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Information Services. All right...
1
In This Session
• Discuss common issues in Intercompany (IC) processes
• Review common design solutions for seven main p...
2
What We’ll Cover
• Intercompany Processes and SAP ERP
• How Can HANA Improve IC Processes?
• Challenges for Implementati...
3
Intercompany Processes
• Intercompany Product Sales
• Intercompany Charge of Services
• Intercompany Lease of Assets
• I...
4
Common Intercompany Issues
• Top-side, high-level entries
• No ability to isolate Foreign Exchange (FX) impact on IC pro...
5
Why Is Intercompany a Challenge in SAP?
• Strictly from an SAP functional perspective:
 Many IC processes are not repre...
6
Intercompany Processes
• Intercompany Product Sales
• Intercompany Charge of Services
• Intercompany Lease of Assets
• I...
7
Design Principles
• Adopt Stock Transfer Orders
• Establish Transfer Price agreements harmonized with SAP ERP
design
• U...
8
Process Flow (Main Activities)
9
Key Enablers: Stock Transfer Order and
Goods-in-Transit Functionality
• Stock Transfer Orders (STO) are used to move mat...
10
Key Enabler: Goods-in-Transit Functionality
• SAP ERP 6.0 with EHP5 supports full automation of intercompany
accounting...
11
Intercompany Processes
• Intercompany Product Sales
• Intercompany Charge of Services
• Intercompany Lease of Assets
• ...
12
Design Principles
• Use Intercompany Charge of Services process to create and
charge a variety of expenses between Comp...
13
Process Flow
14
Design Principles
• Consider the creation by the Buyer of a blanket PO authorizing the
charges while seller creates a S...
15
Design Principles (cont.)
• Trigger Billing and Invoicing periodically and automatically. It is
possible to add an ad h...
16
Key Enabler: Resource-Related Billing
• RRB allows for the summarization of data based on Project, Sales
Order, Service...
17
Example: Usage of WBS and RRB
Service Charges
Labor – $2,000
Fringe – $1,000
Other Costs – $3,000
IT Cost Center
WBS 12...
18
Intercompany Processes
• Intercompany Product Sales
• Intercompany Charge of Services
• Intercompany Lease of Assets
• ...
19
Design Principles
• Leverage the key design principles from IC Sales of Products and
IC Service Charges processes
• Use...
20
Process Flow
21
Key Enablers
• Link Assets, Equipment, and Non-Valuated Material by serial
number
• MM/SD are the drivers for shipping ...
22
Intercompany Processes
• Intercompany Product Sales
• Intercompany Charge of Services
• Intercompany Lease of Assets
• ...
23
Leading Practices
• Use automatic Intercompany Reconciliation Process (ICR)
• Periodically process (during the month) t...
24
Process Flow
25
Option 1: SAP ICR (Intercompany Reconciliation)
Tool
• Solution collects data from Accounts Receivable and Payable
invo...
26
Option 1: SAP ICR (Intercompany Reconciliation)
Tool (cont.)
Navigation Tree with
Differences to Reconcile
by Company a...
27
Option 1: SAP ICR (Intercompany Reconciliation)
Tool (cont.)
Communication (Email)
Workflow (Custom)
Dispute Case
28
Option 2: SAP BusinessObjects IC Reconciliation
Tool
• Easier to include mixed ERP data
• Good integration with Consoli...
29
The total of the invoices
is equal to the balance in
the child account
The total of the
invoices differs from
the balan...
30
Intercompany Processes
• Intercompany Product Sales
• Intercompany Charge of Services
• Intercompany Lease of Assets
• ...
31
In-House Cash Concepts
• Simulate an internal bank and use it to fulfill financial services to
group companies
• It can...
32
Example: Vendor Payment Process Flow
33
In-House Cash
• Principles:
 IHC is set up at the group headquarters
 IHC is a virtual bank where subsidiaries have c...
34
In-House Cash: How Does It Help?
• Benefits:
 Centralized payment and receivable transactions on a regional
or global ...
35
Additional Points
• Critical configuration: ALE and IDocs. Functionality makes
extensive usage of IDocs. Users might ha...
36
Intercompany Processes
• Intercompany Product Sales
• Intercompany Charge of Services
• Intercompany Lease of Assets
• ...
37
Accounting 101: Intercompany Profit Elimination
Intercompany Sales has a
profit of $200.00
Overall inventory is oversta...
38
Accounting 101: Intercompany Profit Elimination
(cont.)
• It looks simple until you add:
 Balances from previous years...
39
Leading Practices
• Keep in mind that there are two processes that must be
addressed:
 Determination of Actual Costing...
