How S/4 Simple Finance will impact the Financial processes for an organization.
tome 83
lecture_33.pptxLecture 3 Introduction to SAP Finance (FI)
FIN419
Learning Objectives
Review of basic Finance management topics
Understand the goal of SAP Finance (FI)
Understand the purpose, master data and reporting of New GL
Understand the purpose, master data and reporting of AR
Understand the purpose, master data and reporting of AP
Understand the purpose, master data and reporting of AM
Understand the integration points between FI and the rest of the FI submodules.
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Finance Review Financial Statements
Statement of financial position - Balance Sheet
Reports the firm’s assets, liabilities and equity at a given point of time
Income Statement
Reports the firm’s income, expenses, and profits over a period of time
Statement of cash flow
Reports the firm’s cash flow activities (operation, investing and financing)
Statement of changes in equity
Explain the changes of the firm’s equity over a period of time
Finance Review Balance Sheet
The Balance Sheet Reports the firm’s assets, liabilities and equity at a given point of time
Assets
Current (life less than one year)
Fixed (life longer than one year)
Liabilities and Owners’ Equity
Current (life less than one year)
Long term ( life longer than one year)
Balance Sheet Identity
Assets = Liabilities + Stockholders’ Equity
Assets
Fixed
Liabilities+ Equity
Equity
Current
Current
Long term
Finance Review Working Capital and Liquidity
Net working capital
Difference between Current Assets and Current Liabilities
It indicate whether the firm has sufficient short term assets to cover its short term obligations
Liquidity
It refers to the speed and ease in which an asset can be converted to cash without significant loss of value
Liquidity is valuable in avoiding financial distress
Net working capital
Assets
Fixed
Liabilities+ Equity
Equity
Current
Current
Long term
Finance Review Debt vs. Equity
Debt and Equity are sources of financing for the firm
The use of debt in a firm’s capital structure is called financial leverage
The more leverage, the higher the risk of financial distress
Assets
Fixed
Liabilities+ Equity
Equity
Current
Current
Long term
Finance Review Income Statement
The income statement measures performance over a specified period of time (period, quarter, year).
Income Statement Equation(s):
EBIT = Net sales – COGS – Operating expense
Net Income = EBIT – Interest - Tax
Addition to REA = Net income - dividends
Net income elements
Dividends paid to shareholders
Addition to retained earnings
Sales (Revenue)
Net income
Dividends
Return to Equity
COGS
Operating exp (General expenses, depreciation, etc)
Interest
Tax
Gross Profit
EBIT
Finance Review Market versus Book Value
Book value corresponds to the balance sheet value (according to US GAAPs) of the assets, liabilities, and equity and is generally not what they are actually worth.
Market value or true value corresponds to the price at which the assets, liabilities, or equity can actually be bought or sold and it is relevant for managers and investors.
| US Firm Balance Sheets Book vs. Market Value | |||||
| Assets | Liabilities and Equity | ||||
| B | M | B | M | ||
| Current | 100 | 300 | Current | 70 | 100 |
| Net fixed assets | 500 | 600 | Long term | 200 | 200 |
| Equity | 330 | 600 | |||
| Total Assets | 600 | 900 | Total L&E | 600 | 900 |
Finance Review Difference between Accounting Income and Cash Flow
Income Statement is not a measurement of Cash Flow
Accrual Basis Accounting
Recognize revenue when it is fully earned, not when cash is received
Net Sales of $5,000 but AR increase of $1,500. Cash from sales = $3,500 ($5,000 - $1,500)
Recognized expenses needed for the generation of revenue, not when cash is paid
Inventory cost of $3,000 but AP increase of $500. Cash to vendors = $2,500 ($3,000 - $500)
Noncash Items in the Income Statement
Expenses charged against revenue that do not affect cash flow. The most important is depreciation.
Finance Review Statement of Cash Flow
The Statement of Cash flow identify the sources of cash over a period of time and its use. It is classified by:
Financing:
Loans or financing activity
Operating.
From the operation of the company
Investing.
Asset investing
Financing
Operating
Investing
SAP Finance (FI) Goal
Financial accounting is designed to collect the transactional data that provides a foundation for preparing the standard portfolio of reports.
In general, these reports are primarily, but not exclusively, directed at external parties.
