?
Rohana Gunawardena: Mahesh, CO-PA is always an interesting area with many questions from managers, end users, and analysts alike. For your specific case, without performing a detailed analysis of you system, here are two ideas I have:
1. Define a currently unused field in your sales order or service order to indicate an override of the default mapping, e.g. instead of the default A -> B mapping the system selects A -> C, have both of these fields drive the derivation rule.
2. Add a new field to your sales order or service order linked to a user exit or enhancement where the end user could mark an override to the existing derivation so instead of the default A -> B mapping the system selects A -> C. The new field could be a material number field allowing any material to be mapped, e.g. A -> X, not just a limited combination like A-> and A-> C only.
Additionally I would highly recommend contacting my fellow director at QS&S Mitresh Kundalia, who has written multiple CO-PA articles for SAP Financials Experts.
SAPinsider: Thanks everyone for joining today’s chat. We’ll wrap up today’s Q&A, and we'll have one or two more questions that we'll add to the transcript.
For more from Rohana on General Ledger, FI and CO, don’t miss his sessions at Financials 2015 Nice this June, and his past articles for Financials Expert. (And if you attended Financials 2015 in Las Vegas, you can access Rohana’s session materials here.)
Thank you to Rohana Gunawardena of Quality Systems & Software (QS&S), and, Rohana, we’ll see you this June in Nice!
Rohana Gunawardena: Kristine, thank you for all of the support setting up the forum, getting so many participants, and for guiding me through the process.
Thanks you to all of the participants for the great questions they have submitted. I will be presenting at SAP Financials Europe 2015 in Nice, 16-18 June, 2015.
I will be presenting 6 sessions:
- Advanced tips and tricks for FI and SD integration and reconciliation
- Deciphering the CO settlement process
- Enhancement package 7: A detailed guide to the latest functionality made available for finance
- Tips and techniques for identifying and analysing CO data
- Using Functional Area to Effectively Report Operating Expenses with SAP GL
- What every finance team needs to know about FI and MM integration
SAPinsider: You're welcome, Rohana! Thanks again!