40
Option 1: Intercompany Profit as a Cost Component
• Inventory value is tracked in legal valuation and group valuation
i...
41
Option 2: STO Updating ICP
Invoice $1,100 Invoice $1,300
• IC profit is recorded in Legal Valuation
• Group Valuation e...
42
Option 2: STO Updating ICP (cont.)
• Uplift included in Legal Valuation plus Actual Costing in Group
Valuation
• Delta ...
43
Changes in Development
• SAP and a partner client are developing and implementing a
solution that enhances Delta Profit...
44
Intercompany Processes
• Intercompany Product Sales
• Intercompany Charge of Services
• Intercompany Lease of Assets
• ...
45
Leading Practices
• Implement one of the two SAP options for managing month-end
closing
 SAP Closing Cockpit − standar...
46
Key Enabler: SAP Closing Cockpit
• SAP Closing Cockpit works through the definition of templates
and tasks lists execut...
47
Key Enabler: SAP Closing Cockpit (cont.)
• It provides a structured list of financial activities that
occur periodicall...
48
Additional Option: Usage of SAP Financial
Closing Add-On
• It requires a separate license agreement
• It connects to mu...
49
What We’ll Cover
• Intercompany Processes and SAP ERP
• How Can HANA Improve IC Processes?
• Challenges for Implementat...
50
How Can HANA Improve IC Processes?
• ICR (Intercompany Reconciliation)
 ICR works directly on the open items in AP/AR ...
51
SAP Simple Finance (Optimized Financial Data
Architecture)
Legal/External
Accounting (FI)
Documents
Legal/External
Acco...
52
Central Journal
• Finance data is copied from source systems
onto a Central Journal instance. Source
systems can remain...
53
What We’ll Cover
• Intercompany Processes and SAP ERP
• How Can HANA Improve IC Processes?
• Challenges for Implementat...
54
Project Perspective
• IC processes are frequently an afterthought
• Seen as only an integration issue instead of a proc...
55
Interim Stage Challenges
• Projects frequently think in terms of to-be processes of final design
• This works fine with...
56
Interim Stage Challenges: Integrating All Companies
• In a phased rollout, a design decision to integrate companies tha...
57
Interim Stage: STO Integration
• Integration can be done through a custom development
(Intercompany Data Transfer)
• Ne...
58
What We’ll Cover
• Intercompany Processes and SAP ERP
• How Can HANA Improve IC Processes?
• Challenges for Implementat...
59
Leading Practices
• Single instance with consistent global template
• Leverage dual posting (Seller AR and Buyer AP)
• ...
60
Leading Practices (cont.)
• Establish materiality thresholds for posting of IC transactions
• Establish a detailed mont...
61
What We’ll Cover
• Intercompany Processes and SAP ERP
• How Can HANA Improve IC Processes?
• Challenges for Implementat...
62
Where to Find More Information
• SAP Financials 2015 presentations
 Sanjeev Walia, “Key Design Considerations for Lega...
63
7 Key Points to Take Home
• Consider IC processes as a project work stream
• Automate transactions and postings across ...
64
Your Turn!
How to contact me:
David Cohen
David.Cohen@ey.com
Please remember to complete your session evaluation
65
Disclaimer
SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or...
Wellesley Information Services, 20 Carematrix Drive, Dedham, MA 02026
Copyright © 2015 Wellesley Information Services. All...
