SAP S4 HANA Finance (Simple Finance) – A Comprehensive Guide for Beginners

Last Updated on May 16, 2023 by Pradeep

What is SAP S4 HANA Finance?

SAP S4 HANA Finance, also known as SAP Simple Finance is the new generation Finance module on the HANA Platform. It is one of the most important modules of the SAP Business Suite. It majorly has two Parts. One is related to Finance and the other is related to Controlling.

What all is covered in this Article:-

• Key Sub-Modules
• Main Features
• Advantages
• Features Vs. Functionality
• Business Scenarios
• Functional Changes
• System Architecture
• Deployment Options
• Conclusion

Let us begin learning about this very important subject.

Key Sub-modules (Elements) in SAP S4 HANA Finance

As mentioned above, SAP S4 HANA Finance has two aspects i.e. Finance and Controlling. Here I mention in brief the most important sub-modules of these aspects.

Please note, Controlling is now part of SAP S4 HANA Finance itself. It is also called SAP S/4HANA Management Accounting. In SAP FICO CO was a separate module from FI. However, in S/4HANA, Controlling’s key topics are now merged with SAP Finance.

Key topics – SAP Finance

• In-memory Technology Concept
• Universal Journal (ACDOCA)
• Extension Ledger
• Centralized Master Data for GL
• Primary & Secondary Cost Element
• Business Partner Concept

Key Topics – SAP CO

• New Profit Center Accounting
• SAP Product Costing
  • Standard Costing
  • Cost Object Controlling
• SAP COPA – Account-Based Controlling
• Profitability Analysis with COGS Splitting
• New Asset Accounting
• Production Order Costing

(All these topics are separately covered in detail in Skillstek’s blog. This will help you to give in-depth knowledge on each topic.)

Do you want to read:- SAP Controlling in ECC and its sub-modules

Top Features of SAP S4 HANA Finance

HANA is not only a Database, but it is also an Appliance, which means it is a combination of Hardware & Software innovation.

With S4 HANA Simple Finance, SAP has replaced the traditional Disk-based Database with In-memory Database, which has Multi-Core processing with many blades. Likewise, it has replaced Software innovations like Row-based Tables with Columnar tables. Consequently, you no more require separate Index Tables, Aggregate Table etc.

Related: Key Features of SAP S/4HANA Finance

OLTP and OLAP

While learning S/4HANA Finance, you will understand that you don’t need to maintain the OLTP & OLAP system separately. Since the HANA Appliance is a combination of both OLTP & OLAP systems together. Hence, you can get HANA Reports on the fly.

SAP ACDOCA – Universal Journal

S4 HANA Finance has introduced a Table ACDOCA (Universal Journal) which has replaced lots of Tables from the existing ERP (ECC). This includes Finance, Controlling, Asset Accounting, COPA etc.

Furthermore, it has all transaction line Items of FI ( BSEG), CO (COEP), CO Object External Posting (COSP), and Secondary Cost Element (COSS). Additionally, it has Open Items like BSID & BSIK and Clear Items like (BSAD & BSAK).

Related: List of important tables in SAP

Leading and Non-Leading Ledger

In S4 HANA Finance Ledgers combines the latest Leading Ledger and Non-Leading Ledger. Additionally, it has launched new features like Extension (Appendix) Ledger & more in its portfolio.

SAP Central Finance

With SAP Central Finance, you can run SAP S4 HANA Finance in a shared service model. It mainly centralises all transactions into a consolidated instance.

SAP Fiori Design

SAP S4 HANA Finance adopts SAP Fiori design to deliver a beautiful and user-friendly finance application for the best consumer experience.

What makes SAP S4 HANA Finance simpler? – Advantages

SAP Simple Finance provides the following advantages:

1. UX – It enables a simpler user experience that provides instant access to any financial insight on any device
2. Process Execution – It simplifies process execution for real-time financials that are always reconciled
3. Decision Making – Further, it makes decision-making simpler by using prediction and simulation, always on the fly.
4. Architecture – SAP Simple Finance provides simple solution architecture without aggregates and data redundancies
5. On-Premise – Likewise, the IT strategy also is easier with cloud, on-premise or hybrid deployment options
6. Pricing – It offers simpler pricing with pricing bundles, including subscription-based pricing for the cloud.
7. Real-time View – Lastly, Simple Finance makes the simpler business justification of a real-time view of the state of the business across all entities and continuous soft close.

Features vs. Functionality in SAP Simple Finance

Read Related: Simplifications in SAP S/4HANA Finance

Business Scenarios in SAP S4 HANA Finance

To illustrate the business value of SAP Simple Finance, I have put various business scenarios which would help you understand the functionalities more precisely.

1- Accounting Financial Close

SAP S/4HANA Finance’s Central Finance deployment option addresses the challenge of multiple SAP ERP systems. An example of this is the complexity of mergers and acquisitions. Likewise, SAP S/4 HANA Finance’s month-end close business scenario addresses the current long closing cycles. Additionally, it accomplishes the desire to have reliable financial data at any time.

