What is SAP S/4HANA Finance?
Vosough et al. (2016) defined SAP S/4HANA Finance as one of the financial software that is found in the platform called the SAP S/4HANA ERP. The software has a set of interrelated monetary management tasks which come up with information that is real-time from the applications known as Enterprise Resource Planning (EPR). May, Bo?hm & Lehner (2017) also contributed to the research of SAP S/4HANA Finance and said that the software is a fragment of the S/4HANA and it is found on in-memory of SAP HANA database podium. The software incorporates most of the monetary organisational functions into one system of finances transaction processes and come up with analysis which is used in the real time period. Sun, Gregor, & Keating (2015) also reported that the software applies SAP Fiori for a consumer-like and custom-made User Experience (UX). The software has brought a lot of positive changes in the analysis of financial data and coming up with reports in a faster rate (May, Bo?hm & Lehner 2017). The paper here in has discussed SAP S/4HANA Finance further by giving the overview and the brief history of the software and the difference between SAP S/4HANA Finance and SAP ERP FICO. The paper has also discussed the benefits of SAP S/4HANA Finance and the challenges and issues the businesses have encountered while migrating to SAP S/4HANA Finance.
According to Vosough et al. (2016) in the introduction part above, SAP S/4HANA Finance is one of the financial software that is found in the platform called the SAP S/4HANA ERP. Nica et al. (2017) reported that the SAP HANA platform has been in the market since the year 2010. SAP HANA is a column oriented with relational management system of the database which is an in-memory and was invented and brought to the market by SAP SE (Ghattamneni 2016). the fundamental function of the software as a database server, is storing and retrieving information as commanded by other financial software like SAP S/4HANA Finance and SAP ERP FICO. The software also performs other function apart from storing and retrieving information. The functions include processing information in a spatial form, analysing data predictively, and processing information in a graph form. Ghattamneni (2016) reported that applications like SAP Business and SAP Enterprise Resource Planning (EPR) have been running in the databases including SAP HANA database.
SAP S/4HANA Finance is new software which was launched in the New York Stock Exchange on 2nd February 2015 (Nica et al. 2017). According to Artale et al. (2017), the introduction and launching of on-premise and cloud edition took place in the event where the SAP S/4HANA Finance was launched. Cloud edition was later made available on 6th May 2015 in Florida at the town called Orlando (Sun, Gregor & Keating 2016). Economist and other business people have called SAP S/4HANA Finance has one of the biggest innovation and update in the Enterprise Resource Planning (EPR) system created by SAP and has never been seen for two decades. Economists have appreciated that SAP S/4HANA Finance is representing financial transformational shift in the business world but they have raised questions on the availability, functionality, migration and the pricing of the software. Ghattamneni (2016) noted that the software has given many business people hard time in pricing and migration to the SAP S/4HANA Finance. The SAP S/4HANA Finance is not easily available for small business people in the market because it is a bit expensive.
Historical Overview of SAP S/4HANA Finance
According to the research done by Prifti et al. (2017), 370 customers had already bought SAP S/4HANA Finance software by 21st April 2015 just two and a half months after launching the application. It shows that SAP S/4HANA Finance has played a significant role in the financial reporting, accounting and auditing. SAP Company had recorded a positive growth in sales of the software by the first half of the year 2015. Ghattamneni (2017) reported that the SAP Company had received more than 1300 buyers by October 2015 which was a growth in sales. The growth of buyers who migrated to SAP S/4HANA Finance has been increasing rapidly and by 30th June 2018, the buyers had increased to 8900 from 5400 recorded in 2016 (Ghattamneni 2017). However, there are number of databases which are not from SAP that are competing with SAP S/4HANA Finance tightly. They include Microsoft, Oracle and Workday Inc. The SAP S/4HANA Finance was produced in two editions that are SAP S/4HANA Cloud and SAP S/4HANA On-Premise (Allen et al. 2018).
SAP S/4HANA On-Premise is similar to the current SAP Business Suite in terms of functionality, coverage, localisation and industry-specific (Pattanayak 2017). The software was created in 64 country versions and has 39 languages including English, French, Germany, Japanese, and Russian (Ghattamneni 2015). The SAP S/4HANA Cloud is offered in 18 languages and the versions are in 33 countries. Both the SAP S/4HANA Cloud and SAP S/4HANA On-Premise have the functionality for accounting, finance, procurement, controlling, sales, plant maintenance, manufacturing, project system and auditing (Sorko & Kohlbacher 2015). To clearly understand the difference between the SAP S/4HANA Finance and current SAP ERP FICO, a person must first understand what SAP ERP FICO is. Therefore, the paper has discussed SAP ERP FICO so that it can be easy to differentiate between SAP ERP FICO and SAP S/4HANA Finance.