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Overcoming the Top 7 Intercompany Accounting Challenges in SAP ERP Financials

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View this session from Financials 2015 in Las Vegas. Coming to Europe! www.Financials2015.com

Overcoming the Top 7 Intercompany Accounting Challenges in SAP ERP Financials by David Cohen, EY

This session will outline and provide resolutions for the seven most common intercompany accounting challenges that companies face within the areas of sale of products, charge of services, AP/AR reconciliation, profit elimination, assets transactions, and month-end closings. By attending you will receive:
- Practical examples on the most effective ways to use standard functionality of SAP ERP, SAP BusinessObjects BI, and SAP HANA to alleviate these issues
- Examples of overcoming difficulties in implementing asset transactions across borders, such as purchase and leasing
- Alternatives to performing inter-company profit elimination
- Lessons for configuring and running your month-end close

Publié dans : Technologie
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Overcoming the Top 7 Intercompany Accounting Challenges in SAP ERP Financials

  1. 1. Produced by Wellesley Information Services, LLC, publisher of SAPinsider. © 2015 Wellesley Information Services. All rights reserved. Overcoming the Top 7 Intercompany Accounting Challenges in SAP ERP Financials David Cohen EY
  2. 2. 1 In This Session • Discuss common issues in Intercompany (IC) processes • Review common design solutions for seven main processes • Examine project challenges for implementing IC processes • Consider how existing and future HANA functionality can improve efficiency of IC processes • Explore Leading Practices in the areas of systems, master data, processes, and people related to IC
  3. 3. 2 What We’ll Cover • Intercompany Processes and SAP ERP • How Can HANA Improve IC Processes? • Challenges for Implementation • Leading Practices – Systems, Master Data, Processes, and People • Wrap-up
  4. 4. 3 Intercompany Processes • Intercompany Product Sales • Intercompany Charge of Services • Intercompany Lease of Assets • Intercompany AP/AR Reconciliation • Intercompany Treasury (In-House Cash) • Intercompany Profit Elimination • Intercompany Month-End Closing
  5. 5. 4 Common Intercompany Issues • Top-side, high-level entries • No ability to isolate Foreign Exchange (FX) impact on IC profit reserve • Limited ability to analyze gross profit on a consolidated cost basis • Intercompany profit reserve based on estimates and averages • Lost goods, goods stuck in transit, COGS without revenue, revenue without COGS, etc. • Lack of established policies and procedures driving IC activities • Not leveraging common processes across multiple countries into one Shared Service Center Manual Processes Poor Visibility Lack of Control Lack of adherence to a process resulted in unexpected IC write-offs and tedious manual processing • Long close cycle times and difficult reconciliation of IC processes • Highly manual and spreadsheet-based process • No ability to adjust obsolescence, revaluation, PPV, or consumption variances for IC profit • Poor data quality and inconsistencies • Low accuracy of product costing
  6. 6. 5 Why Is Intercompany a Challenge in SAP? • Strictly from an SAP functional perspective:  Many IC processes are not represented by specific SAP functionality  Sometimes there is no out-of-the-box standard solution  There might be multiple possible designs and solutions for a specific IC process  IC processes are very dependent on company and the industry • Processes in this presentation are depicted as generic suggestions and not as specific “unique” solutions with all steps • GAPs will vary depending on company, industry, processes, and systems architecture
  7. 7. 6 Intercompany Processes • Intercompany Product Sales • Intercompany Charge of Services • Intercompany Lease of Assets • Intercompany AP/AR Reconciliation • Intercompany Treasury (In-House Cash) • Intercompany Profit Elimination • Intercompany Month-End Closing
  8. 8. 7 Design Principles • Adopt Stock Transfer Orders • Establish Transfer Price agreements harmonized with SAP ERP design • Use EDI to automate booking of payable upon creation of receivable – no manual intervention after Goods Receipt • Handle Invoice Receipt automatically without manual intervention (reduces time required for month-end closing) Special care needed for: • Country Taxes (might require implementation of User Exit) • Additional Lines (freight, customs, etc.)
  9. 9. 8 Process Flow (Main Activities)
  10. 10. 9 Key Enablers: Stock Transfer Order and Goods-in-Transit Functionality • Stock Transfer Orders (STO) are used to move materials between companies integrating both processes • Both companies need to implement Materials Management and Purchasing (MM) and Sales and Distribution (SD) • Process is initiated by company that needs to receive the material • It is necessary to pay attention to fulfilling country statutory requirements – usually revenue recognition, transfer price, and settlement of receivables/payables must be performed as if the companies were independent • The additional usage of Goods-in-Transit improves the financial controls of inventory ownership
  11. 11. 10 Key Enabler: Goods-in-Transit Functionality • SAP ERP 6.0 with EHP5 supports full automation of intercompany accounting, including accruals for stock in transit Seller location On-hand In-transit Buyer location On-handIn-transit Transfer to in-transit (681) Issue paired with receipt (685) Goods receipt (101) Transfer to in-transit (681) Issue paired with receipt (685) Goods receipt (109) Logical receipt (107) Transfer to in-transit (683) Goods receipt (109) Goods receipt (107) Seller ships goods and retains ownership while in transit. Buyer confirms receipt, which automatically books goods issue and receipt to on-hand. Seller retains ownership for part of transit time. POD at title transit point moves inventory to in-transit to buyer. Final receipt moves inventory to on-hand at buyer. Intercompany sale recognized immediately at time of goods issue. Buyer holds inventory in- transit until physical receipt, which moves inventory to on-hand. Intercompany invoicing is automatically triggered when title transfers between companies Inventory location by status, ownership, and movement User task performed in SAP Title transfer point that triggers billing 1. Ship goods 1. Ship goods 2. Create proof of delivery1. Ship goods 3. Receive goods 2. Receive goods 2. Create proof of delivery
  12. 12. 11 Intercompany Processes • Intercompany Product Sales • Intercompany Charge of Services • Intercompany Lease of Assets • Intercompany AP/AR Reconciliation • Intercompany Treasury (In-House Cash) • Intercompany Profit Elimination • Intercompany Month-End Closing
  13. 13. 12 Design Principles • Use Intercompany Charge of Services process to create and charge a variety of expenses between Company Codes • Accumulate charges either by direct posting or with periodic assessment into Work Breakdown Structures (WBS) • Calculate and post invoices (AP/AR) at month end or ad hoc • Use EDI and IDoc integration to automatically create the Accounts Payable invoice, booking it at the same time as A/R • Consider each type of process carefully. As this is not a standard process in SAP, there are several alternatives on how to trigger the process or how to deal with specific charges (IT fees, HR ex- pat charges, training, etc.)
