What is Central Finance?

Klaus Satzke, Associate Partner, IBM

Matt Montes, SAP Financials Senior
Managing Consultant
IBM

THE MOST TRUSTED INDEPENDENT SAPINSIDER COMMUNITY

INFORMATION SOURCE FOR SAP 600,000+ STRONG
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In This Session
SAP S/4HANA for central finance remains a mystery to many while others have
implemented this solution for significant business gains. In this detailed session we
will walk through the 2022 ‘Central Finance self-evaluation’ tool that helps you to
identify the key pillars and possibilities of your business transformation. We will
answer simple questions that can enable you to construct a rock-solid business
case to move to SAP S/4HANA and the cloud.

• Benefits of a Finance First approach to SAP S/4HANA

• Key considerations of SAP S/4HANA for central finance
• How to bring together SAP and non-ERP source systems and how it can fit
into your heterogeneous system landscape without disruption
• Key aspects and best practices for data ingestion (i.e., initial load, master
data load, ongoing replication) and error correction
• How to get an SAP S/4HANA for central finance system up-and-running with
an opportunity to evolve this solution to an operational ERP, that runs both
SAP S/4HANA for central finance as well as logistics in the same system
What We’ll Cover

• What is a Finance First approach to S/4 HANA?

• What is Central Finance?
• Integrating SAP and Non-SAP systems into Central
Finance
• Key considerations and best practices of a Central
Finance Implementation
• How can Central Finance be leveraged as a stepping
stone to S/4HANA?
• Wrap-Up
What is a Finance
First approach to
S/4 HANA?
What is a “Finance First” approach to S/4HANA?
“Finance First” - as the Finance First
name implies, is an Scope Considerations
implementation
approach to S/4HANA
that focuses on
enabling Finance
capabilities first.

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 What are the Benefits of a “Finance First”
approach to S/4HANA?
Top 10 reasons why customers chose “Finance First”

#1 Unified Reporting - you can #4 Central Assets, Treasury, #7 Accelerated value right from the start -
leverage the new SAP S/4HANA for Banking, A/R and A/P - clients delivers analytical detail for deeper insights

Speed to Value & Lower Risk

unified, real-time reporting achieve significant business benefits and allows close the books faster, while
#2 Single Source of Truth - allows with central transaction processing. integrating planning processes with actuals
clients to view and focus on their in the ledger
financial data across the enterprise #5 Shared Service Enablement –
in a the ‘one version of the truth’ enabling or enhancing capabilities in #8 Lower Implementation Risk – less scope
ledger shared services with standardized and complexity to start the journey to
operations across the enterprise. S/4HANA
Finance Functions
#3 Financial Consolidation -
significantly improve the
consolidation capabilities due to #6 Fast M&A and Divestiture - #9 Lower Change Management Impact
the tight integration between SAP mergers, acquisitions, and Capitalizes on the most organized function in
S/4HANA and SAP Group divestitures are ever more prevalent. terms of Global Business Process and Data
Reporting. Finance First deliverers value from Ownership
Reporting

day 1.
#10 Leading Practice - clients have taken
this approach to reimagine their financial
data model and harmonize their master
data.

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Driving business value in Finance
Our Clients have found consistent capabilities to enable data harmonization, process standardization and future transformation.

Capability Benefits Value Pools

- Efficient organization of management and legal entity - The Universal Journal as the one - Primary Value Pool
financial reporting version of the truth aligns Finance and - Financial performance
FINANCIAL
- Global standard for measuring financial performance FP&A processes eval. & mgmt. labor cost
CONSOLIDATIONS - Proper planning, resource allocation, - avoidance
- Global chart of accounts and Financial Master Data
- Enterprise strategy for approach to master data and execution of coding block
governance (process/roles) capabilities is critical for a simple,
standard and global reporting
environment

- Ability to surface source/drivers of revenue and cost - Operating income bridge provides view of - Primary Value Pool
growth increments (operating income bridge) changes in financials to drive business - Planning, budgeting, &
FINANCIAL - Enhanced reporting capabilities decisions forecasting labor cost
PLANNING - Agility and speed to develop and publish plan and quickly - Consistent approach to planning and avoidance
& ANALYSIS reforecast performance measurement
- Ability to use various and complex allocation approaches - Ability to assess performance at the
- Increased flexibility in planning and driver-based planning enterprise level
- Cost-center budgeting/forecasting in integrated system

