11 questions about SAP Central Finance

SAP Central Finance (officially: SAP S/4HANA for central finance) is an operational finance, reporting, controlling and consolidation platform from SAP SE.

With the help of SAP Central Finance, companies can centralize their heterogeneous and distributed IT and SAP system landscape and link it to an SAP S/4HANA system.

A company's existing system landscape can consist of various SAP or non-SAP systems, the source systems. The SAP systems may also have a different release status.

The financial and controlling postings are replicated from these systems to the Central Finance system (a central SAP S/4HANA system) using SAP Central Finance via simple mapping. This enables fast and transparent financial management.

SAP Central Finance has various advantages, including

• Harmonization and centralization of financial and controlling data (“single source of truth”)
• Maximum quality of key financial figures
• Modern reporting and consolidation solution (Central Consolidation)
• All financial and controlling data in real time
• Use of central processes (central payments, central asset accounting, central tax reporting, SAP S/4HANA Finance for Group Reporting, etc.)
• Use of “new” functions (ledger solution, document split to break down the balance sheet by profit center or segment, switch to accounting COPA, SAP Fiori Launchpad, etc.)
• Easier adherence to increasing requirements due to compliance regulations
• No costly redesign for existing IT and SAP system landscape
• No changes in the source systems to harmonize financial master data
• Minimization of risks - even if the system landscape is very heterogeneous and a company uses various non-SAP or SAP systems

Companies often use SAP Central Finance in parallel with existing SAP ERP or non-SAP ERP systems.

These existing source systems are connected to Central Finance.

• SAP source systems with a higher release status are connected to Central Finance via standard connections.
• Both SAP source systems with an older release status and non-SAP source systems are connected to Central Finance via middleware solutions.

The data is transferred uniformly to SAP Central Finance via the SAP LT Replication Server. There, they are transferred to the harmonized target objects in SAP Central Finance using standard mapping technologies.

The AIF (Application Interface Framework) is available as a powerful “Interaction Center” for monitoring and ensuring correct processing in Central Finance.

The replication of required master data between the source and target systems - with the simultaneous option of harmonization - is ensured by an MDM layer (Master Data Management). There are basically no restrictions when choosing the most suitable MDM technology.

As soon as the systems are connected, companies can replicate all financial and controlling documents in the SAP Central Finance System in real time.

The documents are transformed into a “perfect” financial world via simple mapping - a world with a common chart of accounts and harmonized and unique master data. The link between the source and target documents is always maintained.

In addition to the replication of financial and controlling documents, a wide range of logistical information can also be replicated in the standard system. This includes, for example, purchase orders and sales orders. This makes central reporting even more comprehensive and powerful.

SAP S/4HANA Finance is an ERP financial software and one of the central components of SAP S/4HANA. With the introduction of SAP S/4HANA, the former ECC modules SAP FI (Financial Accounting) and SAP CO (Controlling) were combined under the umbrella term SAP S/4HANA Finance.

With SAP S/4HANA Finance, companies can manage their entire financial system. The application's functions range from bookkeeping, financial closing, accounting and cash management to risk management and controlling.

SAP Central Finance, on the other hand, is about standardizing different ERP systems in order to achieve harmonized and up-to-date financial data throughout the company, as well as connecting the different systems to SAP S/4HANA.

If, for example, SAP S/4HANA is initially only introduced in parts of a company group - such as the parent company - SAP Central Finance is used to link with all other existing systems and as a supplier of current and harmonized data for SAP S/4HANA Finance.

A Central Finance system corresponds to a standard SAP S/4HANA system and allows the use of SAP standard modules and functions.

The difference lies in the activated or non-activated posting interface. In an SAP S/4HANA system without SAP Central Finance, the interface is inactive as there is no corresponding license.

The situation is different if the company opts for SAP Central Finance and acquires a license.

In this case, the corresponding function for the posting interface is activated in order to connect the source systems with the central SAP S/4HANA system and seamlessly integrate all relevant functions.

Whether DAX companies, SMI companies or globally active SMEs - globalized companies organize and manage their processes across numerous regional and corporate boundaries.

In order to manage such complex organizations professionally, there is one basic requirement: commercial transparency of value flows. The problem is that this transparency often does not exist.

There are countless system boundaries that interrupt the value flows in heterogeneous IT landscapes. Data is often exchanged between several SAP or non-SAP systems - across the system boundaries of subsidiaries, business units or even countries.

Financial data therefore occurs in different qualities with many variants and definitions. A “single point of truth” is not guaranteed.

• Value flows are often interrupted.
• The processes in finance and reporting are often prone to errors.
• The exchange of data proves to be too slow; the required data must first be determined and then laboriously aggregated.
• High data quality is also not always guaranteed.

