Businesses today, particularly those that have gone through mergers and acquisitions, often have to run multiple ERP systems—which can lead to a less-than-ideal finance landscape. This also creates challenges for CFOs looking to manage core business processes, gather accounting data, and analyze their financial results across the enterprise.
Central Finance, formerly known as Central Journal, is a deployment option for organizations that are not ready for a full SAP S/4HANA upgrade but are looking to bring efficiencies to their business. It’s perfect for those that are aiming for a single source of truth for their data across the organization, whether it’s coming from an SAP or non-SAP system.
ASUG News sat down to ask the authors of Central Finance and SAP S/4HANA from SAP Press to share their insight about what it takes to implement Central Finance and what it can deliver for customers. Carsten Hilker, global solution owner for Central Finance and Julien Delvat, manager of TruQua’s SAP S/4HANA practice and solution portfolio, discussed how you can use this method establish a central processing layer for finance across an organization.
Sharon: What is Central Finance?
Carsten: Simply put, Central Finance is a central SAP S/4HANA system. In the past, we used central ERP systems for finance. But now, with the SAP S/4HANA system, we have an integration layer and a processing layer that come standard with the ERP source systems. So, the integration, the harmonization, the mapping, and the accounts receivable processing are all part of the standard SAP Central Finance solution, as compared with a custom implementation in the past.
Sharon: What types of organizations can expect the greatest advantages from Central Finance?
Julien: Central Finance is ideal for organizations trying to move from an ECC environment into an SAP S/4HANA environment. This is especially true if your current environment is complex and your goal is to either accelerate innovation or to do some process transformation. These types of organizations will benefit the most.
Other types of organizations that will really benefit from a Central Finance deployment are those experiencing frequent mergers and acquisitions and that have a lot of different systems as a result. Or it is good for those organizations with old systems that do not represent their business today, yet they still want to adopt new features and solutions. If your organization has changed business models from when your system was first implemented, say 10 or 20 years ago, it’s the right time to look at Central Finance as an option.
Sharon: What makes Central Finance a silver-bullet solution?
Carsten: Central Finance is a central SAP S/4HANA system. Organizations can deploy it as an ongoing merger and acquisition hub, or as a post-merger integration solution. They also can use it as a digital transformation platform to integrate emerging technologies, or as a stepping stone for a full SAP S/4HANA migration, starting with finance.
In any of these use cases, organizations sometimes end up doing more and more of the same thing, whether it’s another application, another interface, another mapping, or another adjustment at year end. With Central Finance, we can eliminate the legacy system technology that forces us to spread information to as many different places as possible. With an in-memory database that has cloud-based delivery and built-in predictive analytics capabilities, we can bring the data all together into one system based on SAP S/4HANA and integrate it with other existing systems.
Sharon: How does Central Finance work, and how does it connect to other source systems?
Julien: Unlike a business warehouse or data warehouse system where you just copy all the data as-is, the Central Finance system reposts the transaction completely with the entire validation of a normal transaction. So, it’s really a full transaction replication
There are a few tools available to help. The SAP Landscape Transformation Replication Server connects to your current SAP or non-SAP system with the SAP S/4HANA Plus Central Finance Component, which then does the integration between the two. The tool looks at your source system. Every time a transaction happens, it records in your source database tables and it replicates through SAP Landscape Transformation into the Central Finance system.
Sharon: How does Central Finance help customers better manage and govern their data? And how will Central Finance with SAP S/4HANA improve their reporting and analytics capabilities?
Carsten: Central Finance allows you to bring in a transaction and then map the business object included in the transaction for adjusted posting in that central instance. It keeps the old value and posts the transactions to the new values. You will have one single source of truth with a harmonized data view, which will help execute central processes, but also maintain harmonized, aligned, corporate-wide reporting that you can use to compare the performance between the different entities in your enterprise.
From a management perspective, you can govern your data with SAP Master Data Governance (MDG) processes, or other supported tools that make sure the postings and the mapping that you established when you implement Central Finance will remain intact and consistent throughout the use of Central Finance.
So, you will have one system with a single set of transactions based on harmonized data across the entire enterprise, across all systems.
Sharon: How does Central Finance help customers transform their processes?
Julien: First, let’s look at which processes are covered. We have everything from payables and receivables, to accounting, financial close, controlling, and banking and treasury. We can also use Central Finance as a base for more applications such as tax applications, cloud-to-customer payments, or cloud-to-credit integration.
We’re not changing your source system. We do, however, map and then repost each transaction into the Central Finance system. And with that, we can change the configuration.
So, let’s say you have two source systems with different controlling areas. With Central Finance, you can have one. If they have different shared accounts, now you can have a central one. It is truly harmonized data. The goal is to have these separate systems where you can change your processes and not disrupt your current existing environments.
Sharon: How can customers run their implementations without disrupting daily business?
Carsten: When you set up Central Finance, the most likely scenario is that you are using a separate system because you do not have a support system in your environment yet. As such, Central Finance will run on a separate instance that’s connected to your source systems but will not interfere with any business transaction execution.
Once transactions occur in the source systems—SAP or non-SAP—the data that made up the transactions is copied over to Central Finance. So, again, there’s no change required in these source systems, and therefore no disruption.
If you want to improve the way the data is currently captured, you can include additional dimensionality to enhance it. That can be done once the transaction has been brought over and before it is posted into the central system.
From a process execution perspective, customers will be able to continue to process their logistics and their finance transactions of choice in those source systems.
Sharon: How much time and effort are required for training and testing during implementation? What tips do you have for training teams on the new system?
Julien: There is going to be a lot of change management involved, especially if you’re coming from an ECC or non-SAP system. You will need changes to your processes, the master data, and the user interface. So, plan for the time and effort these changes will take.
If you’re planning to spend a year on your Central Finance project, I would allow at least one month for testing and training. Test early and test often, according to our typical SAP Activate Methodology.
One option is to stand up the Central Finance system inside a cloud option and have people start to play with it, get familiar with the user interface, and work with the embedded analytics. Give them the opportunity to get familiar with the environment.
When you reach the real testing phase, it will be a little bit more complex because you will have to run transactions in one system and then compare them in the second system. We recommend having a technical go-live, where the live ECC or non-SAP system is connected to your Central Finance system. This will allow you to monitor the system for a month or two and get users used to seeing what’s going on before it really goes live.
Sharon: In your opinion, how can Central Finance help companies transform their finance functions and move toward the vision of intelligent finance?
Carsten: Central Finance allows us to bring all the emerging technologies of an SAP S/4HANA system to the finance community. It becomes an intelligent finance solution because there are so many baked-in intelligent capabilities such as modeling, simulation, planning, predictive analytics, machine learning, and more.
Sharon: Can you summarize this book in just a few sentences?
Julien: The book tries to answer three different questions. First, why Central Finance? This is really about process transformations, as well as scoping and building a business case. The second question is how Central Finance? This is about implementation. The third question is, what’s next? What are the applications that are available now, what’s the future road map, and where do we go from there?
Central Finance and SAP S/4HANA is available now from SAP Press. ASUG members, please log into your account for discount details. If you want to devote more time to Central Finance, you can also catch the on-demand webcast with the authors, How to Implement Central Finance with SAP S/4HANA.