SAP FI, also known as SAP Finance is the functional module of SAP ERP Financials, which deals with Finance. While Controlling (CO) deals with the business’s cost control, which is the other part of SAP Accounting. Both in combination makes it a complete module. Hence everyone calls it SAP FICO.
Since SAP FI deals with the financial obligations of the business, thus, it is named SAP Financial Accounting of the ERP system i.e. the Finance module in ERP.
On the other hand, Controlling handles the management of costs and expenses. So, we call it SAP Management Accounting.
In this article, we are going to start with what is SAP i.e. the very beginning. So read on.
What all is covered here:-
The term SAP® is the registered trademark of a german-based company SAP AG. It named its product by its name itself i.e. SAP.
SAP is an abbreviation for Systems, Applications and Products in Data Processing.
It is the market leader in business solutions. It provides you with software applications and services to address unique business needs irrespective of industry.
Learn in Detail: What is SAP? (History, Introduction, and Journey)
You can enhance your financial performance with SAP ERP Financials by accurately managing liquidity and cash, streamlining processes, and reducing costs.
The key functionality of SAP ERP Financials aims to give you the business support you need in some important areas. These are Finance and accounting, Cost Control, financial supply chain management, and treasury related. For these requirements, SAP has provided us with four modules in SAP ERP Financials. These are:-
While we will learn the Financial Accounting module in detail, we will also briefly understand the other three modules.
Financial Accounting i.e. SAP FI (Finance) enables company-wide control and integration of financial information that is essential for strategic decision-making.
It complies with international accounting standards such as the US GAAP and TFRS.
(US GAAP is – Generally Accepted Accounting Principles).
(TFRS is – International Financial Reporting Standard).
Further, SAP Financial Accounting also fulfils the local legal requirements of many countries and reflects the legal and accounting changes.
The SAP FI component within SAP Financials has several new functions. Its modern enhancements help to meet today’s financial and management requirements in accounting and reporting.
In SAP FI we have the sub-modules which help to enhance its efficiency and user-friendliness. These are:
Let us read them in detail.
The SAP New General Ledger eliminates the need to maintain multiple ledgers. Its functionality comprehensively supports both financial and managerial accounting as a single application.
New G/L improves financial accounting and reporting through rules-based, real-time allocations between business units. It also automates the reconciliation of journal entries across multiple units.
While in traditional (classic) GL solutions, you require reconciling multiple applications to meet enterprise-wide reporting requirements.
New G/L provides you with the flexibility to create multiple ledgers such as:
All this is within a single application.
SAP New G/L allows you to maintain multiple parallel ledgers that support diverse currencies and financial reporting standards.
Such as IFRS, country-specific regulations such as US GAAP, and any other local requirements specific to your industry.
You can update these parallel ledgers through a single posting transaction using defined business rules. These rules govern how transactions are recorded and reported according to different accounting rules.
Also Read: New Asset Accounting Migration to S/4HANA
New G/L in SAP FI offers you the option of creating a document enhancement or online split “when making journal entries. Hence it streamlines the process of posting transactions.
It further allocates them to different cost or profit centers. While at the same time it makes allocations for specific cost objects.
You can also use the New GL document splitting functionality for customer-defined and industry-specific fields. You can apply these to individual documents and throughout the entire document chain.
New GL features a single reconciled database with robust portioning functionality. Thus it allows you to create multiple ledgers that all reconcile up to a single leading ledger.
For instance, you can include company-code segment and profit-center reporting dimensions in a single data source. This can also be extended to include other custom fields.
Related: Scenarios in SAP General Ledger Accounting
Through a common reconciled database, special ledger postings roll up to the G/L without the need for manual or automated reconciliation. As a result, managerial and financial accounting is always reconciled with the G/L.
With the New G/L, you can now accelerate the period-end closing cycle and automate several period-end activities. For example accruals and journal entries. This is because the data source is common and always reconciled.
Also Read: Top Closing Activities in SAP S/4HANA Finance
New G/L also enables greater transparency for auditing and corporate governance in SAP FI.