2- Treasury and risk management or collaborative finance operations

SAP S/4 HANA Finance’s working capital and receivables management business scenario addresses the organisation’s pain points. This includes the high days of sales outstanding and cash flow challenges.

3- Enterprise risk and compliance management

The process oversight functions of SAP S4 HANA Finance help to identify the areas with high-risk fraud. Thus, it makes the system more secure.

4- Financial planning and analysis

SAP BPC for SAP S/4 HANA Finance addresses the need for dynamic planning and ambition for enterprise-wide integrated planning at the same level. Consequently, it simplifies the planning and analysis process and integrates control at the central level.

Functional Changes with SAP S4 HANA Finance

Universal Journal – ACDOCA

Universal Journal in SAP S/4HANA is the single source of truth for financial information. It carries a new data model that combines Controlling (CO), and SAP ERP Financials (FI). It further has Asset Accounting (AA), SAP Material Ledger (ML), Profitability Analysis (CO-PA), and other financial data in one Universal Journal entry. Furthermore, these all are represented in the table ACDOCA, with full details for all components. Since the system provides all data in real-time from this single journal. Thus, it reduces the period-end reconciliations and financial reporting preparation efforts considerably.

On the Fly calculation process

The new Universal Journal allows ad hoc, on-the-fly computations for converting recurring transactions from batch to real-time. It does not need the data to be replicated first to other systems such as SAP Business Objects Business Intelligence (SAP Business Objects BI). Further, the reporting is simple, fast, and multi-dimensional. Hence it makes the drill-down reports almost redundant.

Smooth Month-end and Year-end closing process

The ability to move away from batch-based and towards event-based processing enables period-end processes to run daily or weekly. Thus, it allows organisations to get a real-time view of their profit and loss (P&L). Even more, it provides the business with early visibility into emerging trends.

This functionality facilitates prompt remedial action where necessary, rather than waiting till the month-end. Consequently, it helps accelerate month-end activities by reducing dependency on scheduled and periodic batch jobs and tedious reconciliation efforts.

SAP BPC for SAP S4 HANA Finance for real-time integrated business planning

This is a new planning functionality in which you can upload planning data using Microsoft Excel, which in turn loads real-time data back to SAP ERP for reporting. It also contains templates for internal orders, projects, profit center, cost of sales, P&L planning and also for SAP cost centers.

New Asset Accounting in SAP S4 HANA Finance

New Asset Accounting in SAP S/4HANA Finance replaces the classic FI-AA functionality. It also simplifies posting logic which in turn allows seamless integration with the Universal Journal. Due to the real-time postings, we don’t need to wait for the month-end depreciation run.

SAP Cash Management

S/4HANA Finance allows an optional replacement for SAP Cash and Liquidity Management. This also adds bank account management, short-term cash position and forecast reports. furthermore, it enables real-time liquidity planning which allows for working capital optimisation.

Likewise, SAP Cash Management provides on-the-fly reporting capabilities for cash position and liquidity forecasts.

SAP Smart reporting with Fiori

We already know that Fiori enables the best user experience and friendlier usage of the finance application. These are optional replacements for many of SAP’s traditional drill-down reports. While the code framework used by the old reports can’t be accelerated much with SAP HANA. SAP Smart Financials reporting uses the SAP Smart Business mobile UI with online KPIs and essential financial information.

This not only saves time but also enhances the performance of the finance application.

Data Ageing

This technical change replaces SAP data archiving. The new method builds data-ageing objects, creates partitions, and executes data-ageing runs. Thus, it reduces the SAP HANA memory footprint. Noteworthy, while only operational relevant data (hot data) is loaded in the main memory, historical data (cold data) is stored on a disk.

New General Ledger in SAP S4 HANA Finance

Now the classic G/L functionality is completely replaced by the SAP New General Ledger. The classic G/L is only supported before the introduction of SAP S/4HANA Finance.

SAP Credit Management

SAP Credit Management is now completely covered under collaborative finance operations and receivables management.

System Architecture with SAP S4 HANA Finance

SAP S/4HANA Finance’s Architecture lies with Universal Journal, which is comprised of a single source of truth for all accounting components. Hence, it makes reconciliation a topic of the past.

The new architecture consists of the following elements:

Universal Journal – One Single Source of Truth

Universal Journal provides us with One single source for data in FI. It offers it in the form of a line-item table ACDOCA with full details for all components.

The following are some of the Universal Journal features:

• It provides a link on the line-item level (1:1) between FI and CO
• It also creates a link from CO line items to a dimension table in CO-PA
• Further, it Enhances account-based CO-PA (detailed postings for the cost of goods sold)
• It provides a logical document (SAP HANA View) for analyzing the converged data
• Above all, Universal Journal does entries as the reporting database with:
  • A Universal Journal entry (table ACDOCA) is used for all accounting-relevant data. However, all previously used tables are still supported via compatibility views.
  • All fields are persisted in the Universal Journal entry, such as asset data, CO-PA attributes, and so on. Also, they can be reported from this single table.

