McKinsey’s Bjørnar Jensen, who focuses on Digital and Analytics, emphasized that the character of the finance function is shifting with an eye toward the future, steering the company through difficult waters.

“You can’t do that if you’re spending 80 percent of your time reporting, or even worse, doing manual transactions with a high quality-control need,” he said. “Instead, CFOs should be spending their time advising the business, being a partner to the business. It’s about using technology in its different forms to improve quality and reduce manual work.”

We at VC ERP understand the stresses of managing business growth, allocating resources, contributing to strategy, enhancing operational efficiency, achieving the “optimal” mix of debt and equity, addressing capital investments, and navigating your organization by managing risks, complying with regulations while strengthening governance.

At the same time, CFOs are responsible for extracting insights from big data, developing a data-driven strategy and producing precise projections that allow organizations to stay financially flexible regardless of the issues they face.

If we consider today’s industry standard practices of a three-day close for legal entities, plus two days for consolidation and reporting, then just 38% of corporations appear to complete their books in five to six days. Even after spending millions of dollars on the greatest enterprise resource planning (ERP) software, many firms’ closing process remains brittle and immensely complex.

This is why CFOs of today are looking into the use of ERP financial software such as SAP S/4HANA Finance to save time spent supporting the closing process and re-prioritize other value-adding activities throughout their organizations.

What is SAP S/4HANA Finance?

SAP S/4HANA Finance is a core module within the SAP S/4HANA ERP suite, specifically designed to address financial processes and reporting needs.

Formerly known as SAP Simple Finance, SAP S/4HANA Finance, was the first module introduced for S/4HANA. It was also the first ERP component in which SAP introduced the new SAP HANA database functionalities for enabling real-time data.

It is intended for financial professionals in many industries and positions, such as CFOs and others working in accounting, taxes, treasury, financial operations, risk management, and compliance.

SAP S/4HANA implementation deployment options include SAP S/4HANA on-premise, and SAP S/4HANA Cloud. Drilling down even more, SAP S/4HANA Cloud implementation has two options: Private and Public Cloud.

Read more: SAP S/4HANA Public Cloud vs Private Cloud: Top 5 Differences Explained

It is critical to understand these alternatives to select the appropriate SAP S/4HANA version and deployment for your business and optimize the overall IT landscape.

Let’s start with the “why” – why is improving the financial close process so important?

Key Drivers for Efficient Financial Close

A financial close covers more than an organization’s closing checklists, closing cycle time, accuracy, and compliance, all while optimizing costs. Some of the factors to consider when determining an entity’s financial close are, inter alia:
  • Confidence of external & internal stakeholders
  • Early identification of financial issues & proactive risk management
  • Improved Access to Up-to-Date Business Matrices

SAP S/4HANA Finance at a Rescue Mission

SAP S/4HANA Finance, the flagship SAP financials solution offers numerous process advancements for the financial sector. In fact, it introduces a single source of financial truth, enabling real-time financial close and consolidating payables and receivables.

It predominantly makes use of the SAP Fiori user interface. Yes, we shall discuss SAP Fiori in a bit.

Read more: How CFOs use SAP S/4HANA for FinanceLet us show you how SAP S/4HANA Finance can help you turn the hurdles you’re facing into opportunities.

Overcoming Financial Close Challenges

The entity close process is about carrying out a sequence of routine interrelated and interdependent accounting procedures throughout the accounting cycle, with the ultimate purpose of providing internal and external financial reporting.

A CFO who closes the books swiftly and accurately makes for a happy CEO.

So you’d imagine that meeting the targets of not only closing it faster but also delivering correct data for financial reports requires not only gifted number-crunching abilities but, increasingly, the right technology. You are correct!

A knowledgeable finance executive understands that a well-planned, well-designed, technology-enabled financial close is a crucial best practice against which the CFO’s office is assessed.

You’re wondering if costing-related (CO) data (for example, inventory WIP) may be made available in real-time, eliminating the requirement for manual reconciliations between physical counts and system records.

In fact, as a CFO, you also need to make sure that the closing valuations are optimized to complete the close faster and deliver financial results sooner.

In SAP S/4HANA Finance, your financials and costing data are brought together under the same canopy. This means that WIP is immediately accessible, and it also means that financial reporting on WIP may be done at any time, any place, and from any place in the world.

What if we told you that this is also true for profitability-related data? Do you require daily profit reporting? Done! S/4HANA Finance does the job.

SAP S/4HANA Finance eliminates the requirement to reconcile Financials (FI) and Controlling (CO) data, allowing for a soft close.

For the Uninitiated:-

Soft Close
  • Offers immediate access to financial insights, no month-end wait! Analyze your data daily, bypassing complex accruals, manual allocations, and post-closing adjustments
  • Provides a real-time snapshot of the company’s financial state
  • Skip reconciliation using trial balances and key performance indicators (KPIs)

Hard Close
  • Prioritizes the accuracy and auditability of financial results for both internal decision-making and external reporting
  • All transactions are processed, locking down financial activity for the period
  • Numbers take time. Expect a week for crunching and another for consolidation and publication
Now that the times have changed, so has the approach to financial closing methods. Accounting teams have traditionally operated like assembly lines, with each team member having specific responsibilities during the close cycle.

Companies are now adopting a new perspective known as continuous close or continuous accounting. The new procedure involves closing the books throughout the month rather than waiting until the end of the month.

