Introduction to SAP Simple Finance

SAP Simple Finance is SAP’s HANA solution for Accounting. The functionality that comes with Simple Finance is quite revolutionary as far as changes go. I have worked in the SAP Finance space for over 17 years and have not seen this many enhancements to the Finance solution introduced at the same time.

Before we get excited about all this, let us get down to some brass tacks. Some SAP customers that I have spoken to feel that it is pretty brazen of SAP to come out with a product with the designation of “Simple”. After all, it was its complexity compared to other systems that was used to lure customers to SAP in the first place. I have heard comments such as “Simple Finance was the solution that we had BEFORE we implemented SAP” and “Why should we pay more money to get a simpler solution?”

I am not part of SAP’s marketing team, and cannot say that I totally endorse the “Simple” moniker. I don’t think the name matters. In fact, the previous name of the solution was “Smart Financials”. In a certain context, the word “Smart” is the exact opposite of the word “Simple”, so who knows the thought processes behind choosing these product names.

In my experience working with finance team members (CFOs, Controllers, Financial Analysts, Accountants etc.), a prevalent and recurring issue is with understanding and hence trusting of the numbers that are reported. However, due to the complexity of the system, when you have variances or reconciliation issues, it is very difficult to untangle the underlying causes of the differences and resolve mismatches between different reports.

I think the Simple Finance Solution addresses some of the major issues which were previously dealt with by using workarounds and custom programs. Here is a summary of some of the new functionalities:

  1. Secondary Cost Elements are now part of the chart of accounts, hence all assessments, overhead calculations, internal activity allocations and settlements can now be seen in the financial statements;
  2. Using Account-based CO-PA, you can now break up the cost of sales value into different cost components, and you can break up the production variance into different variance categories. Basically you now have the advantage of costing based CO-PA (which is useful for contribution margin reporting) and account based CO-PA (which is useful for reconciling with the G/L) combined in one solution;
  3. Real-time summarization analysis is available for product costing reports, which means you do not need to run the data collection transaction (which can take a considerable amount of month end time) before producing these reports in a hierarchical format.
  4. By taking advantage of HANA’s in-memory processing, you can speed up the month end processes such as WIP and variance calculation, results analysis and settlement, and this frees up more time for analysts to evaluate the output of these transactions.
  5. Real-time reporting in the same system that the transaction was processed. This was the original design in the R/3 system. However, those reports became outdated and did not run well with massive amounts of data (and some of them were ugly, to boot). This led to the introduction of Business Warehouse (BW) and subsequently Business Objects reporting. As good as these systems are, not all businesses were impressed with the fact that there was a time lag between processing and reporting, and that some reconciliation issues occurred between the ERP and reporting systems. With Simple Finance, you get the advantage of a “single source of truth” without encountering the issues described above.

I will be blogging over the next few months about the specifics of the new functionalities and will flesh them out in more detail, so please stay tuned. I have also recorded a podcast with SAPinsider on the topic of Simple Finance, which you can find here.

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