How SAP S/4 HANA Finance improves your Profitability Management?

And what does it take?

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Providing profitability information to the organisation is a top priority for all finance leaders. Based on industry, it comes in many forms and shapes – what we are discussing here is profitability of products, customers, distribution channels, etc. that again can be expressed at various margin and detail levels.

Due to the fact that profitability information needs to ‘sum it all up’, be trustworthy, timely and relevant, this has been an area of hard work and often led to frustration for finance people. But profitability analysis will not go away – it is a vital area for fulfilling the role as a true business partner. The good news is that now technology can support us better.

Below are some examples of how new innovations – in this case SAP S/4 HANA Finance – support us:

(Note: Discussions around Account Based COPA vs. Controlling based COPA are not included in this paper)

• The overall set of Finance and Profitability data are now aligned and stored in one table through new database architecture. This allows us to:
• Release valuable time from reconciling FI, CO and CO-PA that is a prerequisite for trust in detailed profitability data.
• Having all dimensions on for instance products and customers inherent available – not spending time on combining data from various sources. This also sheds lights on poor master data quality immediately.
• Improved transparency through better access to data, e.g.:
• Gaining real-time understanding of actual profitability due to reading directly on transaction data, allowing for more details and supporting timely margin analysis.
• Drill-down functionality to cost elements, e.g. material cost, labour cost and overheads understanding the composition of costs and thus profitability.
• Real-time consolidation of profitability data. This allows us to:
• Real-time reconciled P&L reporting at detailed level due to extension of account based CO-PA.
• Reduce time during closing due to daily allocation and product calculation cycles and thus being continuously on top – not just at month end.
• Valuate to actual cost (through Material Ledger), typically run at period end can now be executed on a more frequent basis.

What does it take?

Are you on the SAP platform, engage with your IT department and ask for the plans on moving to the S/4 HANA database and. By now, organisations should already be establishing the business case for S/4 HANA.

As finance people, we need to understand the new opportunities that the technology brings – the above gave a first glance – and then decide on how profitability analysis and management can change for the organisation as a whole and then design the processes accordingly and finally supported by IT.

If we execute on a thorough plan, we will experience significantly more satisfied stakeholders better empowered to do their job.