The term “business as usual” doesn’t quite fit anymore in today’s dynamic global economy where acquisitions and divestitures can happen at any moment, a single tweet can set off stock prices, geopolitical issues are escalating, and the threat of tariffs being levied has created worldwide disruption. It is the opposite of business as usual out there, and for SAP customers to navigate competitive pressures, gain an advantage, and thrive in this new world, they need to be able to react immediately, and on the fly versus in a delayed manner. Every organization needs to understand where it is going, how it is spending its money, and how to maximize shareholder value — so there’s a sharp focus on real-time budgets, forecasts, and annual plans.
It’s no secret that everyone in an organization is planning and has a budget to work toward. Marketing departments have set budgets to adhere to and then justify whether they’ve overspent or underspent. Sales has revenue expectations to exceed, operations has costs to stay under, and HR departments must meet certain headcount targets or benefit premium limits. Traditionally, the department of finance working under a CFO was the guiding light in managing budgets and focusing on top-level finance and sales numbers, costs, balance sheets, and income statements. Today, however, the concept and responsibility of planning has shifted and, effectively, financial planning and analysis (FP&A) has gone from the office of the CFO to everywhere.
According to a recent SAPinsider benchmark report, “SAP S/4HANA Finance: State of the Market” — where more than 400 individuals across all lines of business from nearly 150 companies were surveyed regarding their strategy for SAP S/4HANA Finance — planning was cited as the top financial concern. When these SAP customers listed their current pain points concerning ERP finance, the most popular response (53%) was “budgeting and financial planning” (see Figure 1).
Figure 1 The current pain points cited by SAP customers concerning ERP finance
“It certainly makes sense that budgeting and financial planning is a central focus for survey respondents focused on ERP finance,” says David Dixon, Partner at TruQua Enterprises, an SAP services and software development firm. “This is part of a trend driven by volatility and accelerating change. While many FP&A solutions stand alone from their ERP systems, there is a need for tight integration for proper budget and resource allocation.”
When asked what areas of finance they are making significant investments in over the next year, 38% of respondents named budgeting and financial planning as processes ripe for change (see Figure 2).
Figure 2 The areas of finance where SAP customers say they are making significant investments over the next year
In addition, one of the top strategies that is being prioritized at these organizations is centralizing and automating financial planning, accounting, and reconciliation activities on a global basis, which was cited by 49% of respondents (see Figure 3) — the other two top priorities were providing a single view of financial data (55%) and modernizing reporting for faster business insights (62%).
Figure 3 The top strategies that are being prioritized by SAP customer organizations
“Modernizing a reporting and BI strategy to provide faster access to business insights makes great sense and is almost directly tied to planning,” says Pras Chatterjee, Senior Director of Product Marketing for Planning Solutions at SAP. “Imagine having a massive financial spreadsheet of multiple tabs of income statements, balance sheets, and plans, and then trying to tie in those actuals of how the business performed to the budget estimates when the month closes. Trying to provide analysis through spreadsheets is not a valid reporting strategy because how on Earth can you provide business insights if you are relying on technology that no one else can make sense of? With a true reporting strategy, you have a planning tool that seamlessly integrates with your financial data. And taking a flat file and loading it is not really integration. Integration means — at the push of a button — you can give analysis immediately and on the fly. And then, of course, you have visualization and BI on top of that so you can communicate analysis effectively.”
Dixon agrees that planning and reporting are connected and attributes a main pain point of planning to be organizational and therefore political. “With the need for planning becoming more collaborative and integrated across business units and functions, this results in the need for more change management and governance,” he says. “Moving away from spreadsheets is more than a technology effort.”
Dynamic Enterprises Want Modern Finance Platforms with Integrated Planning
While many organizations are still relying on spreadsheets for budgeting, planning, forecasting, and reporting, the number of business users who love working in them — and are accustomed to hitting “control S” to save the data — is shrinking. Spreadsheets now live in the cloud, where saving happens automatically, and business users want to do as much as they can in a modern analytics environment. “In our personal lives, we can click on an icon in our mobile device and instantly get banking information and see our spending trends, and our banks can provide real-time guidance on our financial health,” Chatterjee says. “Organizations that rely on legacy systems and outdated spreadsheets that have the potential for errors are doing themselves a disservice.”