  14. 14. 13 Process Flow
  15. 15. 14 Design Principles • Consider the creation by the Buyer of a blanket PO authorizing the charges while seller creates a Sales Order for automatic billing  The reference PO is used to post charges to the receiver cost object  Other types of POs can be considered depending on specific business process • Based on the WBS charges, the sales price is calculated and the following documents are created: Billing, Accounts Receivable Invoice, and Accounts Payable Invoice Charges are collected on a WBS by direct posting or by allocation of expenses from Cost Centers or other objects
  16. 16. 15 Design Principles (cont.) • Trigger Billing and Invoicing periodically and automatically. It is possible to add an ad hoc billing event as well. • Activate Extended Withholding Tax (WHT) functionality for all countries – you will need it • Resolve issues with billing through Dispute Management − do not hold back month-end closing SAP GAPs: • Full Processing of WHT in receiver side • Posting Payable Invoice to the correct cost object
  17. 17. 16 Key Enabler: Resource-Related Billing • RRB allows for the summarization of data based on Project, Sales Order, Service Order, and other cost objects in order to calculate COGS and Revenue (Sales Price) • RRB is powerful, but requires standardization and rationalization of different business processes and scenarios • There are several standard possibilities for billing: Cost-Based Billing, Quantity-Based Billing, Fixed Price, Surcharges, and any combination of these. They are used when simple Milestone or Periodic Billing are not enough. • RRB has extensive possibilities for configuration with the possibility of custom logic by using User Exits
  18. 18. 17 Example: Usage of WBS and RRB Service Charges Labor – $2,000 Fringe – $1,000 Other Costs – $3,000 IT Cost Center WBS 123 Country A Charges Labor – $2,000 SAP – $5,000 Support – $8,000 Transferred to WBS 123 Labor – $500 Fringe – $100 Other Costs – $300 WBS 123 Labor – $500 Fringe – $100 Other Costs – $300 Allocated to WBS 123 IT Charges – $1,000 Allocated from IT IT Charges – $1,000 Month-End Billed – $1,900 COS – $1,900 A/R – $2,000* Revenue – $2,000 *Difference between COS and A/R is due to markup and surcharges
  19. 19. 18 Intercompany Processes • Intercompany Product Sales • Intercompany Charge of Services • Intercompany Lease of Assets • Intercompany AP/AR Reconciliation • Intercompany Treasury (In-House Cash) • Intercompany Profit Elimination • Intercompany Month-End Closing
  20. 20. 19 Design Principles • Leverage the key design principles from IC Sales of Products and IC Service Charges processes • Use a zero-dollar value PO (STO) to request rental equipment or an asset • Match Asset or Equipment to a Non-Valuated Material through Serial Number • Enhance SAP solution through user exits to handle all scenarios of Withholding Tax and other Fees Most prevailing technology nowadays: Excel spreadsheets!
