What Are the Use Cases for SAP Central Finance?

With centralized replicated data, Central Finance offers customers consolidated reporting

with a single source of truth view of an enterprise.

As a result, with a Central Finance implementation, companies can improve their decision-making, compliance, and operational processes across the enterprise significantly. Central Finance brings several use cases to customers, as shown in the figure below. The use cases are divided into three broad categories: process transformation, technology transformation, and corporate strategy and planning.

Let’s explore each category of use case next.

Process Transformation

Organizations with heterogeneous ERP landscapes often end up with outdated, ineffective, and inefficient processes. With a Central Finance implementation, you can transform such outdated or inefficient processes by adopting SAP S/4HANA leading practices and optimizing processes. The streamlined financial processes in Central Finance result in improved reporting, better management decision-making, and compliance with regulatory requirements. Let’s explore the important processes related to transformation use cases:

Legacy Process Consolidation

With Central Finance implementation, customers have an opportunity to streamline outdated and fragmented or duplicated financial processes into harmonized centralized processes with a single source of truth. Inefficient or outdated legacy processes cause companies to spend more time and money in manual processes, resulting in data silos and longer financial close cycles. To remain competitive in this emerging market, companies must evaluate legacy processes and consider consolidating or unifying to streamline financial processes.

Centralization and Standardization of Financial Processes

For enterprises with heterogenous landscapes, to remain competitive, Central Finance provides opportunities to standardize and harmonize financial processes across the enterprise. The process of unification can begin with a harmonized CoA design in Central Finance that caters to current and future business processes. Standardization can then be expanded to other financial processes to centralize processes. For example, a few processes that can be centralized in Central Finance include the following:

• Centralized payment
• Centralized credit
• Centralized dispute processes
• Centralized collection processes

Fast Financial Close

With the Universal Journal in SAP S/4HANA, the advanced financial closing cockpit, and other innovative tools, customers will be able to accelerate closing by organizing, automating, and governing closing tasks. Fast financial close is achieved with improved processes as a result of the Central Finance centralized processes and following leading practices in SAP S/4HANA. Key benefits of fast close are as follows:

• Visibility to pre-closing activities much early in the period
• Quick access to data as a result of real-time data availability from various source systems
• Accelerated closing with innovative tools offered in SAP S/4HANA
• Real-time reconciliation due to the Universal Journal
• Improved cash flow due to real-time insights into liquidity and forecasts for all ERP systems.
• Support for local and statutory reporting

Central Close

With Central Finance, companies can perform centralized close by consolidating and integrating financial processes across multiple source systems. With SAP-delivered closing tools such as intercompany reconciliation and advanced finance closing in SAP S/4HANA, you can organize and govern closing tasks to improve their accuracy. In addition, central close helps organizations comply with regulatory requirements and provide timely insights to financial data for better decision making:

• Faster and efficient reconciliation process due to the Universal Journal
• Availability of SAP S/4HANA closing tools
• Enhanced workflow automation and approval processes related to closing

Compliance

Central Finance can leverage the SAP Document and Reporting Compliance tool, which is a next-generation legal and statutory reporting tool to support reporting and compliance needs for entities operating worldwide. This tool is supported in Central Finance to comply with country-specific reporting requirements such as electronic invoicing, real-time monitoring, and real-time visibility of processes to stakeholders. Central Finance coupled with SAP Document and Reporting Compliance brings customers the following:

• Reduced risk of noncompliance penalties
• Reduced errors as a result of process automation
• Real-time insights into compliance processes and data
• Mitigated audit risks in a distributed landscape with centralized data to facilitate audit processes

Group Reporting

With Central Finance and group reporting, you have opportunities to standardize group reporting–related financial processes. Group reporting processes are often complex due to the nature of multiple processes unified in Central Finance. However, with financial data harmonization and group reporting integration with the Universal Journal, SAP made consolidated entity reporting seamless in Central Finance. Key benefits include the following:

• Real-time integration of centralized data for consolidation and group reporting
• Unified data model with the Universal Journal and reporting
• Automated consolidation-related tasks
• Intercompany reconciliation and elimination
• Compliance and regulatory reporting
• Quicker management decision-making with real-time insights

Technology Transformation

Next, we’ll explore the technology-related use cases by transitioning to Central Finance:

• Sidecar adoption: With Central Finance implemented with the sidecar approach, you can leverage SAP S/4HANA innovations without interrupting the core ERP systems. This approach provides the immediate benefits of most SAP S/4HANA innovations in incremental ways while keeping legacy systems intact. Several benefits of a sidecar approach are listed here:
  • Reap SAP S/4HANA benefits immediately in incremental steps with a nondisruptive approach to core ERP systems.
  • Transition to SAP S/4HANA gradually or in a phased approach.
  • Real-time replication of financial and nonfinancial data provides consolidated reporting capabilities.
  • Increased scalability is provided compared to core ERP systems.
  • Fallback to core ERP systems is possible for risk mitigation.
• Move to cloud: Central Finance provides customers an opportunity to migrate from an on-premise system to a cloud environment. The cloud environment can be either an SAP cloud or other third-party clouds such as Microsoft Azure or Amazon AWS. the cloud environment helps customers centralize operations. In Central Finance view, a cloud environment provides customers with several benefits:
  • A scalable cloud environment infrastructure to support growing business needs
  • Flexibility in implementing the solution
  • Reduced capital infrastructure cost and maintenance cost
  • Less downtime due to service level agreements with cloud providers
  • Increased performance as a result of redundancy and failover infrastructure
• Shared services: Central processes in a shared service model is one of the key use cases of Central Finance. Centralization of processes with the Universal Journal leads customers to leverage shared services opportunities in various departments such as accounts payable, accounts receivable, and payroll. Most important key benefits of Central Finance shared services include the following:
  • Unified data model to ensure shared services uses a single source of truth
  • Cost reduction due to simplification and reduced duplication of efforts across multiple source systems, resulting in reduced redundancies of work and reduced overhead cost
  • Economies of scale due to bulk processing and operations from Central Finance
  • Standardized and uniform processes across core ERP systems

Corporate Strategy and Planning

A company’s corporate strategy and planning begins with a vision and mission statements that dictate the overall direction of a company and its key objectives. It’s imperative Central Finance implementation is no exception when it comes to aligning both the short-term and long-term goals of a company. Corporate strategy and planning include mergers, acquisitions, consolidations, divestures, carveouts, and joint ventures. Let’s discuss each corporate strategy next:

• Mergers, acquisitions, and consolidations: Corporations evaluate mergers, acquisitions, and consolidations opportunities as part of their goals to keep a competitive edge with rivals or as part of overall strategic goals. This includes adding a new subsidiary or existing subsidiary to the system landscape. Central Finance provides companies with opportunities by integrating acquired or merged companies by simply replicating financial transactions to Central Finance without interrupting the existing acquisitions processes. In addition, Central Finance streamlines and centralizes processes from the acquired or merged company. This leads to a report on a unified view of mergers, acquisitions, and consolidated entities using consolidated data in the Universal Journal.
• Divestitures: Companies divest or dispose of a business unit for multiple reasons such as strategic decisions or to streamline operations. Central Finance helps in such situations to divest data into a new instance by replicating data from a source system. You can identify divesture requirements and strategize how the Central Finance solution fits into those situations.
• Carveouts: Carveouts lead to selling a subsidiary or spinning a division to form an independent legal entity. The Central Finance sidecar approach could be used to replicate both financial and nonfinancial data on the newly setup company code. In addition, selective data transmission is also possible based on the project requirements.
• Joint ventures: Companies come forward to form joint ventures as a collaborate effort to achieve a specific goal or project. This is common in the oil and gas industries. Central Finance supports replicating joint venture accounting (JVA) data to Central Finance.

Editor’s note: This post has been adapted from a section of the book Implementing Central Finance with SAP S/4HANA by Anand Seetharaju. Anand is a certified SAP S/4HANA financial and management accounting consultant. He holds active CPA and CMA licenses and has more than 25 years of experience in business process design, consulting, and accounting system implementation. He has led several SAP S/4HANA Finance and Central Finance transformation projects and has presented on those topics at SAP conferences. Additionally, he has extensive implementation experience with the SAP classic general ledger, new general ledger, and SAP S/4HANA general ledger, including conversion from the classic general ledger. Anand’s experience includes global SAP finance and controlling implementations and rollouts with an emphasis on receivables management, revenue accounting and reporting, cash and liquidity management, profitability analysis, project systems, product costing, material ledger, capital asset management, leasing, global tax, and legal reporting.

This post was originally published 1/2025.