The SAPinsider research findings uncovered that many customers admitted feeling tied to a mix of legacy systems and highly manual integration and reconciliation processes. Respondents expressed displeasure with their existing environments, citing complaints such as the following:
- Poor synchronization of data between the general ledger and planning
- Budgeting and analysis are not in sync with the ERP system
- Lack of integrated budgeting and planning tools beyond spreadsheets to assist in complex processes
- Planning is not in one system
- Budgeting and forecasting on cost centers is too time consuming, and there is no automatic update of actuals for forecasting
These findings are consistent with what Dixon is seeing in the marketplace. “But I do find it surprising that a lot of companies consider cost-center accounting integration to be a struggle,” he says. “I’m seeing more advanced customers challenged in the areas of governance. Another big complaint I hear is around not having quality data for forecasting where customers want a consensus on forecasts and a process that is more fact-based, transparent, and driver-focused.”
With all these struggles, it’s no wonder that 73% of respondents are actively evaluating or implementing SAP S/4HANA Finance. Chatterjee, for one, is not surprised to hear that financial planning is a top area for improvement and that SAP customers are starting to invest in modernization and digitization. “Investing in ERP platforms such as SAP S/4HANA means they want to work in a real-time manner with a single modern environment that is more efficient and faster and able to streamline how their finance and operations come together,” he says. “When organizations say that financial planning is their biggest concern, it absolutely is. Because if you can’t plan in real time, be responsive, and do true finance transformation and innovation with your planning, you are stuck in the dark ages — no matter how far ahead you move with a solution such as SAP S/4HANA.”
Executives today want answers in real time. Traditionally, it would have been very difficult to get a sales executive, for instance, an immediate response about what is happening in sales “right now.” To get that answer, individuals typically followed crude methods such as scheduling meetings, sending emails, leaving voicemails, posting spreadsheets on a shared drive, and creating presentations. Oftentimes, after scrambling and devoting so much time to create and finetune the report for the executive, suddenly an assumption or request would change, and the whole process would have to start all over again.
In addition, even though more people in the organization are becoming responsible for planning, some tend to plan in silos, which is a very disconnected and inefficient method. For example, if the sales department decides to increase or decrease sales of a certain product, the manufacturing department then must alter capacity, and that might require hiring more employees or reducing headcount, which means HR and manufacturing have to get involved. Sales — or any other department — cannot work in a silo.
Nowadays, planning is completely interconnected. And while many vendors today are throwing out the statement that their planning solutions are connected, just because people can discuss their plans together doesn’t make it a truly collaborative process, according to Chatterjee. “True collaborative planning means the plans are tied to the underlying transactional systems so the business is actually moving in real time — as sales are happening and costs are being incurred — and comparing budgets or forecasts to get to the pulse of the organization and see what is happening live.”
Adopting a solution like SAP S/4HANA provides a modern and collaborative financial platform, but that is only half of the equation; the second part is implementing a modern planning tool. Over the past 10 years, many companies have invested in planning solutions, but some are using legacy planning tools and spreadsheets that are built for a previous generation. With these solutions, perhaps midway through a month, the business schedules a batch run from the ERP system to the planning tool, and then maybe performs some analysis at the end of the month against those plans from two weeks ago. But what value does a plan provide if it doesn’t offer guidance immediately for today or tomorrow?
“Some organizations very obviously need to invest in planning,” Dixon says. “It is self-evident when they can’t even open up their spreadsheets or their planning solution fails them. For others, the need for investment becomes apparent when finance struggles to explain to investors why guidance was missed or there has been a spectacular fail and waste of resources due to disconnects. For the more enlightened, it shouldn’t take a bad event to recognize that there is more risk and opportunity cost in the business climate than ever before and that effective planning is the way to address it.”
New Real-Time Analytics Expectations: Forget Yesterday — What Will Happen Tomorrow?
