Preface

19

Target Audience

19

Objective

20

Structure of this Book

20

Acknowledgments

23

1 The Basics: What Is Central Finance?

29

1.1 A Centralized Finance System

29

1.1.1 Evolution of Central Finance

30

1.1.2 Central Process Execution Model

32

1.2 Central Finance with SAP S/4HANA

35

1.2.1 Standard SAP (Non-Custom) Solution

35

1.2.2 Technical Foundation

36

1.2.3 Deployment Option

37

1.2.4 System Consolidation Path

38

1.3 Central Finance Components

40

1.3.1 Source System

40

1.3.2 Data Replication

43

1.3.3 Central System

46

1.3.4 Cloud Integration

48

1.4 Central Finance Outcomes

49

1.5 Central Finance Boundaries and Restrictions

51

1.6 Common Central Finance Misconceptions

53

1.7 Summary

55

2 The Mechanics: How Does Central Finance Work?

57

2.1 Functional Foundation

57

2.1.1 Planning, Reporting, and Compliance

58

2.1.2 Finance Operations and Shared Services

59

2.1.3 Central Close

59

2.2 Central Finance Capabilities

60

2.2.1 Data Logging

61

2.2.2 Data Replication

63

2.2.3 Business Mapping

65

2.2.4 Data Digitization and Inbound Posting

67

2.2.5 Error Handling

68

2.2.6 Drilldown/Audit Trail

70

2.2.7 Data Reconciliation

70

2.3 Summary

72

3 The Motivation: Why Central Finance and Why Now?

73

3.1 Central Finance as a Silver Bullet

73

3.2 Innovation Acceleration

79

3.2.1 Pressure to Innovate

80

3.2.2 Earlier Innovation

81

3.2.3 Faster Cycles, Faster Adoption

82

3.3 Process Transformation

83

3.4 Business Model Evolution

85

3.4.1 Enterprise Optimization

86

3.4.2 Business Model Changes

87

3.4.3 Mergers and Acquisitions

87

3.4.4 Divestitures

88

3.5 Technology Transformation

88

3.5.1 Rationalization

89

3.5.2 Consolidation

90

3.5.3 Cloud Transition

91

3.6 SAP S/4HANA Adoption

92

3.6.1 Continued Evolution

92

3.6.2 Side Car Adoption

93

3.7 Summary

95

4 Reporting: What Can I Learn About My Data?

97

4.1 Advanced Reporting

97

4.1.1 Line Item Access

98

4.1.2 Universal Reporting

99

4.1.3 Multidimensional Reporting

101

4.1.4 Microsoft Excel Analysis

102

4.1.5 Root-Cause Analysis and Storytelling

102

4.1.6 Embedded Reporting

103

4.1.7 Real-Time KPIs

104

4.1.8 Predictive Reporting

105

4.1.9 Problem-Solving Solutions

106

4.2 Extended Dimensional Reporting

108

4.2.1 Microsegment Profitability

109

4.2.2 Cross-Organizational Functional Reporting

110

4.2.3 Business Continuity Reporting

111

4.2.4 Artificial Intelligence and Machine Learning-Based Analysis

112

4.3 Entity Reporting

113

4.3.1 Local Processes

114

4.3.2 System of Record

114

4.3.3 Company Code Alignments

115

4.3.4 Tax Optimization

115

4.4 Group Reporting

116

4.4.1 Multientity Reporting

116

4.4.2 Harmonized/Standardized

117

4.4.3 Benchmarking

118

4.4.4 Consolidated Reporting

118

4.4.5 Continuous Close at the Group Level

119

4.5 Summary

120

5 Finance Processes: What Can Central Finance Improve?

121

5.1 Digital Debt

121

5.2 Planning, Reporting, and Compliance

128

5.2.1 Reporting

128

5.2.2 Financial Planning

129

5.2.3 Controlling

130

5.2.4 Prediction and Simulations

134

5.2.5 Tax Reporting and Compliance

135

5.3 Finance Operations and Shared Services

136

5.3.1 Credit, Collections, and Disputes

137

5.3.2 Central Payments

141

5.3.3 Intercompany Movements

147

5.3.4 Bank Account Management

148

5.3.5 Cash Operations and Liquidity Management

151

5.3.6 Treasury

153

5.4 Central Closing

158

5.4.1 Business Model

159

5.4.2 Daily Activities

164

5.4.3 Entity Close

165

5.4.4 Group Close

168

5.4.5 Disclosure

169

5.4.6 Workflow

169

5.4.7 Financial Closing Cockpit

169

5.4.8 Contract Lifecycle Management (IFRS 16)

170

5.4.9 Revenue Recognition (IFRS 15)

171

5.4.10 Group Reporting

171

5.4.11 SAP Financial Closing Cockpit for SAP S/4HANA

173

5.5 Summary

174

6 Finance Data Harmonization: How Does Central Finance Standardize Data?

175

6.1 Why Harmonize Data?

175

6.1.1 Master Data

176

