Dear,
One of the major Financial Innovations coming with SAP S/4HANA Finance is Predictive Accounting.
Predictive Accounting is an important element of the new paradigm of Continuous Accounting, which proposes a real-time implementation of the end-of-period closing processes, delivering Financial information timely, giving advantage to the managers on their decisions taking analysis, and reducing the effort of the end-of-period closing processes.
The logic behind is “let’s use the information as real time integration technology makes it available”.
Predictive accounting goes one step further and uses Sales Orders information (commitments) for producing an Accounting Ledger, including expected Revenue and expected Cost of Sales.
Predictive accounting uses the “Prediction and Commitment” extension ledgers.
Prediction and Commitment extension ledgers are a new type of extension ledgers of SAP S/4HANA Universal Ledger, which take advantage of the improved integration of the Universal Journal and its simplification capabilities.
Prediction and Commitment Extension Ledgers enable the posting of Sales Orders (before delivery or billing) to the Universal Journal to support Revenue, Sales Cost and Profitability Forecasting
This Prediction Ledger can also be used on purchase-to-pay processes to create predictive journal entries from Purchase Orders.
SAP has offered a similar concept for many years; actually we implemented “expected Profit and Losses” functionalities in our firsts SAP R3 projects, more than 20 years ago.
SAP R3 had the Costing Based CO-PA (Profitability Analysis Module) which offered a multidimensional Profit and Loss analysis including “expected postings” from the Sales Orders, reflecting future revenue and cost of sales forecasts (Record Type A).
Unfortunately, Costing Based CO-PA had limitations as it was only available for P&L Key-Figures and it did not represent a complete Ledger with complete accounting capabilities like capital estimations or multi-currency accounting. Some of this capabilities could be built by transferring the expected revenues and costs of sales to Planning systems like Business Planning and Simulation or Business Planning and Consolidation, but the process required integration efforts and time.
Predictive accounting is an important improvement but it does not fix the issue of representing capital consumption in the Financial Statements, as accounting does not provide robust technical elements for representing commitments. Remember that Sales and Purchase Orders represent future revenues and costs but they are also represent commitments, which consume capital.
SAP Financial Products Sub-ledger comes with robust Forecasting, Planning, and Simulation functionalities supporting “predictive accounting”.
SAP FPSL has been built on top of he Integrated Financial and Risk Architecture, and shares its data model with the SAP Financial Services Data Management. They fully support capital consumption representation, including commitments, risk exposure hedging, etc.
Obviously, the integration effort of the SAP Financial Products Subledger with some business processes like Order-to-cash and Purchase-to-pay does not justify modeling them in the Financial Products Subledger, at least not yet.
But don’t forget that we are in a systemic transformation towards an economic model driven by capital scarcity. Measuring capital consumption timely and accurately is the first, mandatory requirement, for capital optimization.
At the end, Sales Orders and Forward Contracts represent the same operational reality, the only difference is its financial representation, depending on the interest or necessity of measuring its capital consumption.
Looking forward to read your opinions.
K. Regards,
Ferran.
www.capitency.com
Join the SAP Banking Group at: https://www.linkedin.com/groups/92860
Visit my SAP Banking Blog at: http://sapbank.blogspot.com/
Let's connect on Twitter: @FerranFrancesGi
Ferran.frances@capitency.com
One of the major Financial Innovations coming with SAP S/4HANA Finance is Predictive Accounting.
Predictive Accounting is an important element of the new paradigm of Continuous Accounting, which proposes a real-time implementation of the end-of-period closing processes, delivering Financial information timely, giving advantage to the managers on their decisions taking analysis, and reducing the effort of the end-of-period closing processes.
The logic behind is “let’s use the information as real time integration technology makes it available”.
Predictive accounting goes one step further and uses Sales Orders information (commitments) for producing an Accounting Ledger, including expected Revenue and expected Cost of Sales.
Predictive accounting uses the “Prediction and Commitment” extension ledgers.
Prediction and Commitment extension ledgers are a new type of extension ledgers of SAP S/4HANA Universal Ledger, which take advantage of the improved integration of the Universal Journal and its simplification capabilities.
Prediction and Commitment Extension Ledgers enable the posting of Sales Orders (before delivery or billing) to the Universal Journal to support Revenue, Sales Cost and Profitability Forecasting
This Prediction Ledger can also be used on purchase-to-pay processes to create predictive journal entries from Purchase Orders.
SAP has offered a similar concept for many years; actually we implemented “expected Profit and Losses” functionalities in our firsts SAP R3 projects, more than 20 years ago.
SAP R3 had the Costing Based CO-PA (Profitability Analysis Module) which offered a multidimensional Profit and Loss analysis including “expected postings” from the Sales Orders, reflecting future revenue and cost of sales forecasts (Record Type A).
Unfortunately, Costing Based CO-PA had limitations as it was only available for P&L Key-Figures and it did not represent a complete Ledger with complete accounting capabilities like capital estimations or multi-currency accounting. Some of this capabilities could be built by transferring the expected revenues and costs of sales to Planning systems like Business Planning and Simulation or Business Planning and Consolidation, but the process required integration efforts and time.
Predictive accounting is an important improvement but it does not fix the issue of representing capital consumption in the Financial Statements, as accounting does not provide robust technical elements for representing commitments. Remember that Sales and Purchase Orders represent future revenues and costs but they are also represent commitments, which consume capital.
SAP Financial Products Sub-ledger comes with robust Forecasting, Planning, and Simulation functionalities supporting “predictive accounting”.
SAP FPSL has been built on top of he Integrated Financial and Risk Architecture, and shares its data model with the SAP Financial Services Data Management. They fully support capital consumption representation, including commitments, risk exposure hedging, etc.
Obviously, the integration effort of the SAP Financial Products Subledger with some business processes like Order-to-cash and Purchase-to-pay does not justify modeling them in the Financial Products Subledger, at least not yet.
But don’t forget that we are in a systemic transformation towards an economic model driven by capital scarcity. Measuring capital consumption timely and accurately is the first, mandatory requirement, for capital optimization.
At the end, Sales Orders and Forward Contracts represent the same operational reality, the only difference is its financial representation, depending on the interest or necessity of measuring its capital consumption.
Looking forward to read your opinions.
K. Regards,
Ferran.
www.capitency.com
Join the SAP Banking Group at: https://www.linkedin.com/groups/92860
Visit my SAP Banking Blog at: http://sapbank.blogspot.com/
Let's connect on Twitter: @FerranFrancesGi
Ferran.frances@capitency.com
1 comment:
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