SAP ERP vs. SAP S4HANA What’s New in Financial Processes

SAP S/4HANA Finance has been around for nearly a decade, and with the 2027 deadline to transition SAP business processes from the current FI-CO modules quickly approaching, now is an ideal time to understand the benefits of SAP S/4HANA Finance. There are numerous benefits that extend beyond the urgency of the approaching maintenance deadline!

The transition from SAP FICO to S/4HANA Finance signifies a shift towards innovation and improved functionalities, with S/4HANA Finance providing a foundation for digital transformation and offering advanced features such as centralized payables and receivables, predictive accounting, and embedded analytics. By leveraging in-memory technology and cloud computing, S/4HANA Finance enhances processing speed, accessibility, and user experience, making it a significant advancement over its predecessor, SAP FICO.

Before we delve deep into the actual content, lets see an introduction to SAP ERP and SAP S/4HANA. SAP ERP and SAP S/4HANA are two prominent enterprise resource planning (ERP) systems offered by SAP.?

SAP ERP Central Component (SAP ECC) is an on-premise ERP system introduced in 2005, known for its extensive user base and customization capabilities. In contrast, SAP S/4HANA, launched in 2015, is a modular ERP solution that utilizes SAP's in-memory database technology, offering real-time analytics and a streamlined data model.?

The transition from ECC to S/4HANA is significant due to the architectural differences, with S/4HANA providing a single source of truth for business data and enabling dynamic decision-making through real-time analyses.

In this blog post, we aim to provide you with:

1. What is SAP ERP
2. What is SAP ERP Financials
3. What is SAP S/4HANA Finance
4. How is SAP S/4HANA Finance Different from SAP ERP Financials
5. Latest Features in SAP S/4HANA Finance
6. Advantages of Moving to SAP S/4HANA for Financial Processes

SAP caters to a diverse array of industries and business operations, spanning from major players in oil and gas production to sports teams and various product- and service-oriented enterprises. This broad spectrum ensures that virtually any business entity can leverage SAP solutions to enhance their operations.?

Whether a company seeks assistance in a specific functional area or aims to streamline all business processes with SAP software, SAP offers tailored licensing options and regularly updates its systems, with quarterly updates for cloud-based systems and annual updates for on-premise systems.?

At present, SAP maintains two comprehensive ERPs, known as "Business Suites," namely SAP ERP and SAP S/4HANA, to serve its clientele.

What is SAP ERP

SAP ERP, stemming from the lineage of R/1, R/2, and R/3 solutions, represents SAP's foundational business suite and marked the initial integration of large-scale internet functionality. Users of SAP ERP have the flexibility to operate it on various platforms of their choice. However, with the introduction of SAP S/4HANA, SAP is phasing out SAP ERP, offering maintenance and sporadic updates until 2027, with extended maintenance slated until 2030.?

SAP ERP encompasses both transactional and analytical systems, providing a comprehensive platform for businesses. Despite occasional confusion between the terms "SAP" and "ERP," it's essential to note that ERP denotes enterprise resource planning software facilitating business activities, while SAP is one among several vendors offering ERP solutions, with SAP ERP being its proprietary offering to customers.

The SAP Enterprise Resource Planning application covers a wide range of business functions, including financial, human capital, operational, and corporate services. This encompasses financial and managerial accounting, personnel information management, career development processing, day-to-day business operations, and external activities like travel management.?

In this blog article, we'll focus on the financial aspect and discuss the rationale for transitioning to SAP S/4HANA Finance.

What is SAP ERP Financials

SAP ERP Financials served as SAP's primary financial and controlling solution until the introduction of SAP S/4HANA Finance. As part of the SAP Enterprise Central Component ERP solution, commonly known as SAP ERP, it focused on two core areas.?

Firstly, financial accounting (FI) enabled businesses to handle the financial obligations of the business, such as general ledger accounting, accounts payable, accounts receivable, asset accounting, and more.?

Secondly, management accounting (CO) deals with the business's cost control, including cost center accounting, internal orders, product costing, and profitability analysis.

Initially designed as accounting software, SAP prioritized the development of its components, focusing on several critical areas:

1. Facilitating rapid local and group closure processes utilizing tools such as the General Ledger and Closing Cockpit.
2. Enhancing business insight for managerial reporting through features like profitability analysis and cost-center accounting.
3. Streamlining financial processing with seamless end-to-end integration and specialized transaction codes.
4. Strengthening corporate governance with advanced security measures, reporting functionalities, and tools for whistleblowing.
5. Elevating performance management with comprehensive analytics, business consolidation tools, and the implementation of value driver trees.

What is SAP S/4HANA Finance

SAP S/4HANA Finance, also known as SAP Simple Finance, is the financial line of business (LoB) within the SAP S/4HANA ERP platform. It serves as the successor to SAP ERP Financials, offering a range of process improvements tailored for the financial world. Initially released in 2014 as SAP Simple Finance, it was later rebranded as SAP S/4HANA Finance as part of SAP's new enterprise resource planning strategy, which divides the system into lines of business-like finance, supply chain, and sales.