6.1.2 Configuration Data

178

6.2 Transactional Data Loads

180

6.2.1 Initial Data Loads and Delta Loads

180

6.2.2 Golden Record Creation

184

6.3 Master Data Processes

185

6.3.1 Request for Change

188

6.3.2 Approval of the Request

189

6.3.3 Execution of the Change Request

190

6.4 Master Data Objects and Hierarchies

191

6.4.1 Chart of Accounts (General Ledger Account)

192

6.4.2 Business Partners

195

6.4.3 Material Numbers

197

6.4.4 Profit Centers

197

6.4.5 Cost Centers

198

6.4.6 Activity Types

199

6.4.7 Statistical Key Figures

199

6.5 Ongoing Transaction Replication

200

6.5.1 SAP Transaction Replication

200

6.5.2 Non-SAP Transaction Replication

203

6.6 Governance

205

6.6.1 Master Data and Master Data Objects

206

6.6.2 Dynamic Cost Object Creation

207

6.6.3 Extraction

208

6.6.4 Harmonization

209

6.6.5 Rationalization

210

6.6.6 Dissemination

210

6.6.7 Maintenance

210

6.7 Summary

212

7 Deployment Options: How Do I Implement Central Finance?

213

7.1 Getting Started

214

7.2 On-Premise

216

7.2.1 Required Deployments

217

7.2.2 Optional Deployments

218

7.3 Cloud

225

7.3.1 Private Cloud

227

7.3.2 Public Cloud

229

7.3.3 Managed Cloud

231

7.3.4 Project Cloud

234

7.3.5 Cloud Integration

235

7.4 Two-Tier Strategy

237

7.5 Summary

238

8 System Architecture

243

8.1 Technical Architecture

243

8.1.1 Technical Foundation

245

8.1.2 Source System

245

8.1.3 Data Replication

246

8.1.4 Central System

247

8.1.5 Extensions

248

8.2 Central Finance Landscape

249

8.3 SAP Landscape Transformation Replication Server

254

8.3.1 Deployment Options

256

8.3.2 Data Migration Server

257

8.4 SAP Application Interface Framework

257

8.4.1 SAP Application Interface Framework Message Processing

259

8.4.2 BC Sets for SAP Application Interface Framework

260

8.4.3 Configuring SAP Application Interface Framework

261

8.4.4 Monitoring SAP Application Interface Framework for Central Finance

261

8.5 Frontend Tools and Central Finance

261

8.5.1 SAP GUI

262

8.5.2 SAP Fiori

262

8.5.3 SAP Analysis for Microsoft Office

264

8.5.4 SAP Analytics Cloud

265

8.5.5 SAP Business Client

266

8.6 Summary

267

9 Implementing Central Finance

269

9.1 Rollout

269

9.1.1 Iterative Rollout versus Big Bang

269

9.1.2 Milestone-Based Rollout

271

9.1.3 Process Selection

272

9.2 Roadmap

273

9.2.1 First Wave

273

9.2.2 Subsequent Waves

274

9.2.3 End State

274

9.3 System Setup

274

9.3.1 Landscape

275

9.3.2 Central Finance Instance

277

9.3.3 SAP Landscape Transformation Replication Server

292

9.3.4 SAP Source Systems

295

9.3.5 Non-SAP Source Systems

296

9.3.6 SAP Master Data Governance

297

9.4 Data Integration Framework

298

9.4.1 Master Data

298

9.4.2 Transactional Data

308

9.4.3 SAP Source Data

312

9.4.4 Non-SAP Source Data

316

9.4.5 Third-Party Interface

317

9.5 Replication Setup

319

9.5.1 SAP Source Systems

319

9.5.2 Non-SAP Source Systems

321

9.5.3 Pre-Implementation Assessment

322

9.5.4 Test Data Load

323

9.5.5 Initial Data Load

328

9.5.6 Ongoing Replication

329

9.5.7 Accounting View of Logistics

329

9.6 Business Mapping

332

9.6.1 Master Data Objects

332

9.6.2 Strategies

333

9.7 Consistency Check Reports

336

9.7.1 FI Configuration Check

338

9.7.2 Central Payment Configuration Check

338

9.7.3 Tax Configuration Check

339

9.7.4 CO Configuration Check

339

9.8 Initial Data Load

340

9.8.1 Prerequisites

341

9.8.2 Configuration in the Source System

342

9.8.3 Initial Load of CO Postings

345

9.8.4 Initial Load for Financial Accounting

348

9.8.5 Final Steps

363

9.9 Summary

365

10 Implementation Project and Operations

367

10.1 Establishing a Governance Framework

368

10.1.1 What Makes Central Finance Different?

369

10.1.2 Change Management

371

10.1.3 Roles and Responsibilities

374

10.1.4 Resourcing Considerations

377

10.2 Project Methodology

378

10.2.1 Agile versus Waterfall

379