- Faster, continuous, and integrated close process. More - With integrated close process, product - Primary Value Pool
ACCOUNTING & automation of tasks (fewer manual entries) information is available sooner to support - Financial reporting labor
CLOSING - Ability to quickly and efficiency reorganize/restate the monthly flash process cost avoidance
OPERATIONS business (hierarchies, rollups, measurements) - Better connection between source data
- Improved approach to allocating expenses to a variety of and consolidated financials
dimensions (product, customer, markets)

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What is Central
Finance?
What is Central Finance?
SAP Central Finance is a finance focused
deployment option of SAP S/4HANA:
FI
• Multiple SAP or non-SAP ERPs are SAP ECC
SAP ECC
CO SAP ECC
connected to S/4HANA as a sidecar
enterprise management system via SAP
Landscape Transformation (SLT) FI SAP 4.7
SAP 4.7
CO SAP 4.7
• SLT facilitates the replication of finance
and management (FI/CO) data in real- FI JDE SAP Landscape S/4HANA Central
time to the S/4HANA system JDE
JDE Transformation Finance

• Connecting SAP systems is a standard

out of the box functionality. Custom FI QAD
QAD
QAD
development required for non-SAP
source systems
FI Oracle
• Non-SAP source systems require a Oracle
Oracle
staging area and staging tables in SAP
Landscape Transformation (SLT) in order
to translate the data

9
 What is Central Finance?
• Central Finance itself is a S/4HANA
system; however, through the use of SLT
enterprises, it can adopt a smooth and
non-disruptive approach to S/4 HANA
• The data elements and organization
entities in the source system(s) are
mapped for posting in SAP MDG or other
master data governance tool
• The FICO documents posted in the
source system are replicated to the S/4
HANA system and posted in the universal
journal
• Errors during the document replication
are captured in the Application Interface
Framework (AIF)
1
0
Financial Data Model - Universal Journal (ACDOCA)
• Single source of truth

• Simplified coding block

• No need for batch processing and data
replication
• No more reconciliation or sub-ledgers
• Harmonized internal and external
reporting
• Higher flexibility in reporting and analysis
• Significantly reduced memory
consumption
• Create queries directly off of ACDOCA

• There’s also ACDOCU Consolidations

Journal and ACDOCP for Planning data
1
1
Integration SAP and
Non-SAP Systems
Architecture Overview
• FI postings
• CO postings
• SD and MM
documents
(AVL)
SOURCE
SOURCE SLT TARGET
SOURCE
SAP Landscape Transformation

SAP ECC 600 or later

SAP ECC 4.6C, 4.7, and ECC 500 with manual efforts SAP S/4HANA On-Premise, all versions
SAP S/4HANA On-Premise, all versions Latest version recommended
SAP S/4HANA Public Cloud, all versions
Non-SAP systems with manual efforts or Magnitude

13
 Non-SAP Source Systems
• The staging area is used to
connect various third-party
systems to Central Finance
• The staging area is comprised of a
variety of staging tables which are
used to house the third-party data
• SAP provides preconfigured
content in the staging area, which
is leveraged to load and replicate
the data into Central Finance
• Extracting and loading the data
into the staging area is dependent
upon the data structure of the
third-party system, so this must be
done via a manual process Source: SAP
Key Considerations and Best
Practices to a Central
Finance Implementation
Understand the Businesses Priorities
FROM Current State TO Future State

• Transaction processing centralized in three regional

• Limited integration, highly decentralized
global business service centers
• Confusion around cost center ownership
People • Fragmented roles and responsibilities
• Site support focused on cost accounting, statutory
reporting, and administrative support only
• Limited finance business partnership
• Dedicated Finance support to the business

• Labor intensive • Automated and digitized

• Physical paper routing • Automated controls environment in compliance with
Process and • Weak controls environment with SOD issues SOX
Control • Long financial close • Faster close, faster insight to the business
• Limited Finance insight • Lean Chart of Account tailored to the needs of the
• Overcomplex Financial Reporting client.

