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As financial management systems evolve, they are increasingly required to provide richer management reporting so that non-financial business managers have the detailed and real-time financial information they need to make critical business decisions.  Accounting information has always been the basis for business decisions. However, while it is the language of business, the fluency in that language has traditionally resided in the finance staff who have the educational background to classify, interpret and act on the information. Often this fluency is lost on line of business managers who must use accounting information provided to them and apply it to their business context; be it managing a company division such as a cost or profit center or making critical decisions on where to allocate precious capital—such as to product development, markets or channels.

 

Financial management systems have evolved over the years; they’ve become increasingly oriented toward providing better and more actionable information to non-finance users across the company so that they can make better business decisions. With modern technology and the advent of cloud computing, financial systems are now even more effective and utilize advanced information management technologies to do this.

 

One of the fundamental challenges with financial management systems is turning a journal entry, with its somewhat arcane account postings, into actionable information the rest of business can use, rather than being just a mechanism for posting a transaction to the general ledger and enabling statutory financial reporting. One of the most effective ways we can do this is through tagging. Tagging allows accountants and business managers to assign attributes journal entries that allocate mainly cost and revenue data to various business units so that we can measure their individual contributions to the company’s performance. Stated another way, rather than simply using the debit and credit entry to post values to an asset, liability, expense or revenue account, we can use tagging to assign these numerical values to a variety of business dimensions (i.e. cost center, profit center, department, market, channel and customer). Coupled with advanced analytics that enrich dry management reporting with more intuitive graphics and key performance indicators (KPIs), we can now place more powerful information in the hands of business managers and knowledge workers across the business.

 

However, flexibility must have limits. Accounting requires rigor, hierarchy and control and some systems can take tagging and its inherent flexibility too far. The finance organization must have the ability to control certain transactional attributes such as to what specific  accounts the journal entry should be assigned. Without this, it would be very difficult for the finance staff to ensure proper controls and accuracy in their financial reporting. Too much flexibility would also make closing the books much more complicated.

 

SAP Financials OnDemand, our new cloud-based financial management application, was designed using the same principles that made our on premise SAP ERP Financials application the choice of 23,000 of the world’s largest and most complex companies. This includes a great deal of flexibility into how companies assign attributes to their financial data, via tagging, to deliver the critical information that helps the business run better. We also designed it with enhanced capabilities such as rich, embedded reporting and analytics, robust support for mobile devices and greater flexibility for companies to tag their data. Finally, we built it to run on HANA, our advanced in-memory data store to enhance reporting and the speed in which it's delivered.  In sum, this enables companies to provide real-time, reconciled financial information when and where people need it.

 

Please be on the lookout for the Financials OnDemand launch at our upcoming SAPPHIRE NOW event next week in Madrid!

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