  21. 21. 20 Process Flow
  22. 22. 21 Key Enablers • Link Assets, Equipment, and Non-Valuated Material by serial number • MM/SD are the drivers for shipping the asset and creating the documentation • For some scenarios, Cost Centers can be used as an indirect assignment of the location (country) of the equipment in order to derive invoice and tax charges (e.g., IT charges to different countries) • It will probably be necessary to develop custom reports to manage end of lease and other management information • Potential GAP for different country taxes  Use combination of Vendor, Country, and other Sales Orders/ Billing characteristics to derive correct tax calculation • There is a need to keep synchronization between AM and MM modules for quantity (i.e., asset disposal)
  23. 23. 22 Intercompany Processes • Intercompany Product Sales • Intercompany Charge of Services • Intercompany Lease of Assets • Intercompany AP/AR Reconciliation • Intercompany Treasury (In-House Cash) • Intercompany Profit Elimination • Intercompany Month-End Closing
  24. 24. 23 Leading Practices • Use automatic Intercompany Reconciliation Process (ICR) • Periodically process (during the month) the reconciliation of IC payable and receivable – no need to wait for month-end closing • Implement Dispute Management process for issues about price, quantity, or quality • Reconcile the documents and afterwards deal with the dispute  Subsequent debit and credit memos derived from the dispute resolution will also be reconciled  Dispute does not interrupt month-end closing The automatic creation of payable (in buyer’s GL) upon the creation of the receivable (in seller’s GL) should reduce the number of discrepancies to a minimum
  25. 25. 24 Process Flow
  26. 26. 25 Option 1: SAP ICR (Intercompany Reconciliation) Tool • Solution collects data from Accounts Receivable and Payable invoice level detail and enables matching analysis during the month. It can accommodate non-SAP data. • There is an opportunity to correct before month-end close, reducing differences at month-end. Nevertheless, it is a batch process. • There is a process for automatic and manual matching with standard or customized rules for reconciliation and matching • ICR is an analysis tool. It does not correct the problem at the source, but can initiate a dispute. ICR works better in an SSC environment (centralized processing)
  27. 27. 26 Option 1: SAP ICR (Intercompany Reconciliation) Tool (cont.) Navigation Tree with Differences to Reconcile by Company and Partner Company Unassigned Documents Partner Unassigned Documents Matched Documents
  28. 28. 27 Option 1: SAP ICR (Intercompany Reconciliation) Tool (cont.) Communication (Email) Workflow (Custom) Dispute Case
  29. 29. 28 Option 2: SAP BusinessObjects IC Reconciliation Tool • Easier to include mixed ERP data • Good integration with Consolidation (BPC) • Good functionality for mixed currencies • Works well in decentralized environment • It can force agreement by generating adjustment posting • More complicated integration to Dispute Management How does it compare to SAP ERP ICR?
  30. 30. 29 The total of the invoices is equal to the balance in the child account The total of the invoices differs from the balance in the child account Matched invoices (in Black font) Unmatched invoices (in Blue hyperlink) Matching takes place based on Invoice reference created by ERP System Uploaded data Amount not matched Option 2: SAP BusinessObjects IC Reconciliation Tool (cont.) The declaring company’s invoices are compared to the partner’s. The invoices are matched automatically: • Have the same transaction reference • Contain the same transaction amount
  31. 31. 30 Intercompany Processes • Intercompany Product Sales • Intercompany Charge of Services • Intercompany Lease of Assets • Intercompany AP/AR Reconciliation • Intercompany Treasury (In-House Cash) • Intercompany Profit Elimination • Intercompany Month-End Closing
  32. 32. 31 In-House Cash Concepts • Simulate an internal bank and use it to fulfill financial services to group companies • It can provide services such as: Provision of FX, Interest Rate Calculation, Liquidity Management, Intercompany Liability, Funding Management, Centralized Management of Payables and Receivables • Two scenarios for Payables and Receivables  External Incoming and Outgoing Payment via In-House Cash (IHC)  All Incoming and Outgoing Payment with external entities is processed through the In-House Cash Center of the parent company  Internal Payments  The In-House Cash Center is used to manage all payments between company units and thus keeps cash resources within the group and optimizes how they are applied
  33. 33. 32 Example: Vendor Payment Process Flow
  34. 34. 33 In-House Cash • Principles:  IHC is set up at the group headquarters  IHC is a virtual bank where subsidiaries have current accounts  Technically, it is a separate engine – that is the reason for the complex ALE/IDoc configuration and the multiple steps in processing  Accounts can be maintained in any currency  The handling of intercompany payments is fully automated within IHC. On the due settlement date, the IHC accounts and the general ledgers of the paying and recipient intercompany counterparties are updated automatically with the relevant postings.
  35. 35. 34 In-House Cash: How Does It Help? • Benefits:  Centralized payment and receivable transactions on a regional or global level  Reduced cost and number of payment transactions, bank account numbers, and bank fees  Surplus cash can be used for financing purposes; cash resources are kept within the group  Better control of financial interest of subsidiaries  Processes internal payment transactions on a cost-effective basis  Reduction of the number of external banks and associated interfaces
  36. 36. 35 Additional Points • Critical configuration: ALE and IDocs. Functionality makes extensive usage of IDocs. Users might have to be trained in troubleshooting them. • Accounts Payable has two steps (instead of one) • SAP ERP functionality works well, but additional custom management reports and interfaces might be required • Plan enough time to test with banks • IHC cannot be implemented for certain countries (e.g., China)  Difficult to have 100% adherence to IHC (country regulations, external systems, etc.)