• A modern interface provided by SAP Central Finance,

enabling centralization of transactional activities
• Disparate ERP systems
• Migration of non-SAP sites to SAP S/4HANA
• Limited to no integration to other Financial systems
Technology • Misalignment of Finance Master Data
• Financial Close powered by BlackLine Systems
• Harmonized Finance Master Data (COA, Vendor,
• Complex business architecture
Cust.)
• Simplified business architecture
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 Functional Importance of Master Data
Phase Central Reporting Central Processing
Company Code Controlling Area Business Partner Logistics
G/L Account Cost Center Customer Payment Terms Assets Materials
Master Data
Activity Type Projects (WBS) Payment
Bank Accounts Sales Orders Sales Orgs
Methods
Profit Center Orders
House
Plants Tax Codes/Rates Divisions
Banks
Tax Procedures

General Ledger Profit Center Cost Center Accounts Accounts Payable Assets Materials Sales &
Accounting Accounting Receivable Distribution
Payables Aging Asset History Goods
Legal Income Statement
Management Income Cost Center Actuals Receivables Aging Analysis Movement Sales Orders -
Reports Legal Balance Sheet Statement Analysis
Payables Overdue
Asset Analysis Actuals
Balances
Management Balance Receivables Overdue Analysis Physical
Trial Balance Sales Accounting
Sheet Analysis Depreciation Inventory Overview
Cash Flow Analysis Analysis

Asset Inventory Values Gross Margin

Transfers - Balances
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Master Data
Master data in Central Finance needs to be approached in two steps
Master Data
Creation
• The creation of master data should allow
for:
• The cleansing of duplicate or
redundant master data objects
Tip
• The harmonizing of master data from
several heterogenous systems
• Master data can be created via:
• Manual procedures
• Master Data Governance
• S/4HANA Migration Cockpit
• Data Services
• 3rd party tool/others
Master Data
Mapping
• The mapping of master data allows for:
• Master data objects from different systems to be inline with
future state design
• The ability to reengineer master data structure within
S/4HANA (reporting, business process, financial data model)
• Master data can be mapped via:
• Key Mapping: ”Id” mapping, created frequently, short-lived,
master data based (G/L account, vendor, customer, cost
center, materials, etc.)
• Value Mapping: “Code” mapping, created infrequently, long-
lived, configuration based (controlling area, document type,
tax code, company code, etc.)
• Cost Object Mapping: The mapping of cost collectors (orders)
from the source system to the Central Finance system
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 Key Consideration #1 - Master Data Creation
Master Data
Integration
Option?

Manual
Automated?
?

Leverage Align with SAP

Use Use
Existing Tools Tool for SAP
and Skills? S/4HANA? Once? Operationally?

SAP Legacy 3rd Party SAP S/4HANA Rapid Data Central

Consolidation
System Migration File Upload Data Migration Migration to Maintenance
Workbench Tools Cockpit SAP S/4HANA ? ?

SAP Master SAP Master Custom Build

Leverage a Pre-
Data Data and/or
Governance Governance Built Accelerator? Extend?
Magnitude SAP SLT and SAP ALE
SAP Data Master Data
SourceConnect Operational
Harmonization Services Data Providers Distribution*

*Exceptions: Pre-
Delivered Central Finance
Functionality for WBS
elements, Projects and
Can be enhanced
SEPA Mandates

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Key Consideration #2 – Master Data Mapping
Key Mapping
• Value and Key mappings can be
maintained in Central Finance to map
source master data objects to Central
Finance master data objects
• The standard Central Finance mapping
functionality, known as MDG Foundation,
is integrated within Central Finance
• MDG Foundation allows for mass
mapping maintenance as well as
individual mappings
• The master data objects of source and Value Mapping
central system can have an N:1
relationship between them

2
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Key Consideration #2 – Master Data Mapping cont…
• To map the cost collectors (orders) into
table AUFK, the methodology for
replication needs to be configured by
maintaining the cost object scenarios

• Different categories of orders eligible for

cost object mapping in Central Finance:
• Production Orders
• Internal Order
• Maintenance Order
• QM Order
• Product Cost Collector

• Each category in the source system can be

mapped to an order category in the Central
Finance system

• Within each cost object scenario orders

can be replicated and mapped between
the systems 2
1
Key Consideration #3 – Configuration
The designing of your Master Data and
Configuration strategy is essential to a
Tip key Central Finance Implementation

Purchasing Organization Purchasing Group Plant Loading Point Shipping Point Configuration

Master Data

Vendor Operating Concern Controlling Area Chart of Depreciation Payment Terms

Chart of Accounts Segment Assets Material Master

Company Code General Ledger Profit Center Projects

Accounts

Cost Center House Bank Dunning

Accounts

Customer Orders Functional Area House Banks Credit Control Area

Sales Organization Division Distribution Channel Sales Office Sales Group

222
2
Key Consideration #4 – Balances and Open Items
• Replicating open items can become a
bottleneck during Initial Load if the setup Caution
is not clean in the source systems on your
customer, vendor, and open-item-managed
G/L accounts

