Why Finance comes first for SAP S/4HANA?

The new decade has seen a real uptake in the number of active S/4HANA projects. Many who adopted a wait and see approach when the ERP solution first landed in 2015, are now actively engaging in defining their approach.

Many of these organisations have opted for a finance-first approach for their journey, because financial data is foundational to so many business capabilities. That’s why CFOs are often driving the case for change.

The benefits are certainly alluring: By establishing a clean, intelligent core for your business, S/4HANA allows you to reconstruct business critical processes. It represents a chance to fix age-old legacy issues in finance, overhaul processes and capture real value in years to come. S/4HANA could be an opportunity to resolve issues in VAT recovery, invoicing, billing, aligning management and statutory reporting and a chance to transform Tax, Treasury and Controls.

But for finance leaders, deciding how and when to implement S/4HANA can be tricky. Equally challenging is translating every finance requirement into IT system design.

So to help, here’s an introductory guide to S/4HANA:

What’s different about S/4HANA?
Traditional ERP systems were optimised for transaction processing, with data stored in many different tables. By contrast, S/4HANA uses its Universal Journal to store all financial transaction details in one table. Availability and access to all that data can happen in real-time, allowing direct reporting from the system and minimising reconciliation efforts.

The new system also brings a simplified data model that lets you record once, use many times, and create a single source of truth. So analytics and insights that were historically very time-consuming to source, and rarely accurate, can now be found quickly to support speedy decision making.

What are the S/4HANA transformation options?
New Implementation: those choosing a new implementation (sometimes referred to as “Greenfield”) typically want to eliminate custom programmes, shed ineffective practices, and drive more standardisation around best practices. Organisations find this approach allows for remodelling to support productivity and growth.

System Conversion: alternatively, companies who want to preserve some of their custom environments and have business models that have not evolved much might opt for a conversion (sometimes called “Brownfield”). This approach is often used by businesses that completed an SAP implementation within the last few years, but who want to take advantage of the S/4HANA digital platform.

SAP Central Finance: SAP Central Finance helps create an S/4HANA platform that receives financial transactions from multiple source systems and enables reporting and also centralised process execution. By mapping disparate financial systems, SAP Central Finance harmonises data and creates a unified data model with fewer replications and reduced levels of aggregation. A company’s current SAP or non-SAP financial systems therefore don’t need to be converted and can remain in their existing environments. A new implementation or system conversion migration can be combined with SAP Central Finance based on the business objective of your organisation.

What can you do now?
Start building the business case: S/4HANA is a great solution to many finance challenges, but a business case based only on cost reduction may not be enough. Ask yourself, how could S/4HANA improve business partnering? What other innovations will it enable? How can I use machine learning or advanced analytics?

Plan ahead: implementation and configuration processes are complex and time consuming. Therefore, you need to take people out of their day-to-day job, especially the heavy hitters, so they can dedicate time to the programme.

Know your options: making the right choice in terms of target architecture between On-Premise and Cloud S/4HANA can often be difficult. This choice should not be driven by technology but based on what your business objectives are.

Large enterprise clients often chose on premise technology for their S/4HANA implementations, an approach that let them use existing infrastructure investments and offered more flexibility. However, over the last few years more and more organisations are looking at cloud-first deployment strategy. In general, this allows for faster implementation, lower Total Cost of Ownership (TCO) but is more rooted to adoption of best practice solutions and principles.

The real benefits of S/4HANA comes from transforming not just finance, but the whole supply chain - tax, treasury, internal controls, procurement, warehousing, and quality management. So irrespective of which option you choose, ensure the decision is informed by broad and rigorous business engagement (as the others will have to work with your choices).

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