  37. 37. 36 Intercompany Processes • Intercompany Product Sales • Intercompany Charge of Services • Intercompany Lease of Assets • Intercompany AP/AR Reconciliation • Intercompany Treasury (In-House Cash) • Intercompany Profit Elimination • Intercompany Month-End Closing
  38. 38. 37 Accounting 101: Intercompany Profit Elimination Intercompany Sales has a profit of $200.00 Overall inventory is overstated by $200.00 Inventory must be adjusted (by eliminating IC Profit) and taxes deferred (30% of ICP, as an example) What is Intercompany Profit Elimination?
  39. 39. 38 Accounting 101: Intercompany Profit Elimination (cont.) • It looks simple until you add:  Balances from previous years  Price Purchase Variances (PPV)  Exchange Rate Differences  Currency Adjustment Translation (CAT)  Production Variances  Price Adjustments and Rebilling  Legal, Group, and Functional Currency  Billing Currency  Daily and Monthly Exchange Rates  Complex Production and Supply Chains (such as tolling)
  40. 40. 39 Leading Practices • Keep in mind that there are two processes that must be addressed:  Determination of Actual Costing across Company Codes  Determination of Company Uplift (or Delta Profit, ICP) • Use the latest SAP functionality in this area:  Parallel Valuation in Material Ledger (Legal and Group/ Management) with single and multi-settlement  Implementation of STOs for intercompany sales  Actual Company Uplift (EHP 5 – business function LOG_MM_SIT) Companies must be in the same Controlling Area
  41. 41. 40 Option 1: Intercompany Profit as a Cost Component • Inventory value is tracked in legal valuation and group valuation in Material Ledger • Company Uplift is a cost component of Group Costing IC Inventory Profit is reported, revaluating inventory and goods movement based on Management View: • Inventory at hand • Good Issue (for relieve of IC Profit) • Returns • Scrap • And so on
  42. 42. 41 Option 2: STO Updating ICP Invoice $1,100 Invoice $1,300 • IC profit is recorded in Legal Valuation • Group Valuation excludes IC profit • Actual costing is calculated based on Legal Valuation • After period end, price differences and variances from sending plant are transferred to the receiving plant in multi-level settlement in group valuation
  43. 43. 42 Option 2: STO Updating ICP (cont.) • Uplift included in Legal Valuation plus Actual Costing in Group Valuation • Delta Profit is updated based on STO information  Condition type PR00 – legal valuation with profit markup  Condition type KW00 (group valuation) – value of the material in the sending plant to be used as the invoice value on the receiving side in group valuation  Updates Delta Profit with:  Purchase Price Value – Sender’s COGS (KW00) • Can use BAdI for changes in how values are calculated and updated
  44. 44. 43 Changes in Development • SAP and a partner client are developing and implementing a solution that enhances Delta Profit calculation  Delta Profit is calculated based on  Transfer price – COGS selling Plant  Variances in multi-level settlement are forwarded to receiving plants and update Delta Profit  External Sales or transfer of goods decrease Delta Profit in the material/plant More Information on upcoming SAP developments Attend SAP Financials 2015 presentation: Sanjeev Walia, EY, “Key Design Considerations for Legal and Group Valuation in SAP’s Material Ledger”
  45. 45. 44 Intercompany Processes • Intercompany Product Sales • Intercompany Charge of Services • Intercompany Lease of Assets • Intercompany AP/AR Reconciliation • Intercompany Treasury (In-House Cash) • Intercompany Profit Elimination • Intercompany Month-End Closing
  46. 46. 45 Leading Practices • Implement one of the two SAP options for managing month-end closing  SAP Closing Cockpit − standard SAP tool to monitor and control the entire period-end closing cycle  SAP Financial Closing Add-On More Information on SAP Financial Closing Add-On Attend SAP Financials 2015 presentation: Genco Odevci, EY, “I Implemented SAP Financial Closing Cockpit in SAP ERP 6.0: Now What?”
