Standardization of finance landscapes drive corporate efficiency and agility, which are key factors that determine success in the digital age.
Today’s ERP landscapes have been historically grown and heterogeneous. As a consequence, companies have to deal with side effects like cumbersome processes, redundant workloads, limited transparency, and hampered management steering capabilities.
To gain competitiveness, organizations need to consolidate these complex finance IT landscapes, and processes have to be standardized and deployed globally. Additionally, new acquired companies, joint ventures, or new business models have to be integrated on short notice.
Experience shows that in many cases, resulting IT projects aiming for harmonization and consolidation of existing systems are very time- and resource-consuming. Required changes have to be adopted in far too many different systems in parallel, resulting in very long project durations before the desired benefits can be achieved on corporate level.
In many cases, a “template,” in most cases developed centrally and rolled out locally, is used to standardize finance landscapes. A template is a standardized master, which typically covers global as well as local requirements. It contains predefined processes and objects like master data and organizational structures, which should be used by the organization running this template. Due to new technologies like in-memory and innovative technological capabilities, new options are emerging. One of the innovative approaches is a central finance platform, also known as “central finance.”
A central finance platform – for a single source of truth
But today’s finance organizations require a much more thorough and faster modernization of their finance architecture to meet their objectives. Typically, these requirements are strong in areas like consolidated finance, management reporting, recentralization of finance processes in shared service organizations, and planning and reporting. Ideally all of these solutions are referring to the same data (“single source of truth”).
While comparing this future-state scenario of modern finance architecture with typical as-is situations, as described above, it becomes clear that a template approach has clear boundaries. A central finance system, in contrast, offers a new approach organizations should consider.
Within such a scenario, the finance data is replicated in real time from different sources into a central finance instance. The source systems are not disrupted, existing business processes are not changed, and the transactions keep running as before.
At the same time, utilizing real-time technology for data processing within the target central finance system provides huge opportunities. These range from standardized modeling and process execution across the whole organization to new steering capabilities, including unmatched transparency and root-cause capabilities.
The advantages: better insights, performance, service levels
The data transferred into the central finance system can be used for a variety of purposes such as corporate reporting, process standardization, as well as use cases in central process execution (shared service centers).
Utilizing a central finance approach has multiple advantages. Companies can transfer their financial data into the new system without disruption. Source data can be harmonized “on the fly” during transfer, resulting in a consolidated reporting with better insights, better performance, and higher service levels.
Transactional processing, planning, and reporting are based on the same granular data (real-time, harmonized, and aligned). Additionally, it is possible to optimize processes (real-time closing) and other productivity enhancements due to new user interfaces.
Different options exist to set up a central finance environment. Migration of ERP source systems to the new central finance system can be achieved step by step, according to the requirements of the organization.
Standardization and harmonization of corporate accounting can be supported by a central finance approach. Reduction of complexity and reduction of costs, improvement of steering transparency, or enhanced flexibility are all examples of corporate objectives that can be met by a modern finance architecture. With central finance, CFOs can prepare their organizations to lead in the digital age.
To learn more about how finance executives can empower themselves with the right tools and play a vital role in business innovation and value chain, please visit the SAP finance page for additional research and valuable insights.
For more insights from other organizations on the benefits of the latest technologies, download the infographic and read the report, Making the Business Case: Real CFOs Discuss the Benefits of SAP S/4HANA Finance.