Collignon (2017) suggested that current SAP ERP FICO is one of the essential functional constituent in SAP ERP Central Component which mandates and make the management of financial information easy for an institution. The main fundamental function and objective of SAP ERP FICO is helping the organisations in managing financial statements for easy analysis and reporting of monetary data hence, making it easy for the management to plan their business and make sound decisions for its company (Allen et al. 2018). There are two modules in SAP ERP FICO which are SAP Controlling and SAP Finance every one of which is utilised for particular money related procedures (Sorko & Kohlbacher 2015). SAP FI was created to deal with all monetary announcing and accounting while SAP CO is used in monitoring and planning of costs in an organisation (Costin & Cojocaru 2017). SAP CO and SAP FI were initially discharged as isolated modules yet are presently so firmly coordinated that numerous individuals allude to them as just one module.
Overview of current SAP ERP FICO
SAP FI Modules allow organisations to come up with budgetary explanations or the financial statements (Allen et al. 2018). For example accountants can use the modules to come up with accounting reports that include profit and loss statements and the balance sheets for financial analysis and reporting (Pattanayak 2017). The modules consist of other sub-modules that help SAP FI in conducting its functions. The sub modules include Bank ledger, Consolidation, Funds Management, Special Purpose Ledger, Asset Accounting, and General ledger. While SAP FI is used in bookkeeping, accounting and external and internal financial reporting, SAP CO underpins procedures to design, provide details regarding financial statements, screen expenses from corporate tasks. According to Plattner & Leukert (2015), SAP CO can be very important in enhancing the productivity of an institution. SAP CO also has some sub modules that help it perform its functions effectively. The modules include Cost Elements, Cost Centres, Profit Centres, Profitability Analysis and Product Costing. SAP ERP FICO together with other SAP software like Production Planning Sales and Distribution and Quality management software perform accounting functions. After understanding what SAP ERP FICO and how it works, now it is easy to know the difference between SAP S/4HANA and SAP ERP FICO.
Even though both SAP S/4HANA and SAP ERP FICO were created by the same company known as SAP, the applications have features and functions that differentiate one software from the other (Foerster-Metz & Golowko 2018). The first difference is that SAP S/4HANA can only be run in one database while SAP ERP FICO on more than one database. In other words, SAP S/4HANA can only function while being run in the Hana database and not any other database. SAP ERP FICO on the other hand can be run in the Hana database, IBM DB2, Oracle and many other databases that can support it (Su?kowski, Kolasi?ska-Morawska & Morawski 2018). In that case any company which want to use SAP S/4HANA should acquire Hana database first before procuring the software. The second difference is that SAP S/4HANA is gives true account compared to SAP ERP FICO. Solitary basis of truth can be seen where SAP ERP FICO consolidates the information structures of various parts including AA, FI, CO, ML, and CO-PA into a solitary detailed table called Universal Journal (ACDOCA). SAP S/4HANA wipes out numerous aggregates and tables inform of indexes. MATDOC is another form of SAP S/4HANA detailed table for stock administration which takes out more than 20 tables (Costin & Cojocaru 2017).
Benefits of SAP S/4HANA Finance
The third difference can be seen in the merger between the FI and CO (Allen et al. 2018). In SAP ERP FICO accounts are planned to CO essential cost components while in SAP S/4HANA, just a single field of Universal Journal is utilised to store cost elements and GL account (Al Oqayyel 2017). The cost components which are both secondary and primary are currently GL accounts and henceforth maintained or made (in FS00) with significant Cost component class. The reconciliation of FI and CO is slower that the period end closing of SAP S/4HANA which is much faster. Fourth, SAP S/4HANA is much faster compared to SAP ERP FICO (Plattner & Leukert 2016). When the accountants are preparing the financial accounts using the SAP S/4HANA Finance, they will get results quickly compared to the accountants who are using the SAP ERP FICO.
Fifth, SAP ERP FICO has two ledger architectures which are general. On the other hand, SAP S/4HANA Finance is using the current General Ledger Accounting architecture which it has automatically implemented as part of its migration process (Michon, Karimi-Alaghehband & Gaudet-Lafontaine 2018). The SAP S/4HANA Finance has a functionality which has been entrenched into the main system of the software called Extended Warehouse Management (EWM) whereas SAP ERP FICO has separate system called SAP SYM which performs the same function like Extended Warehouse Management (EWM) in SAP S/4HANA. Sixth difference is that some of the functions performed by SAP S/4HANA are not performed by the SAP ERP FICO. According to Sorko & Kohlbacher (2015), the processes in migration to SAP S/4HANA are more obsolete than in SAP ERP FICO. The functions that are performed by SAP S/4HANA which were not incorporated in SAP ERP FICO include the SAP Extended Warehouse Management (EWM) and SAP Transportation Management which are vital in financial accounting, analysis and reporting (Sorko & Kohlbacher 2015).