Standard reports include:
Balance Sheet
Income Statement
Statement of Cash Flows
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Internal
Executives
Senior Management
External
Legal authorities
Admin Staff
Employees
Banks
Auditors
Shareholders
Insurance
Tax authorities
Media
Financial Analysts
SAP Finance (FI) Organizational Structure
Client
An independent environment in the system
Company Code
Represents an independent legal accounting unit
Balanced set of books, as required by law, are prepared at this level
A client may have more than one company code
Chart of Accounts
A classification scheme consisting of a group of general ledger accounts
Provides a framework for the recording of values to ensure an orderly reporting
Credit Control Area
An organizational entity which grants and monitors a credit limit for customers
It can include one or more company codes
Represents the legal and/or organizational views of an enterprise and it forms a framework that supports the activities of a business in the manner desired by management
SAP Finance (FI) Organizational Structure (Cont)
Ledger (leading and parallel)
An organization unit that allows you to produce financial statements according to different accounting principles
Chart of Depreciation
An organization unit that allows you to control the legal valuation of assets. They are usually country specific and can be assigned to multiple company codes.
Business Area (could be use for regional reporting)
An organizational unit that represents separate areas of operations or locations within an organization
Segment (could be use for divisions)
An organizational unit that represents separate areas of a company with activities that generate expenses and revenues
SAP Finance (FI) Company Code and Currencies
Company codes can have independent currencies and share one for financial consolidation purposes (group currency).
You can use up to four currencies in financial accounting
Company code (local) currency
Group currency
Hard currency
Transaction currency
Transaction
Document currency
Local
Reporting currency
Group
Consolidation currency
SAP Finance (FI) Global Bike Finance Structure
Two company codes
One chart of accounts
One business area
One credit control area
SAP Finance (FI) Reflection
What currencies would be involved in a FI transaction on Global Bike Inc?
What currencies would be involved in a FI transactions on Global Bike Germany?
What would be the most likely currency for the GBI financial consolidation and why?
What type of regulations may apply the setting of currencies and its configuration at the company code level?
SAP Finance (FI) Sub-modules
New General Ledger (GL) use to record the financial impacts of business process steps. It constrains the data for financial reporting.
Accounts Receivables (AR) is associated with the fulfillment process and is used to manage money owned by customers for good and services sold
Accounts Payables (AP) is associated with the procurement process and is used to managed money owned by vendors for the purchase of materials and services
Asset Management (AM) is used to record data related to the purchase, use and disposal of assets.
Bank Ledger (BL) is used to record the transactions related to the deposits and disbursements of cash
SAP Finance (FI) Master Data Summary
Finance consists of all master data, configuration, and reporting required to analyze external oriented financial statements. This includes the following master data:
General Ledger – financial transactions (balance sheet, P&L)
Customer Master – AR sub ledger
Vendor Master – AP sub ledger
Asset Master – Asset sub ledger
New General Ledger Introduction
The central task of G/L accounting is to provide a comprehensive picture of external accounting and accounts.
The general ledger serves as a complete record of all business transactions.
Managed at the company code level, where all accounting-relevant transactions are recorded here
Benefits
Parallel accounting to recognized multiple GAAP’s
Segment reporting in adherence with US GAAP and IAS
Document splitting
Integration of FI and CO data
Procurement to Pay
Order to Cash
AR
AP
GL
Stock
Vendor invoice
Vendor paymt
Customer paymt
Billing
Bank Acct
Asset Acct
New General Ledger Document splitting
New General Ledger functionality that allows organizations to split documents line
Advantages
Reduces the time and effort for the user to enter documents by deriving segment from profit center which can be derived from a cost object
cost center,
internal order, or
project
Allow a company to create real time balance sheets for segments
New General Ledger Document Principle
Each business transaction impacting FI writes data to the SAP database creating a uniquely numbered electronic document.
The document number can be used to recall the transaction at a later date.
It contains, for example, such critical and necessary information as:
Responsible person, date and time of transaction, commercial content
Once written to the SAP database, a financial document (one impacting the financial position of the company) can not be deleted from the database, although it can be changed to some degree.
The SAP document principle provides a solid and important framework for a strong internal control system – a requirement of law for companies that operate in the United States and in most other countries in the world.
New General Ledger Transactions
FS00, FSP0, FSS0. GL master record
FB50L Enter GL account document for ledger group
FB03 Display document
FB08, FB80 Reverse document and mass reversal
FAGLL03 GL Account line items
FAGLB03 Display balances
S_ALR_87012284 or F.01 Run Financials
FAGL_FC_VAL Foreign Currency Valuation
FBB1 Post Foreign Currency
New General Ledger Master Data (FS00)
General Ledger Account are master data that in the GL that belongs to the Chart of Account (CoA).
Client level
Company code level
Account
Description
Currency and tax data
Account group
Group accounts depending of a defined criteria
P&L or Balance sheet
Reconciliation account
Control sub ledgers
Field status group
It controls fields requirements during posting
Line control
Open item management
Line item display
New General Ledger Master data: Account Group
Classify G/L account into user defined segments
Determine the number range of the accounts that will fall into these segments
Determine field status (suppress, required, display, and optional
New General Ledger Master Data: Reconciliation account
For each sub ledger account you must keep at least one reconciliation account in the general ledger.