SAP Accounts Payable is used to record and administer accounting data for all your vendors. SAP FI-AP is an integral part of the purchasing system that automatically makes postings in response to operative transactions.
In addition, it supplies the Cash management application component with figures from invoices to optimize liquidity planning.
You can use a built-in payment program to make payments for the payables in SAP FI. The postings made in FI-AP are simultaneously recorded in various G/L accounts based on the transaction involved.
You Maybe Interested in:- the Bill of Material in SAP S/4HANA
Similar to FI-AP, FI-AR records and administers accounting data for all your customers. It is an integral part of sales management. All postings in FI-AR are also recorded directly in the GL.
There are several tools in SAP Accounts Receivables that you can use to monitor open items. By using a dunning program to remind your customers of their payables.
This program also provides the data that you need for effective credit management and optimized liquidity planning. This is because it provides links to cash management.
A subsidiary ledger to the G/L, FI-AA (Asset Accounting in SAP FI) is used to manage your company’s fixed assets in the SAP Finance system. You can use this in any country, regardless of the nature of the industry.
Additionally, it is integrated with other application areas also.
Furthermore, FI-AA transfers data to and from other SAP components. Hence, you can pass on depreciation and interest directly to the FI and CO components.
FI-BL (Bank Accounting in SAP FI) enables Bank Master data management and cash balance management besides processing incoming and outgoing payments. Using this, you can freely define all country-specific characteristics. These include:
Using FI-SL, you can define ledgers for reporting purposes in SAP Financials. You can keep these under-defined ledgers as G/Ls. Or you can keep them as subsidiary ledgers with various account assignment objects.
These objects can be either SAP dimensions from various applications or customer-defined dimensions (such as regions).
Here the SAP dimensions are such as account, cost center, profit center or business area.
Using FI-SL does not affect the functions of other SAP applications. With the introduction of New G/L, you may not need FI-SL.
Also Read: Document Types in SAP FICO
Management Accounting is also referred to as SAP Controlling (CO). It helps your analysts and managers work with the same basic data as your company’s financial accountant.
It also enables the valuation and recording of financial data. This does not only work for SAP financials reporting but also as the basis for all cost and revenue-related reporting.
To your knowledge, in S/4HANA, Management Accounting has equal importance. It added new functionality though. Basic concepts remain the same.
The key functions of Management Accounting include the following:-
Related: Product Costing in SAP
Also Read: Key Updates of SAP Profitability Analysis in S/4HANA 2020
SAP FSCM provides you with functions to manage the entire financial supply chain and cash-flow cycle more effectively. It also helps your collections teams to perform better in managing receivables.
Further, it analyzes the root causes of late payments and proactively handles customer disputes.
Learn FSCM in: SAP S4 HANA Finance Training
Treasury and cash managers can use Treasury Management to gain insights into transactions under SAP FI. It checks and controls hedging transactions pooling and allocates cash globally.
It does it with the help of straight-through processing of banking, corporate treasury, and financial accounting processes.
Also Read: Career in SAP FICO
How much knowledge do you possess of SAP Finance? Learning SAP FI is of utmost importance for you, especially if you are inclined to the SAP Accounting application.
Since, finance is the backbone of SAP Accounting, thus, to become an efficient SAP FI consultant, you need to go deep into this subject.
Not just, theoretically, you need to understand things by practical applications. Importantly, you should see all configurations step by step and apply them yourself too. Then only you can do it in real-time.
As the first step to this, you should either do the SAP FICO course or join the SAP S/4HANA Finance training, depending upon your background & interest.
This would help you to understand the concepts practically, consequently helping in real-time work.
All the submodules of SAP FI have their importance and role in the implementation, and migration process.
With the structured system of configuration, sooner or later you would reach up to these components, utilizing their unique functionality, thus needing the proper knowledge of each of them.
So, to sum up, pay equal attention to each one of these to complete your knowledge and scale up your skills.
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