You realize what this means, don’t you? Yes, it allows these organizations to perform a “soft close” at any time. They may still choose to perform a “hard close” at the end of each month or quarter, but the continuous accounting throughout the month drastically reduces the time to close.

This is possible with SAP S/4HANA Finance so that processes that require overnight batch jobs, such as intercompany and GR/IR reconciliations, as well as profitability analysis allocations and reporting, do not have to wait.

Talking about the possibilities, SAP Financial Closing cockpit for SAP S/4HANA (also known as FCC) is one of the standout SAP technologies. The other is Intercompany Matching & Reconciliation (ICMR). Let’s discuss.

What is SAP Financial Closing Cockpit for SAP S/4HANA?

Say you need to automatically generate recurring journal entries for depreciation or accruals, or trigger foreign exchange rate adjustments on month-end close. Or, even better, you’re modifying task plans for multiple entities operating on distinct calendars (for example, a 4-4-5 calendar for manufacturing plants).

Financial Closing Cockpit (FCC) is an SAP S/4HANA-integrated solution for financial task planning, monitoring, execution and analysis of financial closing tasks across all organizational levels.

It is the right solution for many activities and tasks. All of these should be documented with traceability so that all parties can see the progress. For activities that—
  • are carried out regularly
  • with multiple managers involved
  • the work process involves several correlated activities and chronological activities related to periodic closing

The image above illustrates how task lists work in the SAP Financial Closing Cockpit as an example. Financial close people can access their task lists and closing tasks straight from the SAP Fiori launchpad.

Also, the pre-delivered KPIs and reports provide a clear view of closing operations across entities and close cycles to provide complete insights throughout the process.

Thus, the key features of SAP Financial Closing Cockpit for S/4HANA include:
  • You can manage automated and standardized functions like accounting and reconciliation tasks with event-driven and remote task execution.
  • You can sequence, monitor, and control closing tasks across your organization with detailed scheduling and workflow control
  • You can adapt task schedules to different operating cycles, i.e. multiple factory calendar support
  • Gain access to task lists and closing information directly from the SAP Fiori launchpad integration
  • Ensure data accuracy and compliance with a single source of truth, audit trails, and internal controls

What is Intercompany Matching & Reconciliation (ICMR) in SAP S/4HANA?

Your corporate group may have entities that conduct business with one another. For accurate group consolidation, you need an intercompany reconciliation functionality in your ERP that detects intercompany mismatches early on.

This not only allows for early analysis in the closing process to avoid differences entirely, but it also reduces the deadline pressure that typically occurs near the end of a closing period.

The built-in ICMR functionality in SAP S/4HANA speeds up intercompany reconciliation from a company close to a corporate close. The real-time reconciliation is the most attractive feature. Yes, because it supports real-time analytics on constantly changing data sources.

Within SAP S/4HANA Finance, there is a universal journal table that not only simplifies financial tables but also opens up new possibilities. How?

The Universal Journal, as the name suggests, is the shining table in your S/4HANA ERP where your scattered financial data is assembled. What does it all mean? It means that transactions are updated in real-time, and there is no need to search through different tables because your universal journal is the single source of truth. It means you can forget about complexities in data reconciliations.

In conclusion, this is how SAP S/4HANA ICMR works hand-in-hand with Universal Journal:
  • ICMR directly accesses the central Universal Journal in SAP S/4HANA, where all financial transactions are stored in real time
  • Data analysis happens directly within the Universal Journal
  • Reconciliation happens on the fly, providing immediate insights into any discrepancies between companies
Also, ICMR offers a snapshot feature, which means that anytime you require a stable data state, you simply record a timestamp. Your data is continuous and flows, correct? You don’t have to wait until the end of the period to see the reconciliation balances; you can check them at any moment.

The SAP Fiori dashboard from the SAP ICMR application is shown here, with a list of intercompany transactions between different entities within the enterprise. It gives a snapshot of C1001’s intercompany reconciliation balances as of a certain date. It displays the sums owing to and from various trading partners, as well as any discrepancies that must be looked into.

Conquer the Closing Process and Elevate Financial Agility with SAP S/4HANA Finance

We began by understanding how the traditional and time-consuming process of financial close often bothers CFOs. We emphasized the importance of accuracy, timeliness, and compliance, as well as the implications for stakeholders and the finance team itself. These problems and requirements are addressed by SAP S/4HANA Finance, enabling CFOs to conquer the closing process.

We discovered the potential of SAP S/4HANA Finance through a thorough exploration of its functionalities, viz:
  • Unify data under one roof to serve the purpose of a single source of truth, removing the need for complexities associated with reconciliation
  • Continuous monitoring and insights are made possible by real-time updates
  • Close the books faster and reduce closing cycle times by automating routine tasks and enabling “soft closes” throughout the month
  • Powerful analytics capabilities provide CFOs with a more detailed view of financial performance and help them make more proactive decisions
  • Improve collaboration across teams and efficiency with the help of integrated tools such as the SAP FCC and ICMR
  • SAP S/4HANA Finance frees CFOs to make room for strategic initiatives planning, risk management and driving business growth
So, if you’re a CFO battling with the complexities of the traditional financial close, think about taking a risk and ushering in a new era of financial agility.

But deciding how and when to implement S/4HANA can be difficult for finance leaders. It is also difficult to translate every financial requirement into an IT system design.

So let VC ERP Consulting be a part of your success story in this journey because we understand how important the right approach and quality focus are for SAP S/4HANA implementation. Make an appointment for a free consultation with us today.