Implementing SAP Simple Finance

Former Member · ‎09-18-2014

Much has been published about SAP Simple Finance since its official announcement by Bill McDermott at SAPPHIRE NOW 2014[1]. Now a couple months later, customers are moving from “What are you talking about?” to “How do I implement it?”

A Refresher on SAP HANA

By now you should have heard about HANA, SAP's appliance that combines hardware packed with tons of processors and memory, a purpose-built operating system and the latest database architecture design. The result is a solution that can read through millions of database records in milliseconds. This amazing performance could be highly useful in all applications that handle very large quantities of detailed transactions, such as most of Finance (FI) and Controlling (CO).

This brainchild of Hasso Platner, founding member of SAP and chairman of the Supervisory Board since 2003, will have profound consequences on all of SAP's ECC coding, starting with the FI/CO modules. There, volumes of transactions are so large that developers have spent the last few decades optimizing with aggregates based on time, header/line item, hierarchies, indexes and archives.

Last year, Hasso initiated the redesign of FI/CO to leverage the power of HANA.[2]

Why Does Finance Need SAP HANA?

The Old ERP World

In a traditional ERP environment like SAP ECC, accountants handle incoming documents on a daily basis and record them into the system. If the document is related to Primary Costs for instance, both the line item (COEP) and the totals (COSP) tables will be updated. Frequently, managers will run reports reading the aggregates or index tables to analyze these primary costs and then drilldown to the line items for details. In this case, users need access to both tables. This architecture accesses less data at a time and therefore is better suited for an environment where the database is a bottleneck.[JD1]

Reports and database access in a traditional ERP environment

The Ideal World

Given the potential performance of HANA, we can easily identify redundancies. Imagine now a perfect environment in which the performance of the database is not limited, and totals can be calculated on the fly. In this case, the aggregate table wouldn't be needed.

Reports and database access in an ideal ERP environment

Looks much cleaner, right? This can easily be achieved by extending the line-item tables with all the fields from the header table. This removes the need for all the redundant aggregate tables and index tables. With HANA’s column store architecture, the line items can be retrieved quickly and aggregated on the fly. Imagine how your database could be slimmed down by removing all totals and indices, and the potential performance gains in both the data entry and analysis tasks!

Unfortunately, this ideal world has some limitations. First, all the reports and programs would have to be rewritten to select from line-item tables instead of aggregates, which, in SAP's case, could easily take years. Second, some information cannot be stored as a line item but requires a summary level.

For instance, imagine a customer requiring a purchase order for 1,000 widgets to be shipped in boxes of 100 per month. Every month, the manager needs to know: how many were sent (simple sum on shipment line items) and how many are left. If only the line item table exists, the following questions arise: where shall the required quantity be stored? Where can it be decremented?

These may sound like exceptions, but they are, in fact, very common for all planning scenarios or setting targets, usually done in some form of aggregates like a cost center group, cost element group, product line or customer family, as well as all the WIP (Work In Process) transactions. For these, a single line-item table wouldn't be sufficient.

Simple Finance: The Hybrid Approach

In order to solve this double issue (redoing the programs and values on summary data), the SAP development team came up with an hybrid architecture, in which the line item values and the summary specific values are separated into different tables, and then combined into a consolidated view.

Reports and database access in S-FIN

It is very important to understand that these new views (technically called CDS Views) will be automatically generated by Simple Finance during installation and guarantee the continuity of all existing programs, standard (variance, assessments, settlement, etc.) or custom, while reducing the database footprint and boosting the overall performance. As Hasso Platner said himself in his blog: “It is the by far the biggest improvement in the history of SAP's enterprise systems”.[3]

Multiple Implementation Scenarios

The new Simple Finance platform will enable companies to implement new scenarios, depending on their priorities:

Significant reduction in reconciliation efforts;
Real-time processes that eliminate bottlenecks during financial close;
Next-generation user experience.

Reduction in Reconciliation Efforts

As we saw earlier, removing the totals tables speeds up all financial process, and the critical period-end close is no exception. But the redesign of the core didn’t stop there. Indeed, accountants spend a lot of time during the short period-end window reconciling FI and CO.

A typical case is the rework needed when corrections are done in the ledger and subsequent cost allocations have to be reverted and reprocessed. In order to avoid this situation, the FI and CO documents have been merged 1:1 at the line-item level into a so-called “Logical Document.” With this new architecture in place, the internal and external reporting is harmonized, and the reporting and analysis can be performed with more flexibility given the smooth link between FI and CO.

From separate FI and CO documents
to the Unified Logical Document (Source: SAP)

For instance, every company running account-based CO-PA needs to collect FI documents at the end of the period and use them to perform managerial accounting activities like top-down distribution. Companies spend huge amounts of time reconciling between CO-PA and FI-GL[4]. Thanks to the Logical Document introduced with Simple Finance, the account-based CO-PA integration mechanisms can be used in real time; there is no need for reconciliation anymore and several steps can be skipped at each month’s end. (However, be aware that Simple Finance does not yet support costing-based CO-PA.)

