SAP Predictive Accounting in S4 HANA

What is SAP Predicitve Accounting?

SAP Predictive accounting is a projection of the cost and profitability of the incoming sales order. When there is a gap between sales order and actual sales invoice we need to estimate the cost and revenue of the particular sales order to get an advanced overview of the upcoming profit. For this purpose, we use Predictive accounting. It is used in Account-based profitability Analysis (CO-PA) of S/4HANA Finance.

To understand what is SAP predictive Accounting more clearly, we will first understand a base term called Predictive Analytics.

Predictive Analytics

In general predictive analytics is a term that we use to describe features for data mining and data processing. It is often extended with machine learning of current and historical data for predicting future events or results.

Predictive Accounting in SAP

Similar to Predictive analytics, SAP Predictive Accounting is also based on information already available in the system. Along with any actual postings, the system captures the prediction results as predictive journal entries within regular financial postings database, i.e Universal Journal. The predictive journal’s future posting dates indicate when the future economic effect will hit the books.

Hence, in this way predictive accounting extends the traditional reach of accounting beyond regular Generally Accepted Accounting Principles (GAAP) relevant postings. It further ensures that the system still consistently stores all information as financial postings in a common data structure. 

Now I will move on to describe how we can embed predictive accounting into SAP S/4HANA financial accounting. Also, see how predictive accounting applies the major technical innovations of the suite (Universal Journal) and data separation through extension ledgers. This section describes determining Predictive Figures Based on Simulation.

Overview of Actuals vs. Predictive Accounting in SAP.

The above image is the introduction of the simulation layer between real-world entities such as orders, deliveries and so on. It is also a representation of their economic effects as journal entries within financial accounting. It depicts that, starting with the creation of sales order any further process step is simulated. Finally, it calls the same interface and modules to create predictive journal entries as available from the actual world.

Furthermore, the system doesn’t record the simulated entities here. It also doesn’t record, deliveries, goods issues and customer invoices anywhere. In fact, these only exist virtually in the systems main memory for a short time.

They are created for triggering follow-on simulations such as the delivery triggering goods issue and invoice or calling respective document creation modules. In any case, after having triggered the predictive postings, the system clears the simulated entities from its memory without any further system trace.

You may be interested in: CO-PA Process Flow in SAP FICO

Journal Entries for Predictive Postings and Actual Postings

Now that we know about the extensive transfer of accounting concepts, document creation functions and document recording from the actual world into the predictive. From a business perspective and for a business user, actual documents and predictive postings don’t differ all that much. Mainly differences exist in technical and control information. It is only necessary for reporting and for specific predictive accounting follow-on procedures.

Let’s first have a look at how a standard SAP FIORI app visualizes both. For this, I have created sales orders and have let predictive accounting simulate a follow-on goods issue. I have created an actual goods issue for the same sales order. Both simulated and actual goods issued have created a journal entry in financial accounting.

Journal Entries with Predictive Accounting

Predictive document for simulated goods issue at order entry time i.e document number PAXXXX. See the first two images below.

The SAP Fiori app shows two journal entries.

With Actual Document

The actual document for the goods issue was created at the goods issue time i.e document number 14006.

Difference between two sets of images shown above.

We can find the difference between both entries on the left side of the screen where the system shows the basic document information. The system records the predictive document in extension ledger “N3” whereas the actual document in standard ledger 0L.

Technical Set up

First, the technical setup of a predictive document doesn’t include a document header. (There is no entry in the document header table BKPF). The SAP Fiori apps for document display are adapted accordingly and now can show predictive documents as if they were actuals.

Also Read: Tables in SAP Finance

Document Numbering

A second major difference is one that we have identified already. It refers to Document Numbering.

For predictive documents, we avoid situations where we need to force customers to find a used range of document numbers. Or even restructure their existing range for the sake of freeing up numbers for predictive journal entries.

We, therefore, refrain from any configuration for document numbering and assign technical document numbers automatically instead. This we do by applying a dedicated calculation logic. That’s why all predictive journal entries have a technical document number, starting with a two-letter prefix.

Document Referencing

The third major difference between predictive and actual documents involves the area of document referencing.

Actual documents resulting from logistics processes usually refer directly to their originating logistics document. For example, a goods issue document refers to the material document. Or line items of invoice postings refer to the customer invoice. We can find this information in the ACDOCA table fields AWORG, AWREF and AWITEM.

Conclusion

In this blog, we learned how predictive accounting works in S4 HANA as part of S/4HANA Finance. Beginning with basic prediction concepts, we went through and the use of predictive journal entries in the Universal Journal. Surely you would have understood, we can use predictive accounting in our system (both on-premise or S4 HANA Cloud ) and checked key activities such as creating predictive postings, reporting and monitoring.

Though Predictive Accounting was launched I S/4HANA version 1809, but it is getting more attention in recet times. Knowing this subject is itself a bookmark in your profile of SAP S4HANA Finance Consultant that definitely gives you an edge over other participants with you in competition.

So do learn it, mainly practice it into system to see actual results and how it works in SAP S4HANA implementation.

Watch Video: How Predicitve Accounting works in S/4HANA- Concept & Use