Preface

15

The Objective of This Book

15

The Structure of This Book

15

Acknowledgments

17

Conclusion

17

1 Introduction to SAP S/4HANA and Financial Close

19

1.1 Overview of Financial Close

19

1.2 Historical View of Close in SAP ERP

20

1.3 Evolution of Financial Close

21

1.3.1 Moving to SAP S/4HANA

22

1.3.2 Reimagined Ledgers and the Financial Data Model

22

1.3.3 Technical Debt and Opportunities

23

1.4 Financial Close with SAP S/4HANA

23

1.4.1 Trends in Financial Close

23

1.4.2 Advances with SAP S/4HANA

25

1.5 Typical Closing Calendar, Tasks, and Ownership

25

1.6 Policy, Compliance, and Segregation of Duties

28

1.7 Summary

30

2 Organizational Structures, Master Data, and Cost Objects

31

2.1 Overview of Data Elements

31

2.2 Financial Accounting

34

2.2.1 Company Codes

34

2.2.2 General Ledger Accounts

36

2.2.3 Group Accounts

41

2.2.4 Global Hierarchies and Financial Statements

42

2.2.5 Fixed Assets

43

2.3 Management Accounting

50

2.3.1 Controlling Area

50

2.3.2 Operating Concern

52

2.3.3 Profit Centers

53

2.3.4 Segments

56

2.3.5 Cost Centers

56

2.3.6 Functional Areas

58

2.3.7 Activity Types

59

2.3.8 Global Hierarchies

60

2.3.9 Sets

61

2.3.10 Internal Orders

62

2.3.11 Projects/WBS Elements

64

2.3.12 Statistical Key Figures

71

2.3.13 Profitability Segments

72

2.4 Additional Dependent Master Data and Cost Objects

75

2.4.1 Business Partners

76

2.4.2 Material Master

79

2.4.3 Plant Maintenance and Production/Process Order

84

2.5 Summary

88

3 Financial Accounting Preclose and Upstream Activities

89

3.1 Overview of Upstream Activities

89

3.2 Accounts Payable

91

3.2.1 Procurement Integration

92

3.2.2 Payroll and Benefits

100

3.2.3 Travel and Expense Integration

105

3.2.4 Vendor Invoice Processing and Matching

109

3.2.5 Bank Integration and Vendor Payment Processing

115

3.2.6 Manual and Automated Accruals

119

3.3 Goods Receipt/Invoice Receipt

123

3.3.1 Automatic Clearing

124

3.3.2 Processing and Reconciliation

125

3.4 Accounts Receivable

132

3.4.1 Credit Management

133

3.4.2 Sales Quotes, Orders, and Billing

142

3.4.3 External Billing

145

3.4.4 Contract Accounts Receivable

154

3.4.5 Commercial Project Management

157

3.4.6 Manual and Automated Accruals

162

3.4.7 Banking Integration with SAP Cash Application

163

3.4.8 Cash Optimization Business Models

167

3.5 Allowance for Doubtful Accounts and Write-Offs

169

3.5.1 Managing Reserves for Bad Debt

170

3.5.2 Collections Management

172

3.5.3 Dispute Management and Write-Offs

174

3.6 Revenue Recognition

179

3.6.1 Evolution of Automated Revenue Management in SAP

180

3.6.2 Revenue Accounting and Reporting

180

3.6.3 Event-Based Revenue Recognition

181

3.6.4 Contract-Based Revenue Recognition

183

3.6.5 Universal Revenue Recognition

183

3.7 Summary

186

4 Financial Accounting Close

187

4.1 Open and Close Posting Periods

188

4.2 Internal Orders and Project Close

190

4.2.1 Internal Order and Project Completeness Review

190

4.2.2 OpEx Internal Order and Project Settlement

195

4.2.3 CapEx Internal Order and Project Settlement

196

4.3 Fixed-Asset Close and Dependence on Capital Projects

198

4.3.1 Fixed-Asset Completeness Review

199

4.3.2 Assets Under Construction

200

4.3.3 Capitalizing Fixed Assets

204

4.3.4 Depreciation

208

4.3.5 Reviewing and Adjusting Master Data

212

4.3.6 Reporting and Analysis

216

4.4 Intercompany Transaction Management

221

4.4.1 Intercompany Transaction Challenges

222

4.4.2 Transfer Pricing and Integration with Sales and Procurement

223

4.4.3 Classic Intercompany Transactions

226

4.4.4 Advanced Intercompany Sales and Stock Transfers

226

4.4.5 Intercompany Service Transactions

230

4.4.6 Intercompany Reconciliations

231

4.4.7 SAP Intercompany Governance by BlackLine

235

4.5 Currency Revaluation

236

4.5.1 Currency Exchange Rates

236

4.5.2 Advanced Foreign Currency Valuation

240

4.6 Journals and Accruals

256

4.6.1 Manual Journal Entry

257

4.6.2 Journal Entry Approval Workflow

260

4.6.3 Accruals and Auto-Reversal Journal Entries

263

4.6.4 Reclassification Journal Entries

267

4.6.5 SAP Account Substantiation and Automation by BlackLine, Journal Entry Option

268

4.7 Account Reconciliation