• Check the following account maintenance

transactions:
• FS00 – G/L Accounts (tab Control
Data)
• F-32 – Clear Customer
• F-44 – Clear Vendor
• F-03 – Clear G/L Account
• FB1SL – Clear G/L Account for Ledger
Group
• F.13 – Automatic Clearing

2
3
Key Consideration #5 – Data Validation
• Validate FI/CO data in the Central Finance
system

• Analyze the number of documents and

compare balances between source and
target system

• Drill-back to the AIF to see the erroneous

document in the AIF

• Can validate the data through parameters

such as: company code, logical system,
posting date, and fiscal year

2
4
Key Consideration #6 – Business Resources
• Business Resources are required for:
• Data harmonization and mapping decisions à Explore
• Technical posting validations à Realize
• Functional P&L and B/S reconciliations à Realize
• User acceptance testing and execution àRealize
• Change management --> Explore through Run

Resources are more than just IT!

2
5
Best Practices to a Central
Finance Implementation
How Much Time is Truly Needed for a CFIN
Implementation?
• Need more than just an integrated project plan and • What about..
communication materials • Testing?
• What is the ultimate goal of the project • Technical/functional reconciliation?
• Replication • Training and knowledge transfer?
• Processing • Change management?
• Replication + Processing • Building in time for drops and reloads?
• Group Reporting
• BlackLine It is incredibly hard to gauge how much time is truly needed
• OpenText for a CFIN implementation and the biggest factor at the
center of everything is resources and their availability!

27
Integrated Project Plan is Critical..
Explore Realize

High-level Project Plan

2
8
Integrated Project Plan to Environment Overview
Strategize for the Initial Load
• Consider the following topics before starting an initial load: • Decision criteria:
• Does the project or PoC need an initial load? • Data volume
• How many company codes should be included?
• Load duration
• How many fiscal years and periods should be included?
• What Cost Objects should be mapped? • Proof points for PoCs
• What is the potential impact on master data? • Data completeness
• What is the potential impact on archived data? • Reporting requirements
• How clean /up-to-date are the open items?

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Initial Load Schedule by System & Activity
Initial Load Goals & Exit Criteria
Technical Design Importance
• Building a CFIN system cannot solely be treated as building an ERP from the ground up,
there are several considerations at play:
• The configuration in the various source systems will need to be analyzed and
harmonized
• The future state Master Data design cannot fully rely on MDG mapping
• Profit Center
• Cost Center
• Functional Area
• Segment
• What are the Central Finance specific design restrictions?
• SAP Note 2184567
• What is the intended/desired future state of the S/4HANA system?
• Central Reporting
• Central Processing
• Steppingstone to S/4HANA

3
3
KDDs – Key Design Decision Framework
• Comprehensive design document used to document
key decisions from blueprinting workshops
• Document History
• Sections
• Scope and Definition
• Background
• Future State Design
• Approach for harmonization and replication
from Source System to CFIN
• Source to CFIN Mapping
• Universal Journal
• Gap Analysis between CFIN and Source
Systems
• Key Decision Recap & Approval Framework

3
4
Mini KDDs
• Does a new design decision mean
a brand-new KDD?
• How are in-flight decisions
made when the build and
testing is ongoing?
• What happens if one of the
KDD’s needs to be amended?
• How is a new design decision
reached and approved?
• Extremely pivotal for design:
• Continuity
• Consistency
• Thoroughness

3
5
Organizational Change Management Methodology
A structured change management methodology increases the chances of an effective and sustained change.
The premise of the selected methodology is that change starts with individuals before it is perceived at the
organizational level. Concretely, this requires an adaptation of actions to audience groups depending on the level of
change and engagement expected.

