Using Predictive Accounting in S/4HANA Finance

Introduction

Predictive accounting allows businesses to obtain the most recent data from areas in SAP S/4HANA outside of Finance, such as Sales; other integrated products, such as SAP Concur; or external systems, and use it to predict future results at any time. With this functionality, the finance users have a better understanding of what the accounting results at the end of the current period or quarter might look like, and why.

This blog explains in a practical way what the main features for the predictive accounting functionality are, the configuration steps to activate it in SAP S/4HANA and a sample flow for sales processing considering the powerful reporting capabilities available out of the box

What is predictive accounting?

Predictive accounting is a standard functionality available in SAP S/4HANA designed to analyze forecast of finance results based on the most up-to-date data. Once activated, it creates predictive journal entries based on:

• Sales Processes: The source documents are the sales orders.

• Travel and Expense Management: The source documents are the Concur Travel requests.

Using the postings in the prediction ledger, along with the actual data from the underlying ledger, it is facile to predict future figures, such as the revenue forecast for one product. It is also possible to display and analyze the data in detail but also at a higher level using multiple analytical Fiori apps, for example, in a balance sheet report.

Main Features

Since all postings such as expenses or revenues both actual and predicted are stored in one place, the universal journal, it is simple to drill down from the profit and loss statement or the balance sheet to the individual journal entries in the general ledger and analyze the corresponding line item.

?Predictive accounting can be classified in the two main areas for which the source documents are analyzed:

Sales Process

• Predicts future revenue and COGS in the universal journal (Table ACDOCA).
• It updates the universal journal when a sales order is created, before any accounting documents posted in the Sales and Distribution (SD) flow.
• The Predictive Journal Entry – Manage (Synchronous) webservice is also available for using sales orders from an external system as source documents.
• Find below the journal entries created in the predictive ledger within the sales process. This flow will be detailed in the upcoming section.

Travel Expenses

• Direct integration with Travel and Expense Management in SAP Concur and SAP S/4HANA Finance.
• It forecasts the impact of employees' future business trips on future costs from travel requests.
• For travel allocated to cost centers, you can also perform budget availability checks.
• Find below the predictive ledger entries generated during the Travel Expense management process.

Main Customizing Steps

To activate the functionality in SAP S/4HANA for sales order processing, only four basic steps are performed:

Step 1: Define Extension Ledger

• SPRO -> Financial Accounting -> Financial Accounting Global Settings -> Ledgers -> Ledger -> Define Settings for Ledgers and Currency Types
• In the standard template, the ledger 0E is delivered as prediction ledger
• It is recommended to create a custom ledger, like Extension Ledger ZE. It will capture all predictive journal entries with underlying ledger as ‘0L’.

Step 2: Assign Extension Ledger

• In the same SPRO folder as the previous step, the newly created extension ledger is assigned to the relevant company codes.
• Accounting principle and posting variant is maintained as the reference 0E.

Step 3: Activate Predictive Accounting

• SPRO -> Financial Accounting -> Predictive Accounting -> Activate Predictive Accounting
• Activate Predictive accounting at controlling area level selecting the relevant processes that are expected to post predictive entries: Sales and/or Travel Expenses.

Step 4: Maintain Sales Document Item Categories

• SPRO -> Financial Accounting -> Predictive Accounting -> Activate Predictive Accounting for Sales Order Item Categories
• Activate the relevant item categories in sales order for predictive accounting.

It is important to consider, that predictive accounting only creates and processes predictions based on sales orders and travel requests that are created after the activation steps mentioned in the previous steps. If this functionality has been activated after some transactional data was created, SAP delivers a Report to generate Predictive Journal Entries. For that, it is required to execute the report FINS_PRED_REPOST- Repost Predictive Accounting Data to insert the missing predictive journal entries for sales orders created before activation. Find below a sample execution of this report:

Process Flow within SAP S/4HANA

This section explains the predictive postings that are created in an example of standard flow for Sales order processing in SAP S/4HANA:

Sales Order Creation

When a sales order that is relevant for predictive accounting is created, the universal journal entries are updated in the predictive ledger ZE with the stock consumption and the expected revenue based in the values entered in the sales order.

Find below the entries in Journal Entry and the balance sheet figures in the predictive ledger ZE:

Post Goods Issue

Once the goods issue is posted, the universal journal entries are updated in the predictive ledger ZE with the reverse of the stock consumption. In the leading ledger the actual stock consumption is posted.

Find below the entries in Journal Entry and the balance sheet figures in the predictive ledger ZE:

It is important to consider that in the finance reports, the ZE Ledger considers also 0L postings (underlying ledger)

Post Billing Document

To finalize the sales flow, when the billing document is posted, the universal journal entries are updated in the predictive ledger ZE with the reverse of the revenue posted during the Sales Order Creation. In the leading ledger the actual revenue is posted with the amounts entered in the invoice.

Reporting

In addition to the common balance sheet and the line-item report that have the capability to filter by ledger, the following three useful Fiori Apps can be used to analyze the predictive figures:

Gross Margin – Presumed/Actual

• The features of the app allow you to compare predictive amounts to your actual or plan data.
• It considers predicted revenues, cost of sales, margins and sales deductions based on incoming sales orders.

Incoming Sales Orders – Predictive Accounting

• The Fiori App is used to evaluate and analyze predicted revenues, cost of sales, margins, and sales deductions based on incoming sales orders.
• It obtains predictive postings, which are generated in the predictive ledger based on sales orders, goods issues and billing documents.
• You can use the features of the app to more deeply analyze the structure of the predicted cost of sales, sales deductions, and orders at hand.

Display Line-Item Margin Analysis

• The Fiori App display in details the journal entry line items that are relevant for Margin Analysis: account assignments to profitability segments and line items under journal entry documents.