Accounts and Cost elements – Merged

Secondary cost elements are created and depicted as G/L accounts with the following activities:

• G/L accounts and cost elements are merged.
• Secondary cost elements and cost element attributes are merged with G/L accounts.
• Surely, you need to maintain the Primary and secondary cost elements at the company code level.

Simplification of reporting in SAP S4 HANA Finance

Now reporting is based on a single source of truth (e.g., replacement of SAP Business Objects BI reporting). Certainly, it allows fast multidimensional reporting on the Universal Journal. This is possible without replicating data to a separate system.

This simplification process does the following:

• It allows cross-area reporting within FI on all possible dimensions for all reporting objects (cost centres, orders, projects, etc.).
• It also Drilldown to all dimensions—for example, from the balance sheet and P&L to a single line item.
• Furthermore, the reporting allows profitability attributes for every P&L line item in real time.

Reduction of the memory footprint

S4 HANA has reduced the memory footprint by eliminating redundancy.

Capable Finance Structure

Technical preparations have enhanced important structural capabilities of the financial solution (e.g., multi-GAAP, additional currencies, etc.).

CDS Views in SAP S4 HANA Finance

When you activate the SAP S/4HANA Finance, the system replaces aggregate tables of classic FI-AA with SAP HANA views.

Following are the tables:

• General Ledger Accounting’s totals tables and secondary index tables, such as tables GLT0, BSIS, and BSAS, and tables FAGLFLEXT, FAGLBSIS, and FAGLBSAS, respectively
• The totals tables and application tables of Accounts Receivable (AR) and Accounts Payable (AP), such as tables KNC1, KNC3, LFC1, LFC3, BSID, BSIK, BSAD, and BSAK
• The totals tables of CO, such as table COSP and COSS

Learn: Scenarios in SAP General Ledger Accounting

Deployment Options in S/4HANA

Implementation of SAP S/4HANA Finance is undoubtedly a significant strategic decision both for IT and the business. You may use several SAP S4 HANA Finance deployment scenarios based on the situation and the requirements of the organization.

Greenfield implementation

This scenario features a fresh implementation of business processes on the SAP S/4HANA platform. Maybe because it is a new implementation. Otherwise, the reason could be that migrating the existing implementation to SAP S/4HANA provides little benefit.

For any greenfield SAP implementation, brand-new customers might take the view since they’re already implementing SAP. Hence, they should go and get a completely new SAP S/4HANA. However, you need to carefully analyze the organization’s specific financial requirements also. This is to determine the components of SAP S/4HANA Finance that require activation. This also includes assessing nonfunctional requirements too.

Likewise, you need to expect pre-migration validation checks and data fixes that require patience and persistence.

SAP HANA database migration

During the SAP HANA database migration, an organization is already on SAP ERP 6.0 EHP 7 or above (on a traditional RDBMS). Organizations on mature SAP ERP 6.0 implementations can analyze the impact of what a real-time analytical environment may bring them. Also, to know how they can monetize the value of real-time information which is fast available. Consequently, they can create good value for their organizations.

Technically, this commits the organization to SAP’s proprietary in-memory platform. Organizations need to spend time assessing the business case. This includes the risk of adopting the SAP HANA platform versus running the SAP Business Suite on other platforms, particularly in industries that use many other connected applications.

Related: What is SAP?- Learn in detail

Replicate to Central Finance

This scenario replicates all systems, both SAP and non-SAP, into a Central Finance instance before deploying SAP S/4HANA Finance into the company’s environment.

Some organizations are either not yet ready to upgrade their legacy systems or such an upgrade will be complex and time-consuming. Here SAP Central Finance benefits would help. Those organizations should go for the Central Finance deployment option. This is also because the C-Fin system architecture is such that it will support their requirements.

So, in this way, they can get benefit from SAP S/4HANA Finance without touching the existing system landscape. In short, by using Central Journal facilities, they can connect legacy SAP and non-SAP systems to an environment based on SAP S/4HANA Finance.

Also read: How to get a job in SAP FICO

Conclusion

SAP S4 HANA Finance is an interesting subject, also very important. Especially for SAP End-users of SAP finance and for SAP FICO consultants. Since they might want to upgrade their profile with S/4HANA.

S/4 HANA is the future. The features and benefits of S/4HANA Finance are enormous. As you dig into the subject you would find amazing facts that why this subject is the most popular module in SAP. For this very reason, it is in high demand. So, if you have an interest in this field of career, step ahead soon and explore more with the SAP HANA Finance course.

Read: Be a successful SAP S/4HANA Finance Consultant