1 Introduction to the Financial Close

25

1.1 The Business Case for a Fast High-Quality Close

26

1.1.1 Internal and External Stakeholders

27

1.1.2 Regulatory Drivers for the Accelerated Financial Close

27

1.1.3 Benefits of the Accelerated Financial Close

29

1.2 Components of the Financial Close

32

1.3 How Fast Is Fast?

33

1.4 Barriers to a Fast, High-Quality Close Process

36

1.4.1 Compliance-Related Pressures

37

1.4.2 Data Quality/Collection Errors

38

1.4.3 Intercompany Reconciliation

38

1.4.4 Poor Performance from Consolidation Applications

38

1.4.5 Lack of Process Automation

39

1.4.6 Weak Audit Trails

39

1.5 Summary

40

2 Creating an Action Plan for Improving Your Financial Close

41

2.1 Vision, Benchmarking, and Sponsorship

42

2.1.1 Perform “As-Is” Review

43

2.1.2 Define Vision and Benefits

44

2.1.3 Sponsorship

46

2.2 Quick Wins

48

2.2.1 Creating a Close Scorecard

50

2.2.2 Peer-to-Peer Intercompany Reconciliation

51

2.2.3 Right-First-Time Close

53

2.2.4 XBRL Publishing

53

2.3 Big Wins

54

2.3.1 Standard Chart of Accounts

55

2.3.2 Common Single Instance of SAP ERP

55

2.3.3 Reporting and Disclosure Framework

56

2.3.4 Corporate and Entity Close

56

2.4 Continuous Improvements

57

2.5 Summary

59

3 Information Management

61

3.1 Defining Data and Information

63

3.2 Master Data Management

64

3.2.1 Management of Financial Master Data in SAP Business Suite

65

3.3 Transactional Data Management

67

3.3.1 Extracting Data from ERP Systems with SAP Rapid Marts

67

3.3.2 SAP Financial Information Management

68

3.4 Summary

75

4 The General Ledger and Subledger Close

77

4.1 SAP ERP Financials Concepts

77

4.1.1 The Organizational Hierarchy

78

4.1.2 The Document Principle

79

4.1.3 Customer Story: Cargojet Income Fund Soars to New Heights with Greater Financial Visibility

81

4.2 The General Ledger Close

83

4.2.1 Posting Periods

83

4.2.2 Period-End Journal Entries

84

4.2.3 Foreign Currency Valuation

85

4.2.4 The Year-End Close

86

4.2.5 Customer Story: Continental’s Smooth Transition with the SAP General Ledger Migration Service

87

4.3 The Accounts Payable and Accounts Receivable Close

88

4.3.1 Reconciliation of Payables and Receivables Accounts

89

4.3.2 Valuation of Payables and Receivables Accounts

89

4.3.3 Collections and Dispute Management

90

4.3.4 Travel Management

91

4.4 Asset Accounting Close

91

4.4.1 Posting Depreciation

91

4.4.2 Assets Under Construction

92

4.4.3 Year-End

93

4.5 Inventory Management

94

4.5.1 GR/IR Reconciliation

95

4.5.2 Work in Process

95

4.5.3 Inventory Valuation

96

4.5.4 Posting Periods

97

4.5.5 Customer Story: ConAgra Foods Improves Financial Business Processes with In-Memory Computing

98

4.6 Reporting

100

4.6.1 Customer Story: KazStroyService Group Streamlines and Consolidates Business Processes

101

4.7 Summary

102

5 The Financial Close in Controlling

103

5.1 Cost Element Accounting

105

5.1.1 Primary Cost Elements

106

5.1.2 Secondary Cost Elements

107

5.1.3 Integration between Operations and Controlling

108

5.1.4 Customer Story: Korea Exchange Bank Benefits from Standardized Business Processes

109

5.2 Cost Centers

110

5.2.1 Accruals

110

5.2.2 Basis for Cost Center Allocations

111

5.2.3 Cost Elements

111

5.2.4 Activity Types

111

5.2.5 Statistical Key Figures

112

5.2.6 Allocations

112

5.2.7 Variances

113

5.3 Internal Orders

115

5.4 Project Systems

116

5.5 Product Costing

119

5.5.1 Work in Process

121

5.5.2 Variances

121

5.5.3 Customer Story: Qingdao TKS Sealing Industry Achieves Transparent Reporting

123

5.5.4 The Material Ledger

124

5.6 Profitability Analysis

124

5.6.1 Customer Story: Promivi, a Leader in Animal Nutrition, Utilizes SAP HANA and Gains Profitability and Growth Insight