Sub ledger postings automatically posts to the corresponding reconciliation account in the general ledger.
You can not manually post directly to reconciliation accounts.
Ensures real-time integration of sub ledger accounts and the general ledger
New General Ledger Document entry (FB50L)
Company code
Posting & Document date
Currency
Document type
Ledger
Line items
GL accounts
Posting key
Amounts
New General Ledger Document entry: Document type
Two character alphanumerical key that distinguish different business transactions and classify accounting documents
Controls
Document ranges
Account types allowed
Type of transactions allowed
*List on the right is a sample of the document type list
New General Ledger Document entry: Posting Key
Two character numerical key that controls the entry of line items
Determines
Account type
D for customers
K for vendors
S for GL
A for assets
M for materials
Debit/credit posting
Field status of additional data
Layout of entry screens
New General Ledger Document entry: Simulate, Parking, Post
Simulate. It allows you to review a document before posting or parking it.
Parking. It allows you to save a document in a transit space allocating a document but not creating a financial effect.
Post. It saves the document in the system allocating a document and creating a financial effect.
Simulate
Park
Post
New General Ledger Run Financials (F.01)
Chart of Accounts
Company Code
Financial Statement Version
Reporting Year and comparison periods
List output
New General Ledger Run Financials: Financial Statement Version
To meet various reporting requirements, various financial statement versions have been created in the system.
You define exactly which accounts appear in which line items of the financial statement
New General Ledger Reflection
What implications/benefits/uses may have document splitting functionality for finance?
What functionality or functionalities of the new GL would your recommend to implement to address GAAP differences between countries and why?
What internal control benefits would you highlight from the implementation of SAP ECC?
Accounts Receivable Introduction
Records and manages accounting data of all customers.
Integral part of Order to Cash business process.
All billing and cash collections are executed by AR sub-module allowing to report on AR activity.
Postings made to accounts receivable are also recorded directly in the G/L.
AR is integrated with SD and Treasury (order to cash process)
GL
Customer payment
Billing
Accounts Receivable Transactions
XD01 or FD01. Customer master record
FB70 Enter Invoice
FB03 Display document
F-28 Incoming payments
FB08, FB80. Reverse document and mass reversal
FBL1N AR Account line items
FK10N Display balances
Accounts Receivable Master Data (FD01)
Customer Master Account is data needed to conduct business with customers and execute transactions related with fulfillment process.
General (Client)
Accounting (Company code)
Account
Name
Address
Bank information
Payment terms
Payment method
Reconciliation account
Cash management group
Accounts Receivable Credit Management
Accounts are processed on the basis of credit segment in the customer master record. This is maintained in a separate data basis in SAP credit management.
Credit data includes all information about a business partner that is required to monitor credit risk
Credit profile data
Credit segment data
Credit Profile
Contains the procedure for scoring and credit limit calculation, the internal scoring, and sometimes external business partner ratings.
Also includes risk class, check rules for controlling credit limit check, and notes.
Credit Segment
Contains all the data required for checking credit when a sales order is accepted and the resulting order-related credit decision.
You can define a main credit segment as well as additional credit segments for company codes.
Accounts Receivable Invoice entry (FB70)
Company code
Customer and Reference
Posting and Invoice date
Document type
Amount and currency
Line items
GL accounts
Posting key
Amounts
Additional info tabs
Accounts Receivable Incoming Payments (F-28)
Company code
Posting & document date
Document type
Currency
Bank Data (debit)
Value Data (collection date)
Customer Data (credit)
Additional selections for line items identification
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Accounts Receivable Display Balances (FK10N)
Customer
Company Code
Fiscal Year & Currency
Outcome
Beginning balance
Debits and Credits per period
Balance
Ending Balance
Sales related transactions
Drilldown capability
Accounts Payable Introduction
Records and manages accounting data for all vendors
Integral part of the Procure to pay business process
All invoices and payments are executed by AP sub-module allowing to report on AP activity
Postings in accounts payable are simultaneously recorded in the G/L
AP is integrated with IMWM and Treasury (procurement to pay process)
GL
Stock
Vendor invoice
Vendor payment
Accounts Payable Transactions
XK01 or FK01. Vendor master record
FB60 Enter Invoice
FB03 Display document
F-53 Outgoing payments
F110 Mass payments
FB08, FB80 Reverse document and mass reversal
FBL5N AR Account line items
FD10N Display balances
Accounts Payable Master Data (FK01)
Vendor Master Account is data needed to conduct business with vendors and execute transactions related with the purchasing process
General (Client)
Accounting (Company code)
Account
Name
Address
Payment terms
Payment method
Bank information
Reconciliation account
Accounts Payable Invoice entry (FB60)
Company code
Vendor and Reference
Posting and Invoice date
Document type
Amount and currency
Line items
GL accounts
Posting key
Amounts
Additional info tabs
Accounts Payable Outgoing Payments (F-53)
Company code
Posting & document date
Document type
Currency
Bank Data (credit)
Value Data (payment date)
Vendor Data (debit)
Additional selections for line items identification
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Accounts Payable Mass Payments (F110)
Run date
Payment ID
Parameters
Posting date
Doc entry date reference
Company code
Payment terms
Next payment
Vendor range
Select printout/data medium
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Accounts Payable Display Balances (FD10N)
Vendor
Company Code
Fiscal Year & Currency
Outcome
Beginning balance
Debits and Credits per period
Balance
Ending Balance
Purchase related transactions
Drilldown capability
Account Payable and Receivable Reflection
What recommendations would you give to a new SAP implementation in regards the settings for vendor and customer master records?