10.2.2 Waves, Workstreams, and Milestones

380

10.2.3 SAP Activate

381

10.3 Discover and Prepare Phases

383

10.3.1 Road Mapping

383

10.3.2 Readiness Planning

384

10.3.3 Demo and Trial System Options

384

10.3.4 Education and Training Options

385

10.4 Explore Phase

385

10.4.1 Key Decisions

385

10.4.2 Fit/Gap Analysis and Blueprinting

386

10.5 Realization Phase

387

10.5.1 Monitoring Progress

387

10.5.2 Issue Management

388

10.5.3 Development Coordination

388

10.5.4 Testing

389

10.6 Deploy Phase

390

10.6.1 Cutover

390

10.6.2 Centers of Excellence

391

10.6.3 System Onboarding

392

10.6.4 Process Onboarding

395

10.7 Run Phase

396

10.7.1 Ongoing Replication

396

10.7.2 Master Data

400

10.8 Mergers, Acquisitions, and Divestitures

402

10.9 Summary

404

11 Master Data Management

405

11.1 Master Data Integration Technology Options

406

11.1.1 Central Finance-Supported Master Data

407

11.1.2 ALE Master Data Distribution

415

11.1.3 SAP Data Services

422

11.1.4 SAP S/4HANA Migration Cockpit

435

11.1.5 Third-Party Solutions

442

11.1.6 Custom Programs

448

11.2 SAP Master Data Governance

451

11.2.1 Consolidation versus Central Governance

452

11.2.2 Landscape and Architecture

453

11.2.3 Data Models

469

11.3 Summary

474

12 Mergers and Integrations

479

12.1 Integration Catalyst

479

12.1.1 Merger and Integration Platform

480

12.1.2 Merger and Integration Playbook

481

12.2 Mergers and Acquisitions

482

12.2.1 Central Finance as an M&A Platform

483

12.2.2 Building Blocks

484

12.2.3 Capabilities

488

12.3 Postmerger Integration

491

12.3.1 Process Execution Considerations

492

12.3.2 Platform Considerations

493

12.3.3 System Continuity

494

12.3.4 Interim versus End State

494

12.4 Summary

496

13 Central Finance as a Stepping Stone to SAP S/4HANA

497

13.1 Charting Your Journey

498

13.1.1 First Step: Central Finance

499

13.1.2 End State

502

13.2 Choosing Your Route

503

13.2.1 Brownfield versus Greenfield

504

13.2.2 SAP S/4HANA Cloud Code Line

505

13.3 Planning the Process

506

13.3.1 Transition Planning

507

13.3.2 Adoption Patterns

510

13.3.3 Moving a Single ERP System

512

13.3.4 Moving Multiple ERP Systems

513

13.4 Central Finance and the SAP S/4HANA Movement Program

515

13.5 Summary

517

14 Finance Transformation

519

14.1 Strategy Management

520

14.2 Value Management

526

14.3 Risk Management

529

14.3.1 Technical Risk Factors

530

14.3.2 Business Change and Organizational Risk Factors

533

14.3.3 Financial Risk Factors

535

14.4 Business Process Management

537

14.5 Organizational Change Management

540

14.6 Summary

550

15 Platform Transformation

551

15.1 Platform Transformation Strategy

552

15.2 System and Application Consolidation

555

15.2.1 Corporate SAP HANA Reporting Platform

556

15.2.2 Corporate Finance Service Platform

557

15.2.3 Stepping Stone to Consolidated SAP S/4HANA Platform

559

15.2.4 Corporate Mergers, Acquisitions, and Divestitures Platform

560

15.2.5 Orchestration of Source Systems of Record with Central Finance

560

15.3 Digitization

563

15.4 Readiness for Services Consumption in the Cloud

565

15.5 Summary

568

16 Central Finance Business Case Development

571

16.1 Identifying Stakeholders

572

16.1.1 Finance Organization and the Impact on Resources

572

16.1.2 IT Organization

573

16.2 Evaluating the Status Quo

574

16.2.1 Current Landscape

575

16.2.2 Anticipated Challenges

576

16.3 Determining Key Value Drivers

577

16.3.1 Flexibility

578

16.3.2 Efficiency

578

16.3.3 Service Level

579

16.3.4 Cost Reduction

579

16.3.5 Working Capital Improvement

579

16.3.6 Profit and Margin Management

579

16.3.7 Simplification

580

16.3.8 Business Continuity

581

16.3.9 Risk Mitigation

581

16.4 Assessing the Cost

583

16.4.1 Initial Implementation

583

16.4.2 Maintenance

585

16.4.3 End State

585

16.5 Return on Investment

586

16.6 Summary

588

The Authors

589

Contributors

590