275

4.7.1 Balance Sheet Reconciliation

276

4.7.2 Flux Analysis

277

4.7.3 Balance Validation

278

4.7.4 SAP Account Substantiation and Automation by BlackLine – Account Reconciliation

281

4.8 General Ledger Allocations

292

4.9 Summary

295

5 Management Accounting Close

297

5.1 Inventory Accounting and Costing

297

5.1.1 Inventory Valuation

297

5.1.2 Production Orders and Process Orders

299

5.1.3 Variance Reporting

309

5.1.4 Material Ledger and Actual Costing

312

5.1.5 Monitoring Slow or Obsolete Materials

319

5.2 Management Allocations

321

5.2.1 Assessments

322

5.2.2 Distributions

325

5.2.3 Universal Allocations

328

5.3 Profitability Reporting

334

5.3.1 Margin Analysis

334

5.3.2 Customer and Product Profitability

340

5.3.3 Reporting and Analysis

346

5.4 Summary

349

6 Annual Close

351

6.1 Reviewing and Reconciling Year-End Balances

351

6.1.1 Bank Accounts

352

6.1.2 Payables and Receivables

352

6.1.3 Assets and Inventory

353

6.2 Tax Returns and Compliance

354

6.2.1 Nexus

355

6.2.2 Compliance for Direct Taxes

356

6.2.3 Compliance for Indirect Taxes

356

6.2.4 The Compliance Process

357

6.3 Carrying Forward Balances into the New Fiscal Year

359

6.4 Summary

361

7 Consolidation and Group Closing

363

7.1 Implementation Approaches, Setup, and Data Models

363

7.1.1 Integrated Versus Standalone

363

7.1.2 Recommended Setup

366

7.1.3 Data Model

368

7.2 Data Monitor and Consolidation Monitor

371

7.3 Group Reporting Accounting Integration and Data Collection

373

7.3.1 Accounting Integration

373

7.3.2 Master Data Maintenance

375

7.3.3 Data Collection

379

7.3.4 Validation Rules and Net Income Determination

385

7.3.5 Currency Translation

388

7.4 Consolidation Processing and Reporting

391

7.4.1 Eliminations and Reclassifications

392

7.4.2 Consolidation of Investments

397

7.4.3 Group Journal Entry Posting and Approval

400

7.4.4 Reporting Options

403

7.4.5 Reporting Hierarchies and Reporting Rules

408

7.4.6 Matrix Consolidation Using Profit Center and Segment

409

7.4.7 Integration with Disclosure Management Systems

412

7.5 Summary

413

8 Close Automation and Analytics

415

8.1 SAP Advanced Financial Closing

417

8.1.1 Solution Overview

418

8.1.2 Setup, Authorizations, and Configuration

422

8.1.3 System Integration

431

8.1.4 Designing Your Close Process

437

8.1.5 Closing Execution and Monitoring

450

8.1.6 Advanced Closing Capabilities in SAP S/4HANA

459

8.2 Task Management

463

8.2.1 SAP Account Substantiation and Automation by BlackLine – Task Management

464

8.2.2 Best Practices for SAP S/4HANA Automated Close and SAP Accounting Automation Solutions by BlackLine

469

8.2.3 Integration with SAP Advanced Financial Closing

470

8.3 Business Process Automation and Business Process Mining

471

8.3.1 Automation of Closing Activities

471

8.3.2 Streamlining the Closing Process with SAP Signavio

472

8.4 Close Analytics and KPIs

474

8.4.1 SAP Fiori Analytical Apps

474

8.4.2 Review Booklets

476

8.4.3 Reporting and Analytics Capabilities in SAP Analytics Cloud

477

8.5 Summary

478

9 Tax and Compliance Management

479

9.1 Tax Calculation and Provision

479

9.1.1 Direct and Indirect Taxes in SAP S/4HANA

480

9.1.2 Indirect Tax Calculations and Provisions

480

9.1.3 External Tax Engines with SAP S/4HANA

482

9.2 Tax Reporting and Compliance

484

9.2.1 SAP Document and Reporting Compliance

485

9.2.2 SAP Tax Compliance

489

9.2.3 Central Finance

490

9.3 Summary

492

10 Current and Future Innovations

493

10.1 Artificial Intelligence and Generative AI

494

10.1.1 The Promise and Future of AI and Generative AI

495

10.1.2 Use Cases and Direction for SAP Business AI

497

10.1.3 AI and Generative AI from SAP Partners

501

10.2 Universal Parallel Accounting and Value Chain Analysis

506

10.2.1 Universal Parallel Accounting

506

10.2.2 Value Chain Analysis

508

10.3 Sustainability and SAP Green Ledger

510

10.3.1 ESG Regulatory Requirements

510

10.3.2 Carbon Accounting in SAP S/4HANA

511

10.3.3 SAP Green Ledger

512

10.4 Future Capabilities in Financial Close

514

10.4.1 Expected Capabilities in SAP S/4HANA and Beyond

514

10.4.2 Continuous Accounting and Consolidation

516

10.5 Summary

518