SAP S/4HANA Finance encompasses various key areas within a business, including:

• Financial planning and analysis
• Accounting and financial close
• Treasury and financial risk management
• Finance operations
• Enterprise risk and compliance management

SAP S/4HANA Finance is designed to provide immediate insights and on-the-fly analysis by integrating transactional, analytics, and planning systems. It simplifies financial functions by combining ABAP functionalities with the advantages of HANA technology, offering a streamlined and efficient approach to financial management within the SAP ecosystem.

How is SAP S/4HANA Finance Different from SAP ERP Financials?

SAP emphasized the complexity behind the term "simple" in the first iteration of SAP S/4HANA Finance. Users of this new solution would not only benefit from automatic, real-time financial reporting but also from a streamlined data model and lightweight architecture.

This table highlights the key differences between SAP S/4HANA Finance and SAP ERP Financials in terms of architecture, functionality, user interface, deployment options, and migration strategies.

The initial release of FI-CO functionality marked significant improvements over the existing SAP ERP Financials options. This encompassed enhancements in financial planning and analysis, accounting and financial close processes, treasury and financial risk management, collaborative finance operations, and enterprise risk and compliance management.

While providing a comprehensive list of changes is impractical due to the extensive nature of updates, numerous blog posts delve into specific details. Additionally, SAP regularly releases a simplification list highlighting the latest features. simplification list highlighting the latest features.?

SAP ERP's separated financial and management accounting modules required reconciliation during reporting, whereas SAP S/4HANA Finance integrates these functions, enhancing reporting efficiency. SAP S/4HANA Finance also brings default shifts in profitability analysis, mandatory material ledger activation, and a standalone revenue recognition module with improved functionality and integration.

New Features in SAP S/4HANA Finance

The introduction of SAP S/4HANA Finance represented a pivotal moment in finance, introducing the notion of a unified source of truth by consolidating financial data across departments and locations. Utilizing SAP HANA's in-memory storage, the platform enables instant generation of analytical reports accessible to authorized personnel, offering immediate benefits to accountants, project managers, and planners in analysing past, present, and future financial activities and projections.

Consolidated Group Reporting

Leveraging the capabilities of SAP HANA for increased data inputs and accelerated reporting, SAP revamped classic financial consolidation within a fully unified framework, covering the entire data flow and enabling cloud deployment. This enhancement facilitated a "continuous close" of consolidation in SAP S/4HANA, ensuring ad hoc reports are always up-to-date and instantly accessible.

Efficient Financial Closing?

SAP S/4HANA provides two tools to streamline financial closing processes. Firstly, the SAP Financial Closing Cockpit for SAP S/4HANA, integrated directly into the suite, offers a standardized closing template similar to the add-on tool in SAP ERP Financials.?

Secondly, the SAP S/4HANA Cloud for Advanced Financial Closing is a cloud-exclusive option that facilitates planning, processing, and monitoring of financial closing across multiple instances of SAP S/4HANA, connecting both on-premise and cloud solutions. This cloud-based tool proves especially beneficial for large corporations managing diverse SAP S/4HANA deployment options across global hosts.

Universal Journal

SAP S/4HANA's Universal Journal consolidates traditional FI and CO data into a single table, ACDOCA, streamlining legal and management accounting processes. Although this represents a significant change for financial professionals, it retains familiar posting logic, ensuring a smooth transition.

Predictive Accounting

SAP S/4HANA introduces predictive accounting, leveraging existing sales data to generate estimated forecasts for informed financial planning and production decisions. These forecasts are stored in a separate extension ledger to prevent inadvertent inclusion in legal reporting documents.

SAP Fiori Applications

With the introduction of SAP S/4HANA, SAP overhauled the ERP's user interface, shifting from menu paths and transaction codes to SAP Fiori applications. This transition lightened the user experience and enabled easy execution of reports and other essential tasks from both mobile devices and desktop workstations.

Advantages of Moving to SAP S/4HANA for Financial Processes

SAP S/4HANA Finance brings a plethora of benefits, with some highlighted in this post. Leveraging the column-based storage of SAP HANA enables real-time data retrieval, while streamlining functionality eliminates redundancies and introduces enhanced processes, fostering process improvement and freeing up employees for other tasks.

It's evident that SAP S/4HANA Finance surpasses older SAP ERP Financials tools. If you're still using SAP ERP (as we assume you are if you're reading this), now is the time to transition! SAP will cease maintenance on SAP ERP components by the decade's end, and migration projects can be lengthy depending on your business's complexity. Investing in SAP S/4HANA Finance is an investment in your business's future.

Conclusion

As we conclude this exploration of SAP S/4HANA Finance and its evolution from SAP ERP Financials, it's clear that the transition represents a significant leap forward in financial management capabilities. SAP S/4HANA Finance offers a comprehensive suite of tools that streamline processes, enhance real-time analytics, and provide a unified platform for financial operations. From the Universal Journal to predictive accounting and improved consolidation reporting, these advancements empower businesses to make more informed decisions and adapt quickly to changing market conditions.

As the 2027 deadline for SAP ERP maintenance approaches, organizations still using legacy systems should seriously consider making the switch. The benefits of SAP S/4HANA Finance extend far beyond mere compliance, offering a foundation for digital transformation that can drive efficiency, accuracy, and strategic insight across financial operations. By embracing this next-generation solution, businesses can position themselves at the forefront of financial technology, ready to tackle the challenges and opportunities of an increasingly complex and fast-paced business environment.

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