“Essentially you have the old reconciliation records with real CO-PA dimensions,” said Janet Salmon, Solution Manager for Simple Finance.

Real-time Processes that Eliminate Bottlenecks during Financial Close

What makes the financial close so complex is the sheer number of processes to run, as well as their interdependencies. From a high level, the financial ledger needs to be closed, then all orders need to be settled and their WIP calculated, and finally, the cost allocations need to be performed in order to calculate customer/product/corporate profitability before data can be exported to the data warehouse for reporting and analysis. That has to happen for all entities before moving to the corporate level. Only after this long process (that leads to the publication of reports), can any error or discrepancy be found. Potentially, several of the batch programs might need to be reverted and rerun until everything matches up correctly.

Traditional financial close vs. financial close on SAP HANA (Source: SAP)

With SAP Simple Finance, thanks to the removal of aggregate tables and the introduction of the logical document, the period-end close can be performed on a recurring basis and reports can be published in real time. This enables analysts to identify and correct mistakes earlier and decision-makers to correct course during the period rather than 30 days later.[5]

Next-Generation User Experience

We talked a lot about the changes that Simple Finance introduces behind the scenes and what performance, flexibility and real-time processes can achieve. But end-users will also be interested in discovering the new user experience that SAP Fiori[6][7][8] delivers once connected to SAP Simple Finance.

The key difference is that not only were aggregate tables replaced with CDS Views that support a reduced footprint, higher performance, as well as backward-compatibility of all standard and custom ABAP programs, but also that these views were integrated into SAP HANA Live.[9] This HANA layer acts as a content publication service offering an easier platform for the creation of reports. Here are some examples:

New screens can be published with Dashboards[10] or Design Studio.[11]

SAP Fiori Dashboard in SAP Smart Business[12]

With new tools like Lumira, Explorer or Analysis for Office, users can easily discover and analyze large volumes of data, in real time, down to the line item.

WIP Analysis with SAP Analysis for Office[13][14]

Multiple Migration Scenarios and Paths

Now that you understand the value that SAP Simple Finance can provide to your organization, the biggest hurdle that lies ahead is: how do you migrate from your current environment to SAP Simple Finance? There, two options are available:

Using Simple Finance as Central Ledger;
Moving from Business Suite to Financials Add-On.

Simple Finance as Central Ledger

Many large organizations maintain more than a single ERP. This architecture is usually the result of performance trade-offs (one smaller ERP system, according to region), history (mergers, fusions or acquisitions) or legal requirements. In order to achieve a corporate view of the organization, operations are handled locally and data is collected centrally for reporting. However, this process is very slow, doesn’t allow real-time decisions at a high level, and presents a disconnection between the aggregated results in the central repository and the line item stored in decentralized locations.

SAP Simple Finance as Central Journal (Source: SAP)

The solution can be found in the installation of SAP Simple Finance to collect all financial information from the source ERPs in real time. From there, business transactions can be used to plan, consolidate or report. This non-disruptive solution can be deployed in cloud or on premise. Several organizations choose this strategy as a first step towards the adoption of Business Suite on HANA.

From Business Suite to Financials Add-On

If your organization is maintaining a single ERP environment, or only a few ERP instances, a better solution could be the migration from a traditional SAP ERP Business Suite to Simple Finance. To do this, you would have to perform a migration of your underlying database to SAP HANA[15][16][17] before installing the Financials Add-On. Check the documentation for more details on the requirements. [18][19][20]

Migrating from traditional Business Suite to Simple Finance

Learn More

Depending on your role within your organization, you may need to search for more information on SAP Simple Finance from different angles. I have collected many links to diverse sources of information.

Should you still have any question, don’t hesitate to contact me directly at jdelvat@altavia.com.

[1] Finance Took Center Stage (again)

http://scn.sap.com/community/events/sapphire-now/blog/2014/06/20/finance-took-center-stage-again

[2] SAPPHIRE NOW 2014: SAP Simple Finance Highlights

https://www.youtube.com/watch?v=zdY_1GYBedU

[3] Massive Simplification: Case of SAP Financials on HANA

http://www.saphana.com/community/blogs/blog/2013/11/03/massive-simplification-case-of-sap-financials...

[4] Reconciling SAP COPA to the General Ledger

http://www.amazon.com/Reconciling-SAP-COPA-General-Ledger-ebook/dp/B00J66CEYO

[5] Real-Time Business Becomes a Reality: Reinventing Finance at SAP

http://www.saphana.com/community/blogs/blog/2013/12/18/real-time-business-becomes-a-reality-reinvent...

[6] SAP Fiori