  47. 47. 46 Key Enabler: SAP Closing Cockpit • SAP Closing Cockpit works through the definition of templates and tasks lists executed during period end • The key design elements are:  Defining organizational hierarchy for closing  Defining period close template  Assigning tasks to template  Defining task dependencies  Creating and releasing a task list – ongoing each period
  48. 48. 47 Key Enabler: SAP Closing Cockpit (cont.) • It provides a structured list of financial activities that occur periodically • The single-screen layout presents a period-close-centric view • The purpose is to replace spreadsheet-based close checklists. Embedded task dependencies can help prevent timing issues. • Once a task is being worked on, its status will be visible to all • Support documentation or a note can be attached to tasks • Auditors accept completed task list printout as proof of close completion • SAP transactions or custom T-Codes can be directly called from the Closing Cockpit. Task execution captured with a time snapshot. Source: Genco Odevci “Expert Techniques for Making the Most of the SAP Financial Closing Cockpit” (SAP Financials 2014).
  49. 49. 48 Additional Option: Usage of SAP Financial Closing Add-On • It requires a separate license agreement • It connects to multiple SAP ERP systems for remote runs • It offers automated closing tasks, even in remote system. All task types (transactions, programs, jobs, workflow, CPS [Central Process Scheduling by Redwood] tasks) are available for the local and remote systems. • It has reusable task groups • Tasks can automatically start when predecessors are done (e.g., run transaction in test mode; if successful, run in production mode; if errors, send mail using workflow) • It offers collaboration, notifications, and workflows • It offers better real-time insight into the closing status
  50. 50. 49 What We’ll Cover • Intercompany Processes and SAP ERP • How Can HANA Improve IC Processes? • Challenges for Implementation • Leading Practices – Systems, Master Data, Processes, and People • Wrap-up
  51. 51. 50 How Can HANA Improve IC Processes? • ICR (Intercompany Reconciliation)  ICR works directly on the open items in AP/AR (central ERP instance)  Always ready to reconcile – no batch loading or matching  New Management Dashboard • Material Ledger  Side-car solution implemented in several clients  Accelerated Closing Runs:  Material Selection  Single and Multi-Level Settlement  Post-Closing In-memory computing increases speed of tasks due to almost instantaneous fetching of data from the virtual “hard-disk”
  52. 52. 51 SAP Simple Finance (Optimized Financial Data Architecture) Legal/External Accounting (FI) Documents Legal/External Accounting (FI) Totals tables Management Accounting (CO) Documents Management Accounting (CO) Totals tables ERP Financials Market Segment Data Legal/External Accounting (FI) Documents Legal/External Accounting (FI) Totals tables Management Accounting (CO) Documents Management Accounting (CO) Totals tables Profitability Analysis (COPA) Documents Market Segment Data • No Data Redundancy • Easy Reconciliation • High Flexibility • Less Data Volume • High Performance • One-stop shop for all operational financial reporting • Drilldown to atomic detail One Unified Accounting Document • Data Redundancy (Totals tables, Data Warehouse) • High Reconciliation effort • Low Flexibility • Higher Data Volume • Performance issues Physical Data Virtual HANA views Reports Reports Reports Profitability Analysis (COPA) Documents Data Warehouse Simple Finance on HANA
  53. 53. 52 Central Journal • Finance data is copied from source systems onto a Central Journal instance. Source systems can remain in place and continue with local transaction processing. • Real-time harmonized global financial information on a HANA platform with atomic detail, allowing flexible reporting using robust reporting tools • Single Uniform Global Data Model for external (FI), internal (CO), and Profitability/Market Segment (COPA) accounting • No reconciliation across instances • Central Journal is an adoption scenario that enables implementing Simple Finance with minimum disruption to existing systems • It provides real-time replication of financial information from diverse instances that are harmonized into a Central Journal • Can provide consolidated financial and management reporting, central process execution and transaction, planning, consolidation, and reporting based on the same (single source of truth) data set Consolidation Reporting SAP ERP 6.0 SAP ERP 6.0 SAP R3 4.6 Non- SAP Central Journal SAP Instance with Simple Finance
  54. 54. 53 What We’ll Cover • Intercompany Processes and SAP ERP • How Can HANA Improve IC Processes? • Challenges for Implementation • Leading Practices – Systems, Master Data, Processes, and People • Wrap-up
  55. 55. 54 Project Perspective • IC processes are frequently an afterthought • Seen as only an integration issue instead of a process  Integration: Communication or connection between modules (e.g., account determination for material movements)  Process: Series of connected steps accomplishing a goal (e.g., P2P, O2C, R2R) • IC processes frequently “break” during integration tests or after go-live • Create a specific project work stream to deal with IC processes • In a phased rollout, think about interim stage • Give the team the right resources (business and functional)