What are the benefits of AP and AR subledger?
How do you link the AP and AR sub-ledger and the postings to FI?
What are the benefits of the open item management functionality in accounts payable and accounts receivable?
Why the multi-currency functionality of SAP is one of its greatest benefits?
Asset Management Introduction
Records and manage accounting data for all fixed assets
All asset transactions (acquisitions, transfers, sells, retirement, depreciation) are controlled by asset management during its life and calculate asset depreciation
AM is integrated with AR and AP
Postings in AR and AP are simultaneously recording in asset management
Postings in asset management are simultaneously recorded in the G/L
GL
Vendor invoice
Billing
Asset Acct
Depreciation
Retirement
Asset Management Transactions
AS01 Asset master record
F-90 Acquisition with vendor
AW01N Asset Explorer
F-92 Retirement with customer
AFAB Depreciation run
AB08 Reverse document
Asset Management Master Data (AS01)
Asset Master Record contains data to track the financial consequences associated with the entire lifecycle of an asset.
General (Company code)
Dep. Areas (Chart of Depreciation)
Description
Depreciation key
Account determination
Controls the GL postings based on the asset class
Asset class
Cost centers and plant
Origin data
Useful life
Dep. Start date
Change over year
Asset Management Master data: Asset Class
Grouping of assets with possess similar characteristics
Asset classes created at client level (apply to all company codes)
Each asset class is associated to a reconciliation account via account determination
Each asset has to be assigned to an asset class.
There is at least one special asset class for assets under construction and one for low-value assets.
Asset Management Master data: Account Determination
It create the link between the asset master record and the GL
Each asset class is assigned to an account determination but it is possible to have unique account determination per chart of depreciation
Each account determination is associated with a depreciation area
Each account determination holds the GL accounts for
Acquisitions, depreciation and retirement
Asset Management Master data: Dep. areas and dep. keys
Depreciation area
Chart of depreciation specific
Used to calculate different values in parallel for each fixed asset for different purposes an can be linked to different ledgers.
Various data is stored in the asset master record for depreciation areas which control the calculation of normal and special depreciation for the special depreciation areas.
Depreciation key
Depend from the depreciation area
Can use different depreciation method for general business procedures from the depreciation method required by tax authorities.
CoD
Dep area 01
Dep area 02
Dep area 03
GL
Dep keys
Dep keys
Dep keys
Asset Management Acquisition with vendor (F-90)
Company code
Posting and document date
Document type
Line items
Vendor account
Posting key (31 for vendor and 70 for asset debit)
Transaction type to classify the asset transaction
Amount
Asset Management Depreciation run (AFAB)
Only after the depreciation posting run has been completed is the depreciation actually posted in asset accounting and in the General Ledger
The depreciation is posted to the corresponding depreciation accounts in the General Ledger and to the assigned CO cost object assigned to the asset master record.
Asset Management Retirement with customer (F-92)
Company code
Posting and document date
Document type
Line items
Customer account
Posting key (01 for customer and 75 for asset credit)
Transaction type to classify the asset transaction
Amount
Asset Management Asset Explorer (AW01N)
Offers a clear overview of the activity for an asset.
You can see transactions that have been posted to the asset plus planned and posted depreciation per depreciation area, per period for each fiscal year.
You can drill down to the details of the FI transactions
It is possible to branch to master data, other cost objects, and perform simulations
Asset Management Reflection
What is the relevancy of the asset master records in the asset life cycle process?
What role do you think the chart of depreciation play to address GAAP differences between countries and why?
How do you link the asset sub-ledger and the postings to FI?
SAP Finance (FI) Reflection
It is month end at GBI and the accounting group is working on its month end close, what activities would you need to review in each of the areas below
Accounts Receivable
Accounts Payable
Asset Management
General Ledger