Another difference between SAP S/4HANA and SAP ERP FICO is that the running of MRP in SAP ERP FICO which takes place during the off-peak hours and it done through consignment jobs (Kolari?a & Vukomanovi?a 2017). However, when running the MRP in SAP S/4HANA, there is no batch jobs required and the functions are done in real time the database from HANA. Last but not least, SAP ERP FICO gives the alternative of accessibility check at the personal or summarised perquisite which has been accumulated on daily or weekly basis (Rubart et al. 2017). On the other hand, SAP S/4HANA Finance utilises just individual necessities in absence of VBBS table and most likely the method of reasoning is that SAP S/4HANA does not have any total table with its streamlined information model (Allen et al. 2018). The IT leaders in organisations should understand the difference between SAP S/4HANA and SAP ERP FICO so that they can know which function does each system do best and which one they fail at. The difference between SAP S/4HANA and SAP ERP FICO can also help a management of an organisation to make decision on which software to adapt which can help them in accounting practices.
Case Studies Demonstrating the Benefits of SAP S/4HANA Finance
Looking at how business people have migrated and are now using the SAP S/4HANA software to generate and analyse financial reports Plattner & Leukert (2018) concluded that there are numerous benefits of using the application in financial institutions. Kalaimani (2016) also reported that the leaders in finance sector are investing highly in the new technologies which can improve the growth of their institutions. The following are some of the benefits of SAP S/4HANA that have been discussed by different economists and scholars. First, SAP S/4HANA does accounting from batch to real time (Schwerer & Egloffstein 2016). SAP S/4HANA helps the financial institutions to run their financial closing in faster manner as compared to other applications used for the same function. The software is created on the in-memory of the SAP platform which allows the monetary institutions to conduct financial processes in real time rather than in batch processes (Plattner & Leukert 2018).
Second, SAP S/4HANA achieves colossal disentanglement to the administration and organisation of the of the Information Technology departments in the financial institutions (Chofreh, Goni & Klemes 2018). Simplicity is one of the reasons why the financial institutions love to use SAP S/4HANA and simplicity is also the key highlights SAP S/4HANA has brought to the application structure of ECC (Schwerer & Egloffstein 2016). SAP S/4HANA allows the incorporation of network and hardware resources and fills in as the advanced centre for business process disentanglement, by saddling the intensity of its HANA in-memory database. The older systems had a problem of running into numerous batch run reliance. However, SAP S/4HANA brought simplicity by reducing the time for processing and doing away with aggregate tables. SAP S/4HANA has also made it easy for the organisations’ systems to respond to queries and transactions and has also made sure that employees are able to use their work power in growth of the organisation (Schallmo, Williams & Lohse 2018).
The third benefit of SAP S/4HANA is that it is easy to use and analyse (Chofreh, Goni & Klemes 2018). Fiori 2.0 has come up with a cutting edge outline to a totally user or client encounter, empowering users to effortlessly asses the Work Lists, Overview Pages, and the Lists Reports. SAP Fiori’s UI is outlined particularly to be profoundly instinctive, customised, basic and responsive which enable clients to incite queries and access the points of interest by paying little respect to the gadget and the institution (Morillejo González 2016). According to (Rubart et al. 2017), the usability enables a company to develop and in the end drive new incomes, interface with consumers at a more profound level and have access to Iot and Big Data. The benefit can also help the organisations to have insight of any information continuously, hence speeding decision making and basic leadership. The fourth benefit of SAP S/4HANA is that it can increase the performance of organisations that are using it (Plattner & Leukert 2018). SAP S/4HANA empowers enhanced execution by enabling a business person to design, execute, and create analytics and reports in view of live information. SAP S/4HANA also activates the closing period and gives enhanced forecasts of the company’s future performance (Morillejo-González 2016). It additionally empowers an organisation to more improved customer services to clients’ driven applications. In other words, SAP S/4HANA provides appropriate mindfulness and gives more democratise data assess
Challenges and Issues with Migrating to SAP S/4HANA Finance
The fifth benefit is that it is less costly than other applications (Rückert 2018). Embracing SAP S/4HANA is a savvy move if a business person wants cost effective financial software for accounting and other purposes. The cost effectiveness is seen in the functionality of SAP S/4HANA where it has incorporated the accounting and transactional capabilities of plenty frameworks onto one are and hence it empowers hugely better basic leadership in a company. The sixth benefit is innovative function of the software (Sorko & Kohlbacher 2015). SAP S/4HANA sets the phase for forthcoming development and advancement. Technology is advancing at a high speed, which implies that simply keeping up does not slow it down any longer (Rückert 2018). Organisations need to remain on top of things and settle on choices that are future prepared. SAP S/4HANA software use speed, setting and information availability more than any other application. It is additionally driving cloud selection by organisations, a stage which empowers companies to convey inventive arrangements and enlarges the abilities offered by SAP S/4HANA itself (Costin & Cojocaru 2017).