All of this makes consolidation, financial reporting and timely accounting more difficult - and therefore ultimately the management of companies.

In many companies, value flows have so far been consolidated for reporting purposes with the help of SAP BW, a large number of Excel routines or misappropriated third-party applications.

It is not uncommon for management information systems to be created as expert systems in this way. However, this meant that business-critical information could only be consolidated and made available with considerable delays and governance risks.

Consolidation measures could also only be carried out on certain, previously defined key dates.

The data required for this had to be kept redundantly in the individual Group companies. They then had to be laboriously transferred to the existing consolidation systems for consolidation.

In today's environment, this is no longer appropriate. What is needed instead is group-wide transparency so that financial analyses and forecasts can also be carried out at very short notice - i.e. during the period and not just at a specific reporting date at the end of a reporting period.

In order to eliminate the lack of transparency, it was previously necessary to carry out extensive system consolidations of existing SAP and non-SAP applications. Only then was it possible to integrate all relevant value flows and the reporting systems based on them.

With SAP Central Finance, this has changed: value flows can now be standardized across fragmented ERP system landscapes and made available in real time and in high quality - whenever this control-relevant data is required. This also makes real-time consolidation possible.

Companies can be managed faster and more effectively on the basis of consolidated and precise data. Documents and postings are available in SAP Central Finance at the touch of a button.

This also reduces the number of errors. And the workload is also reduced: redundant data storage of master and transaction data is no longer necessary.

By introducing and using SAP S/4HANA Central Finance, the following benefits in particular can be achieved more quickly:

• Fact-based and therefore transparent decisions in real time
• Increased process and information transparency through the use of uniform Group-wide standards
• Secure and automatic mapping of international compliance requirements
• Improvement of business analyses and reporting quality based on similar and trustworthy data (single point of truth)

The introduction of SAP Central Finance enables customers who work with complex system landscapes to achieve completely new transparency in the financial system with manageable effort.

Further processing of documents or document chains is possible, even if their origin lies in an ERP system connected to SAP S/4HANA Central Finance.

Customer invoices from any ERP system can be transferred to SAP Central Finance and processed there at top speed.

The same applies, for example, to centralized incoming invoice processing, centralized cash management, centralized financial statements (including consolidation) and centralized and standardized reporting.

The introduction of such centralized processes in Financial Shared Services can offer considerable potential for increasing efficiency and thus reducing costs. And this can be achieved without first having to solve the problem of a heterogeneous ERP landscape through complex ERP consolidations.

The future use of artificial intelligence technologies for transactional processes in finance will further increase the level of automation. This will further increase the economic attractiveness of shared services.

Under the motto Finance First, SAP Central Finance can be used as an elegant, quick introduction to SAP S/4HANA. According to SAP, SAP Central Finance is even considered the “ideal way” or “ideal door opener” to SAP S/4HANA.

In general, the transition from ERP systems such as SAP R3 or SAP ERP 6.0 to SAP S/4HANA presents companies with particular challenges.

The Central Finance concept based on SAP S/4HANA therefore often serves as the first step in an SAP S/4HANA greenfield implementation, which is successively supplemented by other central processes such as Procurement, R&D or Risk and Compliance Management.

SAP Central Finance can therefore be implemented before SAP S/4HANA is introduced. In such cases, SAP S/4HANA is introduced step by step - starting with SAP Central Finance - on the basis of agile project management.

• The first step is to move the finance area to SAP S/4HANA. This requires the additional SAP Central Finance function.
• In the second step , companies then transfer their logistics data and processes - and thus the various companies within the company - to SAP S/4HANA according to any desired pattern.

The main purpose here is to leverage significant business benefits more quickly and to parallelize the tasks of system consolidation by setting up a new platform for global processes.

The necessary adjustments are manageable because they are largely based on best-practice processes. The introduction of SAP Central Finance can be implemented comparatively quickly.

With the step-by-step approach, companies reduce the risks associated with a complete changeover to SAP S/4HANA in just one step.

Securing liquidity is always of central importance for companies, but is even more so in an economic crisis. If liquidity is no longer available - and this includes credit lines with banks - the company is insolvent and must file for bankruptcy.

For companies, it is therefore important to recognize potential liquidity bottlenecks at an early stage, to analyze the willingness to pay and to tie up capital.

With SAP Central Finance, these challenges can be solved satisfactorily for the first time. This is because processing data in real time in SAP Central Finance makes accurate, regular and timely liquidity planning possible in the first place.

Reports, analyses and decisions are no longer dependent on the latest monthly financial statements, which in cases of doubt have processed figures that are four to six weeks old.

Decisions based on such old data can be fatal, especially when economic conditions deteriorate rapidly - such as in certain crisis situations. What's more, under certain circumstances they can also be criminally relevant for a management (delay in filing for insolvency).