Some of the most intelligent individuals with strong academic backgrounds in finance and business live in a world where they are simply stating the obvious, which is a huge area of concern, according to Chatterjee. “Often individuals will take their end-of-the-month results to whomever is responsible for managing a budget and giving guidance on those numbers — whether that be a CFO, a marketing director, or a manager in HR or sales — and that person will report to executives that targets were either not met or exceeded by a certain percentage,” he says. “But because it takes a month to report those numbers, by that time, the figures have changed. And in this dynamic world, stating the obvious after 30 days serves absolutely no purpose.”
If organizations have finance systems connected to their ERP systems — such as SAP S/4HANA — they can see in real time what orders and revenue are coming in and then compare that against their plans and budgets instantly. “Think of the enterprise as a boat moving forward,” says Chatterjee. “Traditionally, finance teams tend to stay at the back of the boat saying what happened yesterday. But organizations don’t need to know what happened yesterday; they need to know what’s about to happen tomorrow. They need to know what glaciers and icebergs lurk in the waters ahead and what they can do to better equip themselves to compete,” he says. “And a best-in-class finance organization has the tools to stand at the front of the boat and guide the organization versus standing at the back of the boat and stating the obvious.”
To help its customers achieve this state, SAP created a single platform for FP&A, which combines SAP S/4HANA and the SAP Analytics Cloud solution. With SAP Analytics Cloud, FP&A practitioners can become more efficient workers and actually spend less time planning — massaging, matching, and manipulating data — and devote more time for analysis, which is giving valuable guidance to the organization in terms of what is happening today, what’s about to happen tomorrow, and how best to avoid or take advantage of situations that come up.
This demand for analysis is ubiquitous. Customers today expect real-time analytics in business just like they do in their personal lives — where their wearable devices can provide instant results on sleep patterns, exercise, and heartrate, for example. “Business users expect a world where they can just pop open their mobile device and look at data communicated through pleasing aesthetics that really help drive home the point, and that’s what SAP Analytics Cloud helps provide,” says Chatterjee. “It’s a finance tool and it does all the finance budgeting functions that other planning tools do — such as allocations, formulas, and workflows — but it has embedded analytics that allow you to communicate your finance results in a deeply meaningful way.”
SAP Analytics Cloud also has augmented analytics with machine learning and artificial intelligence (AI) capabilities built directly in. “Why rely on spreadsheets when you can use a modern analytics tool that gives you not just the powerful visualization and basic budgeting and forecasting features, but also machine learning and AI in there?” asks Chatterjee. “SAP Analytics Cloud combined with SAP S/4HANA is effectively like having another team member that helps you make better decisions.”
Investing in One Environment for Finance, Planning, and Analysis
With SAP S/4HANA Finance, finance departments no longer spend days after the month’s end trying to reconcile all the numbers and perform intercompany eliminations to close the books. With the platform’s real-time close concept, finance can perform the close throughout the month, immediately and on the fly. And when a company achieves that status — and has trust in its numbers and a proper set of actuals — only then is it ready to make use of that data and compare it to plans, budgets, and forecasts. For customers to make big investments in planning, their key driver is a desire for real-time data access from a single environment, instead of pulling data from a variety of systems, according to Chatterjee. “Too many of our customers, unfortunately, in this day and age have a separate ERP system from one vendor and a separate planning system from another vendor, and then they are trying to marry these systems via batch data feeds once a week or month,” he says. “With an investment in a truly integrated environment like SAP Analytics Cloud and SAP S/4HANA that lets you do everything in one system, you have much better responsiveness and can close the gap between gaining insight and taking action.”
While SAP Analytics Cloud and SAP S/4HANA are in fact two separate products — for example, one customer might use SAP S/4HANA purely for its ERP functionality, and another customer might use SAP Analytics Cloud on a non-SAP ERP system — they are seamlessly integrated and sit on a common technical layer and platform, which means there is no disparity when it comes to data. Customers do not have to move data around various data centers, create batch uploads, or use integration software to use the solutions together. SAP has gone to market with SAP Analytics Cloud as the main analytics system for business intelligence, reporting, and planning for SAP S/4HANA.
