SAP S/4HANA Finance: Group Reporting in the Cloud

Cloud computing is continuing to prove itself across the enterprise, and CFOs and finance teams should be jumping on board. Gartner reported last year that around 36 percent of all transactional systems will move to the cloud by 2020.

Finance applications form a big part of that, with more moving to the cloud with each passing year. There was a time when organizations didn't think that cloud solutions were appropriate for their enterprise. As large-scale efficiency and productivity gains become more robust in the cloud, adoption is rapidly becoming the norm. Easy-to-adopt, preconfigured models in the cloud can facilitate quick reactions to corporate spin-offs, mergers or next steps towards automation. Processes in the cloud can more easily be shared with service providers or advisors where desired.

A finance function that has greatly improved due to advancements in cloud technology is the simplification of group reporting. Entity close and group close accounting processes are converging to yield the next generation of financial reporting. This consolidation aligns with another prediction from Gartner that financial close capabilities will be embedded in core financial management application suites by 2023. Today, a new SAP solution for group reporting is emerging in the cloud, five years earlier than Gartner predicted.

Opportunities for Improvement

Financial consolidation is the nexus of complexity and risk in the financial close process. This is because when there are numerous entities, ERPs, local accounting rules, currencies, and people in play, there's often substantial room for error. When entity accounting and group accounting have different ways to manage processes, it often results in disparate data silos. This can spur lost time and inefficiencies due to either duplicate reporting or lack of visibility into details to properly close the books at the end of the month.

Take for example CPAs that work at corporate headquarters and CPAs that work for a subsidiary. While the latter group of finance professionals must close their own books at month-end, they also need to provide data to headquarters to support corporate processes. To do that requires manual adjustments, access to local tools, corporate tools, and two sets of results to comply with different reporting standards.

Time lost isn't the only symptom of outdated reporting workflows. Additional consequences of disparate financial data silos can include:

• Insufficient accounting details, such as details on intercompany transactions, missing from the data or details on asset movements to automate fixed asset schedules.
• Opaque data mapping from operational details to aggregated group structures.
• Data available to business analysts on group level is limited to their highly aggregated, mapped data lacking the possibility to drill down to operational details and preventing the use of advanced automated analysis.
• Many back-and-forth between group and subsidiary to ask for additional details.
• Data that is populated incorrectly according to local vs. group rules.

SAP S/4HANA Finance for group reporting eases these burdens and brings everything under one umbrella. When all parties have access to underlying financial details, reporting can be calculated in a more automated and accurate way.

Simplification of Group Reporting

Consolidated reporting is about expanding value from a local view to a group view and showcasing statements as a united entity. Under one system, errors can be found earlier in the process so at the end of each close, data is already prepared and in good standing. All details are available automatically for flexible and ever-changing management reporting needs in the digital age. It also provides the foundation to apply predictive techniques and further automation of processes.

From a continuous accounting perspective, financial consolidation can also play a significant role in providing information to the business faster. Moving to a virtual group close, and performing more consolidation tasks in real time, can provide a detailed perspective of the business at any point in the period. If consolidations and planning are brought together into a single application, it provides the perfect vehicle to drive rolling forecasts for real-time consolidated results. Combine this with the predictive accounting capabilities of SAP S/4HANA Finance, we are moving rapidly towards providing the best available numbers and several scenarios to decision-takers anytime during the period.

Advances in group reporting technologies are also helping companies accelerate their book-closing processes. A recent Wall Street Journal article cited research finding that the top quartile of closers using technology were able to close the books in 3.5 days, while the bottom quartile, who often were more spreadsheet-centric, took 7.5 days or more. With the support of continuous accounting and group reporting, corporate finance departments can shave as much as seven days off the closing cycle, freeing up more time for value-added tasks.

The Best Run SAP

By using the right information technology, accounting teams can increase the data quality, speed, and transparency of group closing processes - and help their firms run better and smarter. Using a single source of truth can give the board, shareholders, and business partners complete confidence in the finance team's numbers, while minimizing the time and resources required to produce them.

To learn more or receive a demo of automated consolidation processes, data integration, data validations, and consolidation methods following US-GAAP or IFRS, visit our session at SAPPHIRE NOW titled 'Reimagine Financial Consolidation in the Cloud.'

Ulrich Schlueter is senior development manager at SAP SE.