  56. 56. 55 Interim Stage Challenges • Projects frequently think in terms of to-be processes of final design • This works fine with big-bang style implementations, but most Global implementations are phased by business and/or geography • The Key Decision is whether or not to integrate the IC processes in the interim stage • Unless the company works with two or more disconnected systems in terms of IC processes, there is a need to link all systems from day one  The design for the interim stage can absorb significant resources from the project team (up to 30% to 40% of work)  To-be might need to be adjusted to work together with the interim design (need for compromise) The Key Decision is whether or not to integrate the IC processes in the interim stage
  57. 57. 56 Interim Stage Challenges: Integrating All Companies • In a phased rollout, a design decision to integrate companies that have not migrated to the new environment into the IC processes has advantages and disadvantages • Immediate benefit to IC processes by implementing leading practices • Better management reports • Faster closing • Alleviates issues with communications • Easier transition in future rollouts • Early work on master data harmonization Advantages • Complexity of implementation • Consumption of project resources • Potential issues with differences in business processes (e.g., transfer prices, material valuation) • Need to compromise a few to-be design decisions Disadvantages
  58. 58. 57 Interim Stage: STO Integration • Integration can be done through a custom development (Intercompany Data Transfer) • Need to customize IC Data Transfer for each IC process
  59. 59. 58 What We’ll Cover • Intercompany Processes and SAP ERP • How Can HANA Improve IC Processes? • Challenges for Implementation • Leading Practices – Systems, Master Data, Processes, and People • Wrap-up
  60. 60. 59 Leading Practices • Single instance with consistent global template • Leverage dual posting (Seller AR and Buyer AP) • Use the matching and reconciliation functionality for AR/AP and GR/IR • Use ERP (SAP In-House Cash) netting functionality • SAP ERP 6.0 since Enhancement Pack 5 – provides Goods in Transit visibility • Use workflow and IDocs where possible • Single point consolidation (avoid sub-consolidation) and leverage a tool (HFM, BPC, etc.) Systems Master Data Management and Governance • Establish a governance policy to manage strategic changes to master data • Establish master data policies and procedures for change management • Ensure that all projects that impact systems include master data team participation • Assign full responsibility of master data to individuals for maintenance
  61. 61. 60 Leading Practices (cont.) • Establish materiality thresholds for posting of IC transactions • Establish a detailed monthly calendar for IC tasks • Establish a Dispute Resolution Policy with a Committee that arbitrates disputes • Establish upfront approvals • Consider tax needs (provisioning, transfer pricing) when establishing timing of billing (monthly, quarterly, annual) for corporate pass-downs • Establish policy on currency for transactions between entities with different currencies for reconciliation and settlement • Document and communicate IC policies and procedures Processes People • Centralize IC accounting (where possible), but maintain a single point of contact for IC transaction inquiries for each company • Document and train for specific roles and responsibilities, including handoffs • Train and provide job aids/contact information for all personnel involved in IC transactions • Document review/approval/escalation points for IC transactions
  62. 62. 61 What We’ll Cover • Intercompany Processes and SAP ERP • How Can HANA Improve IC Processes? • Challenges for Implementation • Leading Practices – Systems, Master Data, Processes, and People • Wrap-up
  63. 63. 62 Where to Find More Information • SAP Financials 2015 presentations  Sanjeev Walia, “Key Design Considerations for Legal and Group Valuation in SAP’s Material Ledger” (Las Vegas, 2015).  Genco Odevci, “I Implemented SAP Financial Closing Cockpit in SAP ERP 6.0: Now What?” (Las Vegas, 2015). • Prem Ramlal, “Manage Cash Flows and Reduce Bank Costs with an Integrated Treasury System” (SAP Financials 2014, Orlando). • Financials Expert (http://sapexperts.wispubs.com/Financials)  Janet Salmon, “Calculate Actual Costs Across Multiple Company Codes Using a New Business Function in SAP Enhancement Package 5 for SAP ERP 6.0” (Financials Expert, December 2010).
  64. 64. 63 7 Key Points to Take Home • Consider IC processes as a project work stream • Automate transactions and postings across company codes • Use a formal process of Dispute Resolution to avoid interruptions in the IC processes • Standardize IC processes and manage the necessary change to accomplish them • Review policies to support the implementation of leading practices • Do not forget about the interim stage with a phased rollout • Be bold – You will live with the system for the next 15 years!
  65. 65. 64 Your Turn! How to contact me: David Cohen David.Cohen@ey.com Please remember to complete your session evaluation
  66. 66. 65 Disclaimer SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries. All other product and service names mentioned are the trademarks of their respective companies. Wellesley Information Services is neither owned nor controlled by SAP SE. EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Ernst & Young LLP is an EY member firm serving clients in the US. For more information about our organization, please visit ey.com. © 2015 Ernst & Young LLP. All Rights Reserved. 1401-118151 This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.
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