Last Updated on April 24, 2023 by Pradeep
The periodic Year-end and Month-end closing activities in SAP S4 HANA Finance are carried out in the system by the accounts department. Thus, as the SAP S4 HANA Finance consultant, you need to have a good understanding of these closing activities in SAP.
Importance of Closing Activities in SAP
Many processes can’t be executed unless these activities are completed successfully.
Closing activities in SAP S/4HANA Finance are handled by the GL (General Ledger) department. In contrast, the other activities are the responsibility of the Accounts Payable and Account Receivable departments.
Some activities are performed Monthly and some are annually. Here I have explained some period-end closing activities in the SAP S4 HANA system by using different FIORI apps.
Read Related: SAP General Ledger Period-End Closing
List of Closing Activities in SAP FICO or S/4HANA Finance
We have many types of month-end closing activities in SAP FICO. For this, we use a structured way called FSV which helps you to settle month-end activities in a strategic manner. Let us understand it first in detail.
Financial Statement Version (FSV)
FSV is a structured way of grouping accounts. The basic reports you define in this system are the Balance Sheet and the Profit and Loss (P&L) statement. When you learn SAP S4 HANA Finance, you would know that we maintain the Financial Statement Version (FSV) to produce the financial statements.
- We can create FSVs for other internal and external reporting purposes and for planning.
- These FCVs can have up to 20 item hierarchy levels.
- For each level, the system can calculate a subtotal based on the accounts assigned in the nodes below.
- Further, for each item at all levels, you assign a unique key and relevant texts.
At the first hierarchy level, the FSV has the following items by default:
- Asset
- Liabilities and Equity
- P & L Result
- Net Result: Loss
- Net Result: Profit
- Financial Statement Notes
- Not Assigned
- Financial Statement Output with SAP FIORI
You can use the SAP Fiori Display Financial Statement App to output a financial statement. With this, you have the following options:
- You can select to display only opening values, the movements, or all values combined.
- You can select any currency type of those assigned to the company code and ledger selected.
Now we will see the kinds of Month end closing activities in SAP that are majorly based on FSV structure.
GL Closing Activities in SAP Finance
The basic G/L closing operations manage the posting periods, executes balance carry forward at year-end and also use the Audit Journal.
1. Posting Periods
Open and close posting periods are a customizing app. In this App, we perform maintenance at the level of the posting period variant. Also, we update the open periods for all company code/ledger combinations assigned.
We can define different settings per account type, such as:
- A: Asset
- C: Customers
- K: Suppliers
- M: Materials
- S: G/L accounts +: All accounts
Also, we can maintain a very detailed period block for CO (SAP Controlling) transactions.
Further, we can use this only for specialized control. This is because the maintenance through the FI period controls is usually adequate.
2. Balance Carryforward – Year-end Closing activities in SAP
The balance Carry Forward program carries forward the balances of the G/L, customers, vendors, and asset accounts to the next fiscal year. We usually execute it at the end of the current fiscal year or right at the beginning of the new year.
Since Balance carries forward is executed with the Carry Forward Balances application. Thus, here we define the new fiscal year, the company code, and the ledger that we want to carry forward.
You may be interested in:- What is the Fiscal Year Variant in SAP?
3. Auditing
Offering clear auditing reports and helpful tools is a must for any system that handles financial data. This is because SAP S/4HANA stores everything on the line item level. Thus, it makes it easy to understand the origin of every value in the corporate books.
Executing auditing reports is essential before performing any archiving activities in FI (SAP Finance). This is because we need to provide lists of documents and line items for previous years. Noteworthy, we define the number of years by local legislation.
A/R & A/P Closing activities in SAP
For the Accounts Payable and Accounts Receivables modules, we perform periodic closing activities. This ensures that we are in sync with business partners on open amounts and due dates. Additionally, we must execute foreign currency valuation for the open amounts and post any required value adjustments for overdue receivables, depending on local regulations.
1. Balance Confirmation
Once a year, companies usually generate balance confirmations and send them to customers and suppliers. They often club them together with a reply slip to request the same from them. Consequently, it helps us to verify if the accounting figures between the business partners match.
You prepare balance confirmations in Customizing by defining and assigning the required forms to the print programs. You also make sure to maintain the address details for your company code. Furthermore, You can set different addresses for the same company code by using the address ID to differentiate them.
Material Management Closing Activities in SAP
As a financial consultant, you should be familiar with a few activities concerning the integrated closing process with MM (SAP Material Management). These include managing the physical inventory documents, clearing the goods received/invoice received account, and evaluating material stocks.
1. Physical Inventory
Physical Inventory is a business process in which you compare and match the actual physical stock with the stock in your books. It is generally a legal requirement to carry out an inventory at least once a year. You perform the inventory for your own stock and special stock (e.g., items held for third parties).
There are various types of Physical inventory such as:
Periodic physical inventory
In this type of inventory, we physically count all stocks of the company on the balance sheet key date. Subsequently, the entire warehouse is blocked for material movements while the inventory is ongoing.
Continuous Physical Inventory
In this type of inventory, we count the stocks continuously during the fiscal year. Here, it’s important for you to count every material physically at least once during the year.
2. Cycle Counting
In this type of inventory, we count stocks at regular intervals within a fiscal year. These cycles are configurable through the cycle counting inventory in the Material Master records. This method is best for fast-moving items.
3. Goods Receipt/Invoice Receipt Accounting Clearing
Sometimes we found inconsistencies between the quantities delivered (from goods receipt) and the quantities invoiced. Thus, at that time, we post them either to the goods receipt or invoice receipt (GR/IR) clearing account.
Read related: GR/IR Clearing Account Interview questions
Conclusion
So, these are some key closing activities in SAP S/4HANA Finance. The same belongs to SAP FICO as the only application is different in HANA technology, which uses the Fiori.
While in SAP FICO, we do all these years and month-end closing activities on-premise.
Another thing that differentiates is, S/4HANA. lots of reconciliation activities are automated. Such as FICO reconciliation, Asset Reconciliation, Customer Vendor reconciliation etc. While in FICO, these are done by SAP end-users.
Thus, you can understand, these closing activities in SAP involve SAP Finance consultants as well as end-users both. It also reinforces the fact that closing activities are vital for SAP implementation work.
Do Read Details:- SAP FICO Training on S/4HANA