Seventh, it is easy to change from on-premise to cloud (Costin & Cojocaru 2017). SAP S/4HANA offers simple change to cloud. Missbach (2016) reported that, a move from on-premise to cloud can occur whenever in an organisation wants to reduce the cost of migration. Another benefit of SAP S/4HANA is that it does not bring any disruption to the on-going operations of an organisation when the company has decided to migrate to it (Rückert 2018). The software will not disturb any operations going on in the system of the institution that wants to adopt it; rather it will improve the rate and speed at which those operations should be accomplished. SAP S/4HANA also encourages centralised finance system in that the organisations that have adopted the software can be able to manage its cash flows and liquidity in a central manner (Missbach 2016).
In another hand, an accountant of a given company can use the application in service model that is shared and the transactions are consolidated in a centralised form. The new modifications in SAP S/4HANA can help in predicting the financial reports and monetary analysis (Ghattamneni 2017). The modifications include Modern analytics, IoT, and machine learning which can automatically match transactions which include both the payments and invoices (Ghattamneni 2015). Business leaders should understand the benefits of SAP S/4HANA before they make the decision of venturing into this new technology. Lastly, when an organisation is using the SAP S/4HANA application, it is connected to more than 20 industries, 62 countries which are very healthy in a business context (Rubart et al. 2017).
Many companies like LyondellBasell Industries NV, ICS Consultancy Services and SAP SE faced a lot of issues while migrating to SAP S/4HANA Finance (Rubart et al. 2017). Research done by Karthikeyan & Director-ASB (2015) have showed that these companies faced the following challenges when migrating to SAP S/4HANA Finance. First, planning the migration process is an issue. According to Leukert (2015), the managing director of LyondellBasell Industries NV mentioned that to decide the size of the SAP S/4HANA Finance is very critical and managers should think critically and make the wise decisions in this context. Planning of SAP S/4HANA Finance migration requires infrastructure, the migration strategy, and the sizing. A lot of money was used by LyondellBasell Industries NV, ICS Consultancy Services and SAP SE in coming up with working S/4HANA Finance application. It is also very challenging to whether to use cloud, on-premise or hybrid S/4HANA Finance strategy (Karthikeyan & Director-ASB 2015).
The second challenge is budgeting for the migration process (Plattner & Leukert 2018). The process itself requires a lot of money and also making the decision on which business case to fund is also an issue. Therefore, the managers should have the knowledge on which business case is good and how much funds is needed to set it up. Third, the companies reported in Karthikeyan & Director-ASB (2015)’s report that most of them lacked the knowledge and skill in dealing with S/4HANA Finance. In other words, the personnel of these companies did not understand how the S/4HANA Finance works and they did not have skill of how to use the application. Hence, organisations find it very expensive to migrate to S/4HANA Finance because they need to train the personnel who will use the expensive application (Allen et al. 2018). Lastly, executing S/4HANA Finance is also an issue, multiple challenges like code optimisation, downtime and cut over need to be overcome so that the application of S/4HANA Finance should be successes (Sorko & Kohlbacher 2015). Execution of the plan also requires skilled personnel who are expensive and a powerful computer which is also expensive (Allen et al. 2018).
Conclusion
From the discussion above, S/4HANA Finance is software found in the platform called the SAP S/4HANA ERP. The software has a set of interrelated monetary management tasks which come up with information that is real-time from the applications known as Enterprise Resource Planning (EPR). Since it was launched, it has attracted a lot of buyers and statistics shows that the buyers increase every day. After looking at the difference between S/4HANA Finance and SAP ERP FICO, it has been found out that S/4HANA Finance has more advantages compared to other applications. The point has been supported by the numerous benefits of S/4HANA Finance outlined above. However when migrating to S/4HANA Finance, business managers should study the challenges faced by the three companies above when they were migrating to S/4HANA Finance. In conclusion, managers should weight all the points before deciding to implement the software into their businesses.
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