Change Clarification Change Assessment Change Transition Change

Sustainment

• Clarify urgency • Identify relevant • Build change • Execute on

for change (why) audience groups support model transition plans
• Identify • Evaluate change • Define transition • Pulse audiences
expected impacts plans progress
changes (roles, • Define level of (communication, • Gather and act
process, engagement training, on feedbacks
technology) required coaching) (resistance to
• Summarize • Engage change change,
future state champions and improvements
(think, do, say) leaders to plans)

Ensure a disciplined and timely change actions execution along the project delivery

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Revised Training Structure
Project Central Finance Postings and Central
Master Data
Overview Replication Journal Entries Processing

Project Architecture Business Partners Master Data Replication BlackLine GBS Finance

Introduction to Business SAP Central Finance BlackLine Functionalities

Project Overview and Scope
Project systems and processes
architecture
Partners Governance
Vendors creation process and
tool
Customers creation process and
tool
Finance Master Data
Introduction to Finance Master
Data
AR Process and System
Introduction Overview
Client Central Finance Set Up BlackLine Postings and Journal
AP Process and System
Overview Entries walkthrough
BlackLine Accounts Fixed Assets Process and
Reporting Reconciliation walkthrough System
Cash Management Process and
Overview of available reporting System
tools
Credit Management Process
Fiori reporting basics and and System
navigation

Central Finance Data Mapping AO reporting basics and

and Structure navigation
Finance master data creation Selected reports walkthrough
process and tool

37
Leveraging Central
Finance as a
Stepping Stone to
S/4HANA
Configuration and Master Data Design
The designing of your Master Data and
Configuration strategy is essential to a key
Central Finance Implementation
Tip

Purchasing Organization Purchasing Group Plant Loading Point Shipping Point Configuration

Master Data

Vendor Operating Concern Controlling Area Chart of Depreciation Payment Terms

Chart of Accounts Segment Assets Material Master

Company Code General Ledger Profit Center Projects

Accounts

Cost Center House Bank Dunning

Accounts

Customer Orders Functional Area House Banks Credit Control Area

Sales Organization Division Distribution Channel Sales Office Sales Group

How can Stepping Stone Approach be Achieved?
• Start by laying out the relevant building blocks for your
business Don’t design in a vacuum, keep the
• What processes/functions are important? future in mind!

• Have detailed and forward-thinking Key Design

Decisions (KDDs)
• Don’t just design for one building block, design for all

• What are the critical Master Data and Configuration

components driving or supporting the KDDs?
• Master Data: COA/BPs/Cost & Profit Centers

• Configuration: Currency/Ledgers/Tax

• What are the expected business outcomes from each

building block?
• Statutory and Management Reporting?

• Faster Month-End close processes?

• Financial Consolidations?
4
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 S/4HANA and Central Finance Building Block Example
• TruQua leveraged the Building Block framework to
design and build the existing finance foundation (blocks
1-4) in a clients S/4HANA Central Finance system.

• Value and importance of the Building Block framework is

centered around the understanding that the finance
foundation would need to support current finance
processes while also serving as a future enabler for
downstream processes (PTP, O2C, PTM, and RTR).

• Building and designing a system for both current and

future processes requires diligent planning and a
comprehensive understanding of the existing Key Design
Decisions and how they will impact the building blocks.

• When building out S/4HANA in an existing Central

Finance system you don’t have the freedom/flexibility of
a net new design, must leverage existing design and
build on top of that
• Pre-existing knowledge of Building Blocks 1 and 2 are
critical to building out future business processes
Wrap Up
Where to find more information
• TruQua, an IBM Company Central Finance as a Stepping Stone Whitepaper Series:
• How to use SAP Central Finance as a Stepping Stone to SAP S/4HANA
• SAP Central Finance Key Design Decisions for Reporting Deployments
• Deployment Strategies and Benefits of a Finance First Approach
• SAP Notes
• Overview of notes relevant for source system – 2323494
• SAP LT Replication Server for SAP Central Finance – 2154420
• Central Finance: Implementation and Configuration - 2148893
• Central Finance FAQ (item #25) – 2184567
• Central Finance Case Study
• SAPInsider Central Finance Case Study - Excelitas

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Key Points to Take Home

• SAP Central Finance is a finance-focused deployment option of SAP

S/4HANA that can be leveraged for SAP and Non-SAP ERP integration
• Master Data and Configuration design are critical to the foundation of a
Central Finance system
• Detailed and future-focused Key Design Decisions are critical to being able to
leverage Central Finance for future business processes
• Having a clear and thorough Initial Load strategy (from design to execution)
can make a huge difference in project timelines and overall data quality

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Thank you! Any Questions?
Matt Montes
Matt.Montes@IBM.com

Klaus Satzke
Klaus.Satzke@IBM.com

Please remember to complete your session evaluation.

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