The Value of Combining SAP S/4HANA and SAP Analytics Cloud
According to Chatterjee, one of the distinguishing features of SAP Analytics Cloud is its collaboration capabilities. “A big complaint I often hear from my finance colleagues is that they have to spend so much time trying to make sense of the numbers, and that collaboration piece is often ignored,” he says. “However, SAP Analytics Cloud has chat-like functionality built in, so mobile device or web client users can pull up a single intersection of data, a report, or a whole booklet into a chat group — adding multiple people to the chat just like with text messaging or instant messaging — and by collaborating immediately and on the fly, they in turn become much more responsive and improve decision making.”
Combining SAP S/4HANA with SAP Analytics Cloud to achieve real-time and predictive insights helps organizations not only make better budgets and plans, but also become better business partners. “As a finance individual, you don’t serve yourself. Rather, you serve the enterprise,” Chatterjee says. “Companies that have brought these tools together have a much stronger finance department that is more in touch with the overall financial health of the organization, and individuals serve their jobs better with the guidance they are able to provide.”
Both solutions are built on the SAP HANA in-memory database platform, which means faster results and, in turn, better performance. And because it is all in the cloud and easy to use, there is also a lower total cost of ownership, according to Chatterjee. “We’ve taken the Run Simple motto to heart when it comes to this product, by providing prebuilt models and best practices to help make life for finance owners and business users much easier,” he says. “With visualization built directly into the tool, productivity improves as well. You don’t need a business intelligence consultant to build dashboards, graphs, and charts for you. Rather, you build them yourself directly in SAP Analytics Cloud on top of your finance data, so that data is reflected in a manner that’s meaningful for you. So with very little reliance on IT, the IT department is freed up to be more strategic.”
In addition to the cloud-based planning capabilities of SAP Analytics Cloud, SAP offers on-premise planning capabilities for those customers that have somewhat recently implemented SAP Business Planning and Consolidation and aren’t ready to upend their environment by moving to the cloud. SAP has also built integration between SAP Analytics Cloud and SAP Business Planning and Consolidation so on-premise customers can leverage all the new features and functionality (predictive analytics, machine learning, AI, collaboration, and visualization). Stay tuned for a future article that covers this integration.
In general, the combined capabilities of SAP S/4HANA and SAP Analytics Cloud take FP&A to the next level for SAP customers, according to Dixon. “Taking the intuitive usability, collaboration features, and analytic power of SAP Analytics Cloud to transform the user experience with SAP S/4HANA makes a lot of sense,” he says. “As a result, finance can spend more time analyzing and communicating insights rather than manipulating data sets and reconciling them, and this increases the speed of business.”
Be a Best-Run Business: Don’t Go Halfway
The journey to SAP S/4HANA Finance might not be an easy one — because it probably requires a complete transformation to become a more modern enterprise — but it is also a foundation for innovation, and this innovation extends to planning. SAP has integrated its ERP system and planning tool in real time, with built-in visualization and augmented analytics to provide predictive capabilities along with machine learning and AI. For organizations that have taken the first step and modernized their ERP systems and finance departments, the next logical step is to get rid of the non-integrated, outdated planning technology and batch processing that is not aligned to the SAP software. Chatterjee recommends that these customers go all the way and do a complete transformation, innovating across all of finance and not just part of finance. “Planning and analysis is one of the most crucial — if not the most crucial — components of planning and analysis, as we saw from the survey,” he says. “So if you recognize the importance of finance transformation and innovation, keep on innovating by making your planning that much better and driving that much value. A planning department that can act faster and provide better FP&A contributes that much more to the health of your organization. Don’t go halfway. Contribute to overall finance transformation and innovation by having the best planning finance arsenal on hand to be a best-run organization.”
The days of working in a business-as-usual manner — complacently, with a status quo “punch in, punch out” mentality — are gone. “It’s a dynamic world for all of us out there, and the only way to be able to act immediately and on the fly is to have the best finance system on hand for both your actuals, which is SAP S/4HANA, and your planning, which is SAP Analytics Cloud, all in one system,” Chatterjee says. “Instead of standing at the back of the boat and stating the obvious, be an organization that stands at the front of the boat and guides the organization through troubled waters and takes the best course of action.” For more information, visit here.