126

5.7 Profit Centers

127

5.8 Year-End Closing

128

5.9 Reconciliation Between the FI and CO Modules

129

5.10 Summary

129

6 Entity Close Management

131

6.1 Plan and Prepare the Entity Close

132

6.2 Execute the Entity Close

134

6.3 Customer Story: Dow Chemicals’ Faster, Less Costly Financial Close Process with SAP Solutions

136

6.4 Monitor the Entity Close

137

6.5 Summary

139

7 Enhanced Internal Controls for Better Compliance

141

7.1 Access Risk Management

144

7.1.1 Segregation of Duties

146

7.1.2 Customer Story: Infosys Treats Governance and Compliance Strategically with SAP Access Control

147

7.2 Identifying Controls across a Business Process

148

7.2.1 Control Monitoring and Remediation

148

7.2.2 Customer Story: REC Silicon, Inc. Leverages Enhanced Process Controls

150

7.3 Audit Management

151

7.4 GRC Analytics

153

7.5 Summary

156

8 Intercompany Reconciliation

157

8.1 Defining Intercompany Reconciliation

157

8.2 SAP Solutions for Intercompany Reconciliation

158

8.2.1 One Source System

159

8.2.2 Multiple Intercompany Source Systems

160

8.2.3 Leveraging Consolidation Systems for Intercompany Reconciliation

161

8.3 Managing the Intercompany Process

161

8.3.1 Traditional Intercompany Reconciliation Process

161

8.3.2 Peer-to-Peer Intercompany Reconciliation Process

162

8.4 Faster, Collaborative Intercompany Reconciliation with SAP Intercompany

163

8.4.1 Web-Based, Peer-to-Peer Communication

163

8.4.2 Collaboration, Monitoring, and Approval

164

8.5 SAP Intercompany Deployment Options

165

8.5.1 Data Entry and Adjustments in SAP Intercompany

166

8.5.2 No Data Entry or Adjustments in SAP Intercompany

166

8.6 Security and Configuration

167

8.7 Summary

168

9 Financial Consolidation

169

9.1 Data Collection

171

9.1.1 Customer Story: Altron Consolidates Financial Data to Better Manage Assets and Risk

172

9.1.2 Loading Data

173

9.1.3 Data Mapping/Central Chart of Accounts

174

9.1.4 Dimensionality: Identifying the Level of Detail to Collect

175

9.1.5 Data Validation and Control

179

9.1.6 Collecting Commentary with Data

180

9.1.7 Workflow and Approval of Data

180

9.1.8 Periodicity of Data (Collecting Year to Date versus Periodic)

181

9.1.9 Currency (Local, Transaction, Group)

182

9.2 Processing Data

183

9.2.1 Customer Story: HMY Group Enables More Comprehensive and Up-to-Date Reporting with SAP Financial Consolidation

184

9.2.2 Managing Organizational Structures

185

9.2.3 Consolidation Adjustments

189

9.2.4 Intercompany Eliminations

190

9.2.5 Elimination of Investments

192

9.2.6 Foreign Currency Conversion and Currency Translation Adjustments

192

9.2.7 Rounding

193

9.2.8 Workflow and Approval of Adjustments

194

9.2.9 Consolidation Versions

194

9.3 Differentiation between Consolidation Solutions

196

9.3.1 Business Suite Solutions

197

9.3.2 SAP Business Planning and Consolidation (BPC)

199

9.3.3 Customer Story: Russian Railways Gets On the Right Track with Planning and Consolidation

200

9.3.4 SAP Financial Consolidation

201

9.3.5 Customer Story: Bekaert Standardizes Global Financial Reporting

203

9.3.6 Engaging with SAP experts

204

9.4 Starter Kits

204

9.4.1 Customer Story: Bank of Cyprus Group Achieves Clear Audits with SAP Solutions

207

9.4.2 SAP Disclosure Management Consolidation Starter Kits

208

9.4.3 SAP Financial Close and Disclosure Management Rapid Deployment Solution (RDS)

210

9.5 Summary

210

10 Disclosure Management and XBRL Filings

213

10.1 Collect Information from Source Systems

217

10.1.1 Financial Figures for Disclosure Reports

218

10.1.2 Unstructured Information in Financial Statements

220

10.1.3 Customer Story: Metcash Delivers the Goods in Corporate Governance

222

10.2 Manage Financial Statements and Reports

224

10.2.1 Tracking the Progress of the Disclosure Process

224

10.2.2 Manage Report Documents

225

10.3 Collaboration and Workflow

228

10.3.1 Role Definitions and Configuration of Workflow

228

10.3.2 Document Control

229

10.3.3 Workflow and Status Management

230

10.3.4 Approvals

232

10.3.5 Customer Story: GEA Group Produces Audit-Compliant Financial Statements Faster

233

10.4 Publish Disclosure Statements and Reports

234

10.5 Create and File XBRL Statements

236

10.5.1 Tagging Data for Filing Financial Statement and Forms

239

10.5.2 XBRL Instance Documents

240

10.5.3 Customer Story: SAP Speeds Up the Last Mile of Financial Reporting with SAP Disclosure Management

241

10.6 Summary

243

11 Financial Reporting

245

11.1 Reporting Requirements

245

11.1.1 Balance sheet, P&L, and Cash Flow Reporting

246

11.1.2 Management versus Statutory Reporting

248

11.1.3 Variance Reporting

249

11.1.4 Periodic Comparison

249

11.1.5 Budget, Plan, and Forecast

250

11.1.6 Versioning and What If Statements

250

11.1.7 Drill Down versus Drill Though

252

11.2 Reporting Delivery Methods

254

11.2.1 Business Intelligence

255

11.2.2 SAP Crystal Reports

255

11.2.3 SAP BusinessObjects Dashboards

256

11.2.4 SAP BusinessObjects Web Intelligence

256

11.2.5 SAP BusinessObjects Analysis

256

11.2.6 SAP BusinessObjects Explorer

257

11.2.7 SAP BusinessObjects BI platform

257

11.2.8 Mobility

257

11.3 Summary

258

12 The Future of Finance and Its Impact on the Financial Close

259

12.1 Economic Environment and the Role of Finance

259

12.2 Financial Operations

262

12.2.1 SAP Business Suite Powered by SAP HANA

264

12.2.2 Embedded Analytics

264

12.3 Managing Stakeholder Expectations

265

12.3.1 In-Memory Powered Planning, Budgeting, and Forecasting

269

12.3.2 Predictive Analytics and Data Discovery

269

12.3.3 Mobilizing Finance

270

12.4 Ensuring Regulatory Compliance

271

12.4.1 Taxation

272

12.4.2 Integrated Reporting

273

12.5 Summary

275

Appendices

281

A Glossary

283

B References

287

C The Authors

289